Roche Stock Has More Upside

+39.55%
Upside
42.28
Market
59.00
Trefis
RHHBY: Roche logo
RHHBY
Roche

The stock price of Roche’s ADR (OTCMKTS: RHHBY) has seen a fall of 7% year-to-date, while it’s up 3.5% in a month. Roche’s revenue grew 13% y-o-y to $72.4 billion in 2021, aided by Covid-19 diagnostics tests and Ronapreve – a treatment for Covid-19, developed by Regeneron and distributed by Roche outside the U.S. The Covid-19 related products alone accounted for $7 billion of the $72 billion in sales for Roche in 2021. The company also benefited from the continued uptick of its relatively new drugs, including Perjeta, Kadcyla, Alecensa, Tecentriq, Actemra, and Ocrevus. While this trend is expected to continue going forward, an anticipated decline in sales of Covid-19 related products is likely to weigh on the company’s top-line in 2022.

Recently, the company announced new positive long-term efficacy and safety data for its newly approved Evrysdi used for the treatment of spinal muscular atrophy. [1] Evrysdi competes with Biogen’s Spinraza. However, Roche has priced its drug much lower than Spinraza to garner a better adoption rate. There are other advantages of Evrysdi, including oral dosing at home, compared to Spinraza, which requires an injection into the spinal fluid. Overall, Evrysdi is likely to see strong revenue growth over the coming years. Roche has applied for its approval in China and the EU. The drug garnered $662 million in 2021, and it will likely be a blockbuster drug this year. On the diagnostics side, Roche is likely to see a pickup in routine diagnostics over the coming quarters, but it is unlikely to offset the expected decline from Covid-19 related testing.

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We estimate Roche’s valuation to be $57 per share, reflecting a 19% upside from its current level of $48. This represents a P/E ratio of 20.6x based on expected adjusted EPS of $2.77 in 2022. But what about the near term? Given the 3.5% rise for RHHBY stock in a month, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of a rise in RHHBY stock over the next month. Out of 625 instances in the last ten years that RHHBY stock saw a twenty-one-day increase of 3.5% or more, 359 of them resulted in RHHBY stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 359 out of 625, or about a 57% chance of a rise in RHHBY stock over the coming month. See our analysis on Roche Stock Chance of Rise for more details.

While RHHBY stock may see higher levels, the Covid-19 crisis has created many pricing discontinuities, which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Medtronic vs. IDEXX Laboratories.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 RHHBY Return 1% -7% 68%
 S&P 500 Return 0% -9% 95%
 Trefis MS Portfolio Return -1% -11% 249%

[1] Month-to-date and year-to-date as of 3/17/2022
[2] Cumulative total returns since the end of 2016

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Notes:
  1. Roche’s Press Release, March 16, 2022 []