Galapagos NV – Value Analysis (EURONEXT AMSTERDAM:GLPG) : December 29, 2017

Capitalcube gives Galapagos NV a score of 50.

Our analysis is based on comparing Galapagos NV with the following peers – ThromboGenics NV, Ablynx nv, Evotec AG, TiGenix NV, Sanofi, MDxHealth S.A., Abbott Laboratories, GlaxoSmithKline plc and Teva Pharmaceutical Industries Limited Sponsored ADR (THR-BE, ABLX-BE, EVT-DE, TIG-BE, SAN-FR, MDXH-BE, ABT-CH, GSK-GB and TEV-DE).

Investment Outlook

Galapagos NV has a fundamental score of 50 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It’s current Price/Book of 3.89 is about median in its peer group.
  • GLPG-NL‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • GLPG-NL‘s relatively low net margins and poor asset turns suggest a problematic operating strategy.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, GLPG-NL‘s return on assets has improved from below median to better than the median among its peers, suggesting that the company has improved its relative operations markedly.
  • While GLPG-NL‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • GLPG-NL‘s operating performance may not allow it to raise additional debt.

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Leverage & Liquidity

GLPG-NL would seem to have a hard time raising additional debt.

  • With debt at a relatively low 0.00% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 16.91%), and relatively tight interest coverage level of -131.32x, GLPG-NL would have a hard time raising much additional debt. Thus, the company is classified as having Limited Flexibility when it comes to raising more debt.
  • Of the 9 chosen peers for the company, only 8 of the stocks have an outstanding debt balance. Companies with no debt include THR-BE.

GLPG-NL has maintained its Constrained profile from the recent year-end.

  • GLPG-NL‘s interest coverage is greater than (but within one standard deviation of) its five-year average interest coverage of -223.49x.
  • Though its interest coverage has remained relatively stable at -131.32x compared to 2016, its peer median has decreased to 3.48x from 6.74x during this period.
  • Interest coverage rose 3.26 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • GLPG-NL‘s debt-EV is its lowest relative to the last five years and compares to a high of 0.12% in 2013.
  • Like the interest coverage trend, its debt-EV has also remained relatively stable at 0.00%, while its peer median has decreased during this period (to 16.91% from 18.72%).
  • Relative to peers, debt-EV rose 1.81 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
ThromboGenics NV 0 9.16 No interest exp 999
Ablynx nv 17.49 4.09 -7.67 -47.31
Evotec AG 5.66 0.69 15.31 57.93
TiGenix NV 24.94 1.37 -1.48 -21.13
Sanofi 16.32 1.59 19.14 43.93
MDxHealth S.A. 0.23 4.9 -11.59 -453.69
Abbott Laboratories 22.69 2.69 2.92 25.9
GlaxoSmithKline plc 20.09 0.64 7.4 40.5
Teva Pharmaceutical Industries Limited Sponsored ADR 60.75 0.96 4.04 13.55
Galapagos NV 0 8.05 -131.32 -16010
Peer Median 16.91 2.14 3.48 19.73
Best In Class 0 9.16 No interest exp 999

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Company Profile

Galapagos NV is a biotechnology company, which engages in the identification and development of small molecule and antibody therapies. It operates through the Research and Development and Fee-for-service segments. The company was founded by Onno van de Stolpe, Rudi Pauwels, and Helmuth van Es on June 30, 1999 and is headquartered in Mechelen, Belgium.

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