Why Ipsen S.A. (EPA:IPN) Is A Buy When Markets Go Down

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Ipsen S.A. is a financially healthy and robust stock with a proven track record of outperformance. We all know Ipsen, and having this large-cap to cushion your portfolio during a volatile period in the stock market isn't a bad idea. Today I will give a high-level overview of the stock, and why I believe it's still attractive.

Check out our latest analysis for Ipsen

Ipsen S.A. operates as a biopharmaceutical company worldwide. Established in 1929, and run by CEO David Meek, the company size now stands at 5.66k people and has a market cap of €8.4b, putting it in the mid-cap category. Bear market volatility can have a short-term impact on large, well-established companies, but in the long-run, these businesses are likely to prevail. This is because fundamentally, nothing has changed. A fall in share price is hardly detrimental to its financial health and business operations. So, large-cap stocks are a safe bet to buy more of when the stock market is selling off.

Currently Ipsen has €587m on its balance sheet, which requires regular interest payments. This requires the business to have enough cash to meet these upcoming interest expenses. Ipsen generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 107x, which is well-above the minimum requirement of 3x. Furthermore, its cash flows from operations copiously covers it debt by 97%, which is higher than the bare minimum requirement of 20%. And, a given, its liquidity ratio holds up well with cash and other liquid assets exceeding upcoming liabilities, meaning IPN's financial strength will continue to let it thrive in a fickle market.

IPN’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 20%, beating the industry growth rate of 4.1%. It has also returned an ROE of 21% recently, above the industry return of 9.1%. Ipsen'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:

Ipsen makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with Ipsen? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I've put together of other things you should consider before you buy:

1. Future Outlook: What are well-informed industry analysts predicting for IPN’s future growth? Take a look at our free research report of analyst consensus for IPN’s outlook.
2. Valuation: What is IPN 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 IPN 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.