Every investor tries to live by the old, worn out adage to buy low and sell high. Making a profit is the name of the game. Nobody enters the equity arena trying to lose what they’ve worked for. For most of us, we go through the numbers, look at the charts, ask our broker, read research… but we don’t have access to inside goods, like a Chief Executive Officer (CEO).
When we see a CEO successfully do the buy low and sell high thing, we can’t help but notice. When the CEO works the adage with a million bucks, the bells start ringing like a winning slot machine, ding, ding, ding, ding, ding. Really, it’s probably more like a cash register, cha-ching, cha-ching…
Herve Hoppenot is the CEO of Incyte Corporation (INCY). Incyte was incorporated in 1991 and is a biopharmaceutical company that focuses on the discovery, development, and commercialization of proprietary therapeutics in the United States and internationally.
Hoppenot is the cha-ching CEO in terms of his history buying and selling the biopharma stock with sums that normally require two commas. His first reported action, although out of order chronologically on our reference site, was a $12.7 million sale at $102.91 in late June 2016. The CEO’s second act was to sell some $8.4 million more in September 2017.
Incyte shares get whacked in May 2018 and Hoppenot breaks out the checkbook and buys $914,100 worth at $60.94. Stocks roll and Incyte is along for the ride, less than two-years later, the CEO is back in the sell column, unloading $9.8 million at $110.
That brings us to last week. The biotech’s shares have been under pressure, falling from $100 in late January to $78.66 as we type. And guess who is back? That’s right, Chief Executive Officer Hoppenot. He bought 12,925 shares at $77.37 for one-million and seven dollars. The seven must have been for good luck. (1)
Speculating based on his history, Hoppenot probably feels he’s buying low and, if things go as they have since 2016, we could see a sell ticket from him in the next 18-24 months when/if Incyte gets to the plus side of $100.
Analysts have a consensus one-year price target of $105.38. (2) Wall Street expects Incyte to earn a consensus $4.47 per share in 2022 with sales hitting $3.45 billion. (3) Normally, we take a look at the five-year average or median price to earnings (P/E) and price to sales (P/S) ratios to create potential landing spots for Incyte in the next 18-24 months. However, the company has a spotty history of turning a profit; therefore, we’ll have to rely solely on price to sales.
As it is with most bio-techs, INCY has lofty historical valuations. The average P/S ratio for the last half-decade is 12.51. The median (midpoint) is 9.42 and it trades at 6.43 times sales today. For our purposes, we’ll use the two lower numbers.
At 9.42 times sales, we get a potential price target of $148.32 and $101.29 if investors continue to value Incyte at today’s P/S ratio. At the low-end, it’s potential upside of 28.77% and 88.56% to the upper level.
Outlook: Incyte Corporation’s (INCY) CEO, Herve Hoppenot has a solid track record of buying low and selling high. Of course, past performance doesn’t guarantee a thing, but it’s worth noting. Additionally, shares of the drug company offer respectable upside based on 2022 sales forecasts and its current P/S ratio.
More aggressive investors seeking to add biotech exposure to their portfolio might consider Incyte Corporation.
1 – https://www.secform4.com/insider-trading/1596492.htm
2 – https://finance.yahoo.com/quote/INCY?p=INCY
3 – https://finance.yahoo.com/quote/INCY/analysis?p=INCY