Celgene

01/06/2014 5:00 am EST

Focus: HEALTHCARE

Stephen Quickel

Editor, US Investment Report

Our conservative growth stock favorite for 2014 is a large-cap healthcare stock specializing in therapies for cancer and immune-inflammatory related diseases, suggests Stephen Quickel, editor of US Investment Report.

Celgene Corp. (CELG), of Summit, New Jersey, has had quite a run the last 18 months—rising from $60 in mid-2012, and from $80 last January, to the $160-$170 range during the final weeks of 2013.

We've recommended CELG for most of that period. But, because it is still reasonably valued thanks to its ongoing rapid growth, we believe the stock could continue rising into 2014—certainly to the $180-$190 range, and probably above $200.

And because it remains reasonably valued, it tends to resist the downside pressures that can plague stand-out growth stocks.

Fundamentally, Celgene has plenty of established drug products and several promising new ones coming along—including Revlimid, a treatment for multiple myeloma, and transfusion-dependent anemia, whose Stage Three trials recently revealed strong efficacy and safety data.

Recently, too, Celgene has formed a strategic partnership with OncoMed (OMED) to develop up to six anti-cancer stem-cell antibodies.

Celgene itself has posted four successive quarters of revenue growth, which is expected to lift annual sales from $5.5 to $6.4 billion for calendar 2013, and to $7.5 billion in 2014. Despite its expanding size, earnings per share are projected to grow by 23.2% a year, by 28 Street analysts following its stock.

The stock trades at forward P/E of 22.8 times the consensus 2014 earnings estimate. Factoring in its 23.2% a year expected bottom line growth, the stock's P/E to Growth (PEG) ratio of 0.98—right at the 1.00 level—is considered ideal by PEG ratio advocates.

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