Repligen’s stock price has taken a beating over the past six months, shedding 26.1% of its value and falling to $124.04 per share. This may have investors wondering how to approach the situation.
Is now the time to buy Repligen, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think Repligen Will Underperform?
Even with the cheaper entry price, we're swiping left on Repligen for now. Here are three reasons why RGEN doesn't excite us and a stock we'd rather own.
1. Revenue Tumbling Downwards
We at StockStory place the most emphasis on long-term growth, but within healthcare, a stretched historical view may miss recent innovations or disruptive industry trends. Repligen’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 7.5% over the last two years. 
2. Core Business Falling Behind as Demand Declines
Investors interested in Drug Development Inputs & Services companies should track organic revenue in addition to reported revenue. This metric gives visibility into Repligen’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Repligen’s organic revenue averaged 7.9% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Repligen might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
3. Shrinking Adjusted Operating Margin
Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.
Analyzing the trend in its profitability, Repligen’s adjusted operating margin decreased by 14.8 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its adjusted operating margin for the trailing 12 months was 14.1%.
Final Judgment
Repligen falls short of our quality standards. Following the recent decline, the stock trades at 67.2× forward P/E (or $124.04 per share). At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment. We’d suggest looking at a top digital advertising platform riding the creator economy.
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