Key insights
- This analysis presents Exelixis (EXEL) as a case study demonstrating that a stock trading at an all-time high can still be considered a value pick. The author's algorithm flagged EXEL due to significant earnings growth (EPS projected to rise from $0.65 in FY23 to $2.88 in FY25) leading to a P/E compression from 37x to 15x, despite the stock price tripling. This highlights that valuation should be based on earnings, not
A few weeks ago I posted here about Micron coming up as my algorithm's #1 value pick after the stock had already tripled, and the argument was that price doesn't tell you whether something's cheap - earnings do. Here's another one doing the exact same thing, a mid-cap most people don't follow: Exelixis. It was #1 on my mid-cap value screen in May and #2 in April.
Pull up the chart and your first reaction is fair - it's at an all-time high, breaking above levels it hasn't seen since 2017. That's not what a value chart is supposed to look like. But here's what the earnings did underneath it:
|FY|EPS|P/E|ROE| |:-|:-|:-|:-| |2023|$0.65|37x|9%| |2024|$1.80|19x|23%| |2025|$2.88|15x|36%|
The stock is up 167% over three years, but EPS has increased more than 4 times, from $0.65 to $2.88. So the multiple didn't expand on the way up - it compressed, from 37x to about 15x. Back when this was a $20 stock it traded at 37x earnings; today around $52 it's about 18x. It's literally cheaper now, at 2.5x the price. That's exactly what the screen is built to catch, and it's why a name at an ATH can still score as value - it came in at 83/100 and ranked #1 mid-cap: cheap on earnings (15x), strong on quality (ROE 36%, essentially debt-free at 0.08 D/E), with the DCF leg maxed.
The thing driving it is margin, not growth. Revenue only went from $1.8B to $2.3B (about 7% in the latest year), but net income went from $208M to $783M.
It's up around 18% since the May selection, so some of this has already played out. I'm posting it more as a case study in why an ATH chart and a value rating aren't a contradiction than as a buy call.
Not investment advice. DYOR.