Repligen trades at $120.32 per share and has moved almost in lockstep with the market over the last six months. The stock has lost 10.5% while the S&P 500 is down 7.7%. This might have investors contemplating their next move.
Is now the time to buy Repligen, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why you should be careful with RGEN and a stock we'd rather own.
Why Do We Think Repligen Will Underperform?
With over 13 strategic acquisitions since 2012 to build its comprehensive bioprocessing portfolio, Repligen (NASDAQ: RGEN) develops and manufactures specialized technologies that improve the efficiency and flexibility of biological drug manufacturing processes.
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 11% over the last two years. 
2. Core Business Falling Behind as Demand Declines
We can better understand Drug Development Inputs & Services companies by analyzing their organic 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 11.3% 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 one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.
Looking at the trend in its profitability, Repligen’s adjusted operating margin decreased by 16 percentage points over the last two 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 12.9%.
Final Judgment
We cheer for all companies serving everyday consumers, but in the case of Repligen, we’ll be cheering from the sidelines. After the recent drawdown, the stock trades at 72.5× forward price-to-earnings (or $120.32 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward the most dominant software business in the world.
Stocks We Would Buy Instead of Repligen
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