How To Gain With UCB SA (EBR:UCB)

Stock market crashes are an opportune time to buy. High quality companies, such as UCB SA, are impacted by general market panic and sell-off, but the fundamentals of these companies stay the same. In other words, now is the time to buy strong, well-proven stocks at an attractive discount.

See our latest analysis for UCB

UCB SA, a biopharmaceutical company, researches, develops, manufactures, sells, and distributes biopharmaceutical solutions for people living with neurology and immunology conditions. Founded in 1928, and run by CEO Jean-Christophe Tellier, the company now has 7.50k employees and with the market cap of €13b, it falls under the large-cap stocks category. Generally, large-cap stocks are well-resourced and well-established meaning that a bear market will cause it to rejig some short-term capital allocations, but stock market volatility is hardly detrimental to its financial health and business operations. Therefore large-cap stocks are a safe bet to buy more of when the wider market is going down and down.

ENXTBR:UCB Historical Debt, August 20th 2019
ENXTBR:UCB Historical Debt, August 20th 2019

UCB currently has €1.3b debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. UCB generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 19.36x, which is well-above the minimum requirement of 3x. Moreover, its cash flows from operations copiously covers it debt by 75%, above the safe minimum of 20%. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means UCB is financially robust in the face of a volatile market.

ENXTBR:UCB Income Statement, August 20th 2019
ENXTBR:UCB Income Statement, August 20th 2019

UCB’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 33%, outpacing the industry growth rate of 7.3%. It has also returned an ROE of 11% recently, above the industry return of 10%. UCB’s strong performance over time is a demonstration of its ability to grow through cycles, raising my confidence in the company as a long-term investment.

Next Steps:

Whether you’re convinced or not, the key takeaway here is that every stock gets hit in a bear market, but not every stock deserves the blow. When prices are dropping like flies, now is the time to do your research and buy at a discount. UCB tick the boxes in terms of its scale, financial health and proven track record, but there are a few other things I have yet to consider. Below I’ve compiled a list of factors for you to continue your reading before you buy:
  1. Future Outlook: What are well-informed industry analysts predicting for UCB’s future growth? Take a look at our free research report of analyst consensus for UCB’s outlook.
  2. Valuation: What is UCB worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether UCB is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.