Biogen

The operation of a business is critical to any investor. Before investing in a company, a wise investor will examine its performance. Investing in a business through the purchase of shares is significantly dependent on the investor’s goal. Most investors begin by calculating the potential profits they will receive after a specific investing period. Dividends are one type of return. The dividend discount model, or DDM for short, is one of the methodologies used to value an investment’s returns. The concept is based on the fundamental financial idea that a dollar now does not have the same worth as a dollar tomorrow. DDM predicts the value of future dividends and relates them to their present value.

Where:

In the case of Biogen, stock market experts predict that the company will grow at a rate of 10.13% in the coming year. The expected returns in investing in the company’s shares are 13.05% compared to 2.73% returns in investing in treasury bonds. Over the years, the company has not offered any dividends rather has focused on investing the funds in research.

Investing in biotech companies is risky as these companies are greatly affected by economic fluctuations. In addition, the biotech industry is more competitive in comparison to other markets (Patrick, 2015). Investing in Biogen is a wise decision. The company has over the years performed fairly well and is expected to maintain this trend in the future.

Biogen performance is impressive. As of 2017, the profit margin of the company was 28.06%. Its working capital has also increased by 27.2% in the same period. The debt to asset ratio is 51% meaning the company has significant debt.

Johnson & Johnson

Johnson & Johnson stock price is fair. The annual dividend growth rate for the company is 2.59%. The yield is low in comparison to Biogen. The advantage of investing in Johnson & Johnson is that the company is more secure than Biogen. Johnson & Johnson has a debt to equity ratio of 48.05%. According to Omar Venerio, an investor should seriously consider buying the stock (Omar, 2017). Johnson & Johnson’s current share price is $130.01 and its intrinsic value is $135.12 (Stock Analysis on the Net, 2017).

Pfizer

In comparison to the last 5 years, the S&P 500 has generated 70% on returns while Pfizer has only managed to generate 46.7%. Johnson & Johnson has generated over 90%. This shows that investing in Pfizer is a bad strategy due to low growth. The share’s intrinsic value is $32.68, which is lower than the actual stock price of $35.70 (Stock Analysis on the Net, 2017).

References

Seeking Alpha. (2017). Johnson & Johnson vs Pfizer. Retrieved from SeekingAlpha: https://seekingalpha.com/article/4109227-johnson-and-johnson-vs-pfizer-better-buy

Stock Analysis on the Net. (2017). Instrinsic Value. Retrieved from Stock Analysis on Net: https://www.stock-analysis-on.net/NYSE/Company/Pfizer-Inc/DCF/DDM

Lan, J. (2014). Calculating Intrinsic Value with Dividend Growth Model . Retrieved from http://www.aaii.com/journal/article/calculating-intrinsic-value-with-the-dividend-growth-model

Patrick, M. (2015). Economic Factors That Affect the Biotechnology Industry. Retrieved from Market Realist: http://marketrealist.com/2015/07/economic-factors-affect-biotechnology-industry/