Ligand Pharmaceuticals Incorporated (LGND) slid from $80 in the middle of June to $55.92 as of the close of trading on Friday, September 29, 2023. Shares are just a few bucks ahead of its 52-week low of $52.61.
Earnings were the most important news during the 30 percent drop. LGND’s quarterly grades were a mixed bag. Earnings per share (EPS) tallied $1.42 compared to Zacks’ forecast of $0.76. Sales, however, fell short of the research firm’s target of $28 million, instead they printed $26.4 million for the second quarter. (1)
Ligand is a biopharmaceutical company focused on developing or acquiring technologies that help pharmaceutical companies to discover and develop medicines worldwide. Its commercial programs are used to treat multiple myeloma, COVID-19, osteoporosis, Streptococcus pneumoniae serotypes, pneumococcal pneumonia among children, acute lymphoblastic leukemia or lymphoblastic lymphoma, in adult and pediatric patients, postpartum depression, post-menopausal symptoms, autoimmune diseases and breast cancer.
Chief Executive Officer (CEO) Todd Davis might have seen value in the pharmaceutical company’s stock price at current levels. He acquired 4,000 shares at $59.38, investing $237,529 on September 22, 2023. (2) He could be correct based on Ligand Pharmaceuticals’ PEG ratio (price/earnings-to-growth) of 0.84. (3)
According to Investopedia, “In theory, a PEG ratio value of 1 represents a perfect correlation between the company’s market value and its projected earnings growth. PEG ratios higher than 1.0 are generally considered unfavorable, suggesting a stock is overvalued. Conversely, ratios lower than 1.0 are considered better, indicating a stock is undervalued.” (4)
Davis is no stranger to buying and selling Ligand stock. So far, he’s been on the right side of the tape each time. He sold 2,500 shares in October 2018 at $253.99 per share. Less than a year later, he flipped to a buyer at $93.59 in August 2019. In February 2021, the CEO went red ticket again, unloading 5,083 shares at $213.14, collecting more than a million dollars. As we mentioned above, he pulled the blue buy ticket last week.
Of course, past performance is no guarantee of future performance. However, CEO Davis’ track record must excite shareholders of the lagging biotech company. As might Wall Street’s one-year price target of $112.67 (5), which is 88 percent potential upside to target. If the street is right, the Chief Executive’s record of being on the right side of the trade will remain spotless.
Earnings are expected to dip a little next year, to $4.25 per share from $4.98 this year. But, sales are predicted to increase handsomely, to $145.02 million from this year’s forecast of $126.97 million, flipping the script from the most recent quarter.
Overall: Ligand Pharmaceuticals Incorporated (LGND) appears to offer investors the potential for well above average returns based on Wall Street’s price target while offering value with a PEG ratio under 1.
With a five-year beta of 0.93, shares of the biotech are appropriate for investors with average risk tolerance and time horizon of at least one year.
Rich Meyers
1 – https://finance.yahoo.com/news/ligand-lgnd-4-raised-23-154500951.html
2 – https://www.secform4.com/insider-trading/1392029.htm
3 – https://finance.yahoo.com/quote/LGND/key-statistics?p=LGND
4 – https://www.investopedia.com/ask/answers/012715/what-considered-good-peg-price-earnings-growth-ratio.asp#:~:text=The%20price%2Fearnings%2Dto%2D,can%20indicate%20an%20overvalued%20stock.
5 – https://finance.yahoo.com/quote/LGND?p=LGND&.tsrc=fin-srch