Biogen Inc. Performance (Term Paper Sample)
Financial Instruments and Markets
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1. Compare the types of equity securities that companies can use to raise equity capital
and understand how share prices are determined.
2. Interpret international financial economic theories in relation to financial instruments
and markets, including the effect on calculation of financial instrument prices
BIOGEN INC REPORT
Biogen Idec Inc is one of the most popular multinational biotechnology company that primarily specializes in the development, discovery, and delivery of therapies mainly for the treatment of neurological diseases to global patients. Biogen Inc was founded by Charles Weissmann, Phillip Allen Sharp, Walter Gilbert, Kenneth Murray in 1978 in Geneva, Switzerland but currently, the headquarters are in Cambridge, Massachusetts, United States (Burns, 2012). Some of the major products include AVONEX (interferon beta-1a), BENEPALI (etanercept), FAMPYRA (prolonged-release fampridine tablets), FLIXABI (infliximab), IMRALDI adalimumab), PLEGRIDY (peginterferon beta-1a) SPINRAZA (nusinersen), among others. Being listed in the public trading companies, Biogen trades as NASDAQ: BIIB that is in the NASDAQ-100 component S&P 100 as well as the S&P 500 component (Shah & et al., 2019, 26). This paper primarily focuses Biogen’s financial analysis cutting across comparison of various types of equity security in Biogen as well as ethics and the international financial economic theories that relate to the financial instruments and markets.
Biogen Inc analysis
The international financial economics describes the financial trade patterns, the rate of consumption, the impact of trade on production and the income distribution (Lucey & et al.,2018, 35-49). This aids in the determination of the trades on prices of goods and services in relation to the economic growth. Hence, the forming the fundamental of Biogen public trading in NASDAQ. For proper analysis, we will look at the short-term as well as the long-term activities (Boisjoly & et al., 2020, 1-8). Under the short-term operations ratio, the cash conversion cycle shows that the financial metric should measure the period that is needed for a company to change to cash that is invested to the company’s operations to cash received this means that the operations are dependent on the equal to inventory processing period on average added to the collection of the receivables period on average and subtracting the payment of the payables on average (Wang, 2019, pp.472-497). This means that Biogen Inc.'s cash conversion cycle demonstrates a decline from 2017 to 2018 but on the other hand, there was an improvement from 2018 to 2019, which even exceeded the 2017 level.
The most common share price movement analysis method is the analytical study of the price to earnings ratio (P/E ratio) (Dhole & et al., 2019, 101212). Hence, the calculation of the P/E ratio aids in the determination of the value of a stock, comparison of a stock P/E ratio of the competitors, and the industry standards (Jitmaneeroj, 2017). The P/E ratio value is calculated by dividing the stock's market valuer per share by its earnings per share (Gottwald, 2012, 21-24). The P/E Ratio insights for Biogen, currently as of December 18th, 2020, in the NASDAQ: BIIB is at $ 249.81 share price, which is a 0.71% drop compared to last month (November) where the stock had increased by 2.32%. However, in comparison with 2019, the stocks fell by 17.16%.
This means that Biogen's short-term performance is a slight risk, whereas the long-term performance is operating at profitable and great margins; hence, long-term shareholders might invest more in Biogen. Concerning the ceteris paribus of all factors, an opportunity for the investors would arise, which will result in the diversification of the portfolio with the biotechnology stocks and capitalization of the lower share price (Lee & et al., 2019, 66-81). Consequently, the P/E ratio, according to the financial instruments and markets, is mainly important to the long-term shareholders. This is because they use the ratio to determine the market performance of the company regarding the aggregate market data as outlined by the previous earnings as well as the ongoing operations in Biogen. Consequently, a lower P/E indicates that the stocks have no future better performance; hence, the shareholders are aware that the company is undervalued. Besides, most investors will not be willing to invest if the P/E is low; however, lower P/E also indicates that the shareholders are less willing to pay for the company's share price since there might not be future earning obtained from their investment. On the other hand, concerning specific cycle phases in the business, this is because some industries normally perform better than others. In Biogen Inc, there is a lower P/E than the aggregate P/E of 38.45 of the Biotechnology industries.
