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Roche Holding AG ADR RHHBY

Morningstar Rating
$32.88 −0.20 (0.60%)
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Company Report

Roche Earnings: Headwinds From Currency Continuing but Fundamentals Remain Strong

We’ve lowered our Roche fair value estimate to CHF 379/$55 from CHF 414/$59 after incorporating the firm’s 2023 financial results and 2024 outlook into our valuation model. Wide-moat Roche is facing relentless pressure due to the strength of the Swiss franc against other major currencies, so although the firm produced 1% constant-currency sales growth in 2023 despite pressure from COVID diagnostic and treatment declines (and above the low-single-digit decline guidance), this resulted in a 7% sales decline as reported. Similarly, the firm’s 6% core EPS growth rate (boosted by a one-time tax settlement) reversed to a 9% decline, as reported. However, we continue to see Roche shares as undervalued. Fundamentally, Roche’s base business (excluding COVID and foreign exchange headwinds) grew 8% on the top line in 2023, a combination of 9% pharmaceuticals and 7% diagnostics growth. Management expects COVID headwinds and erosion from generics and biosimilars to amount to CHF 2.7 billion in top-line pressure in 2024, down from the CHF 6.4 billion faced in 2023. Overall, we think the firm is in a good position to achieve its goal of mid-single-digit sales and core EPS growth in 2024, even after factoring in higher interest expenses tied to new debt.

Price vs Fair Value

RHHBY is trading at a 40% discount.
Price
$32.88
Fair Value
$85.00
Uncertainty
Low
1-Star Price
$68.43
5-Star Price
$99.00
Economic Moat
Kyc
Capital Allocation
Shnztglps

Bulls Say, Bears Say

Bulls

Roche and its innovative U.S. arm Genentech have a solid history of generating blockbuster therapies in oncology, and Roche's pipeline is full of novel candidates, with a particularly large late-stage pipeline.

Bears

Roche's immuno-oncology drug Tecentriq was launched third to market behind Bristol's Opdivo and Merck's Keytruda, raising questions about Roche's innovation.

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News

Trading Information

Previous Close Price
$33.08
Day Range
$32.8033.00
52-Week Range
$31.7740.48
Bid/Ask
$32.83 / $33.00
Market Cap
$209.71 Bil
Volume/Avg
979,582 / 2.0 Mil

Key Statistics

Price/Earnings (Normalized)
12.07
Price/Sales
3.15
Dividend Yield (Trailing)
3.89%
Dividend Yield (Forward)
4.24%
Total Yield
3.89%

Company Profile

Roche is a Swiss biopharmaceutical and diagnostic company. The firm's bestselling pharmaceutical products include a variety of oncology therapies from acquired partner Genentech, and its diagnostics group was bolstered by the acquisition of Ventana in 2008. Oncology products account for 50% of pharmaceutical sales, and centralized and point-of-care diagnostics for more than half of diagnostic-related sales.
Sector
Healthcare
Industry
Drug Manufacturers - General
Stock Style Box
Large Core
Total Number of Employees
103,605

Competitors

Valuation

Metric
RHHBY
ABBV
MRK
Price/Earnings (Normalized)
12.0715.9482.69
Price/Book Value
6.0130.188.36
Price/Sales
3.155.785.26
Price/Cash Flow
11.5715.6820.77
Price/Earnings
RHHBY
ABBV
MRK

Financial Strength

Metric
RHHBY
ABBV
MRK
Quick Ratio
0.990.630.68
Current Ratio
1.350.871.25
Interest Coverage
14.933.572.33
Quick Ratio
RHHBY
ABBV
MRK

Profitability

Metric
RHHBY
ABBV
MRK
Return on Assets (Normalized)
17.03%14.54%3.59%
Return on Equity (Normalized)
53.42%150.11%9.12%
Return on Invested Capital (Normalized)
26.30%28.30%5.88%
Return on Assets
RHHBY
ABBV
MRK
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