Why It May Be Time To Buy the Dip on BioMarin Pharmaceutical (BMRN)

Buying the dip is simple in theory. It’s quite hard to actually pull off in practice. For starters, in a majority of cases, when a stock’s price drops, there’s a good reason why.

However, in some cases, there isn’t a great reason — rather, it’s the result of investors and traders acting irrationally. Sometimes, stocks drop even if their long-term growth prospects are still intact. 

These rare cases present opportunities for investors.

I believe we have one such case with BioMarin Pharmaceutical (NASDAQ: BMRN).

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First, let’s quantify the “dip” in question. At writing, BMRN shares have lost 12.66% in value since the start of the year.

But was the dip an overreaction? I think so — while the wider biotech sector has seen some instability, and BioMarin was removed from the Russell 1000 Value-Defensive Index in July, which reduced liquidity, it’s worth bearing in mind that the company has beat earnings estimates for six quarters in a row — and in most of those quarters, it outperformed estimates by a significant margin.

Our quant rating system, Zen Ratings, which takes into account 115 factors when evaluating a stock, also ranks BioMarin stock quite highly. To be more precise, BMRN currently ranks in the top 3% of equities, giving it a Zen Rating of A, which has historically corresponded to an average annual return of 32.52%.

Each Zen Rating consists of seven Component Grade ratings, each of which focuses on a particular area. To use an example, Financials focuses on a company’s balance sheet, and takes into account metrics such as return on equity (ROE) and gross profit to assets. In terms of its Financials Component Grade rating, BioMarin stock ranks in the top 8% of equities.

However, what’s truly impressive about BMRN is just how well-rounded it is. Our Artificial Intelligence rating uses a neural network trained on two decades of data to identify likely outperformers. In this regard, BioMarin shares rank in the 86th percentile.

In terms of Sentiment, the stock ranks in the top 6% of equities. BMRN is covered by 7 Wall Street analysts — their ratings are split between 5 Strong Buys, 1 Buy, and 1 Hold, and the average 12-month price forecast, currently pegged at $101.29, implies a very hefty 74.42% upside. 

Last but not least, we have BioMarin Pharmaceutical’s Value Component Grade rating. The stock is currently trading at a price-to-earnings (P/E) of 16.88x. For reference, the wider market average stands at 34.76x.

BMRN also happens to be one of the 7 stocks in our exclusive Zen Strategies Buy the Dip portfolio, which has an all-time annual return of 35.1%.

We’ve gone through a lot of figures here, but they all boil down to the same essential thesis — BioMarin is a company on a solid winning streak in terms of core operational metrics, but the stock price hasn’t reflected that as of late. When we say solid winning streak, we actually mean more than just garden variety solid — in the last 4 quarters, earnings per share (EPS) have outperformed estimates by 56.25%, 34.25%, 30.91%, and 29.82%, respectively.

It’s only a matter of time before the markets catch on — once that occurs, BMRN will command a much higher premium. Provided that you’re comfortable with holding until that happens, BioMarin is a great opportunity.

—> Check out our exclusive Zen Strategies portfolios or take a closer look at BioMarin

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