Conclusively, there are signs that Biogen Inc has above-average exposure to three very important drivers of stock market profits. Hence, potential investors have good quality shares that are well priced and rising in the market have very broad appeal. For future reasons, it is important to look at how to price Biogen Inc.'s (NASDAQ: BIIB) Stock for adequate valuation and financial analysis. The first valuation to undertake is the deep-dive into intrinsic valuation, which looks that the forecast into the distant future and the forecasting of free cash flows (FCFs) for businesses (Bennett & et al., 2016, e1005020). Second, the deep-dive into a relative valuation to looks at what the investors ought to pay in the case of identical risks and return on two companies. Examining Biogen Inc's financial health via balance sheet analysis and future earning via analysis of the expected growth chart is vital. The two major factors that determine the Biogen Inc share price are high quality and reasonable prices.
Biogen Inc performance
The table below shows the current price from 7th to December 29th, 2020 of the ordinary common shares of Biogen Inc (NASDAQ: BIIB) Investors bought Biogen's (NASDAQ: BIIB) Shares Three Years Ago is experiencing a downfall in shares by 24%.
With the definition of successful investing as the beating of the market average over the long term by most investors, the results after three years show a downfall. Nevertheless, there are likely to be some stocks that fall short of that benchmark in any portfolio. Based on the reports, the long-term Biogen Inc. (NASDAQ: BIIB) shareholders are already experiencing share price dropping by 24% in the last three years. Besides, the market return of Biogen Inc. (NASDAQ: BIIB) is about 46%. Hence, it is evident that the shareholders have had a rougher period of running lately, with the share price being down by 19% in the last 90 days (September- November 2020).
On the other hand, the latest analysis of Biogen Inc. (NASDAQ: BIIB) shows that despite markets being powerful in pricing mechanism, the share price aids in the reflection of the investor sentiment other than just the current business performance. One of the most popular, simple, and faulty way of determining the Biogen's earning per share (EPS) is by looking at the market perception and the shifts compared to the changes in EPS with the share price movement (Serafini & Alex 2017). Additionally, during the unfortunate three years of share price decline, the earnings per share (EPS) in Biogen has improved by 23% per annum.
With the known share price reaction, the EPS fails to offer the perfect predictions for business performance during the three-year periods due to a one-off loss or gain (Ringel, 2017, 597). Besides, it can be due to the company's previous over-hyped, and so its growth has disappointed; hence, there is a need of looking at the Biogen's other metrics such as revenue as illustrated in the diagram below since in some incidences, the EPS growth fails to match the falling Biogen's share price.
Nevertheless, in relation to the long-term activity ratios, that is the net fixed assets turnover, the equity turnover and the total assets turnover of Biogen Inc showed various changes over the last 3 years. This is because the net fixed asset turnover ratio declined from 2017 to 2018 and later in the period from 2018 to 2019, there was an improved that exceeded the levels obtained in 2017. Whereas in the case of the total asset turnover it is evident that Biogen Inc.'s improved from 2017 to 2018 but later from 2018 to 2019 there was a slight decline.
Lastly, the Biogen Inc.'s equity turnover ratio shows that there was an improved from 2017 to 2018, and still the same constant movement with slight improvement from 2018 to 2019.
right95821500 Besides, the profitability ratios are also essential for Biogen's company analysis. The gross profit margin indicates that Biogen's Inc profit margins deteriorate from 2017 to 2018 and from 2018 to 2019.
Notably, the operating profit margins illustrate that Biogen Inc.'s profits positively changed from 2017 to 2018 which was also the case in the 2018 to 2019 period. Nevertheless, the net profit margins show that Biogen Inc.'s growth in profits from the 2017 to 2018, as well as from 2018 to 2019.
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