EXELIXIS INC (NASDAQ:EXEL): A Prime Example of Affordable Growth in Biotech

Growth investing often involves the risk of paying too much for future potential, but the "Affordable Growth" strategy aims to reduce this by finding companies that offer both strong growth and fair prices. This method looks for stocks with a growth score above 7, good profitability and financial health, and a valuation score above 5, making sure they are not overvalued based on their fundamentals. One example that meets these criteria is EXELIXIS INC (NASDAQ:EXEL), a biotech company focused on oncology, which offers a mix of growth, value, and financial stability.

Growth: A Key Factor

EXELIXIS has a Growth score of 8, showing its strong past and expected growth. Key points from its fundamental analysis report include:

• Earnings Per Share (EPS) growth of 205.56% over the last year, along with a 17.51% average yearly revenue growth, which is higher than many competitors.
• Future EPS is predicted to grow by 25.80% each year, supported by its oncology pipeline, including cabozantinib, a treatment for multiple types of cancer.
• While revenue growth may slow slightly to 11.19%, the company’s rising EPS trend points to better efficiency.

For the "Affordable Growth" strategy, consistent and scalable growth is essential, and EXELIXIS shows both, lowering the risk of investing in overvalued, unstable growth stories.

Valuation: Fair Compared to Others

Despite its growth, EXELIXIS is priced fairly, with a Valuation score of 8:

• Its P/E ratio of 20.73 is lower than 95.12% of biotech peers, and its forward P/E of 15.80 is below the S&P 500 average (37.67).
• The Enterprise Value/EBITDA and Price/Free Cash Flow ratios also show it is undervalued compared to 96% and 95% of the industry.
• A low PEG ratio (considering earnings growth) further suggests the stock’s price hasn’t exceeded its growth potential.

This balance between growth and valuation fits the strategy’s goal: avoiding overpaying for growth while benefiting from upward trends.

Profitability and Financial Health: A Strong Base

EXELIXIS has a Profitability score of 8 and a Health score of 9, highlighting its operational strength and financial stability:

• High Return on Equity (30.20%) and Return on Invested Capital (26.25%) put it in the top 3% of the biotech sector.
• A debt-free balance sheet and Altman-Z score of 12.66 (showing low bankruptcy risk) offer security for investors.
• Strong gross (96.78%) and operating (35.43%) margins indicate pricing power and cost management.

These metrics are crucial for the "Affordable Growth" approach—strong profitability ensures growth is lasting, while financial health reduces risk during market downturns.

Conclusion: A Strong Growth-at-a-Fair-Price Option

EXELIXIS represents the "Affordable Growth" strategy well, with rising earnings, fair pricing compared to peers, and a solid financial foundation. Its focus on oncology—a high-need medical field—further supports its growth potential.

For investors looking for similar opportunities, more screened results can be found here.

Disclaimer: This article is not investment advice. Always do your own research or consult a financial advisor before making investment decisions.