Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
I will take a crack at this one but keep in mind that I am a scientist, not an accountant so if I make any mistakes please point them out. Due to the Redemption event, accounting changes, and legal costs, I find Genentech's financial statements a bit tough to wade through.

I obtained my data from the earnings press releases located on Genentech's website: http://www.genentech.com/gene/investor_relations/financial_info/earnings_releases.html


As P/E ratios are usually derived by using earnings from the last year, I will use Q2-Q4 of 2000 and Q1 2001 data in my calculations. I obtained the numbers by going through each quarterly earnings report and tallying up the income and EPS numbers.

So for the last 12 months:
Actual Net Income = $31.5 million
Actual EPS = $0.08

Pro forma Net Income = $338 million
Pro forma EPS = $0.64


So today, Tuesday, Genentech closed at $50.25. Since I believe most sites such as Netscape and Yahoo must use the actual #'s then the P/E comes in at 628 or so, and thankfully this is the same as what I found at marketwatch.com so my math looks ok.

This high P/E should not be cause for concern for two reasons. First, if you don't understand the Redemption event check out Genentech's SEC filings and earlier threads in this board for an explanation. These charges absolutely kill the earnings figure while not having anything to do with the business whatsoever. So using the pro forma EPS we now get a P/E of 78.5, which is still high by most accounts, but definitely not as bad as 600.

I hope this answered your question
Charly
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.