Shire Shares Overvalued After Rally

Morningstar Equity Research implies the market is overvaluing the pharma stock relative to its fair value

Holly Cook 29 November, 2011 | 12:46PM

Biopharmaceutical firm Shire (SHP) has enjoyed a strong rally in recent trading sessions, bolstered in part by full-year results published at the start of the month. But with the stock currently trading above 2,030p per share (as at November 29), the Morningstar Rating for Stocks implies Shire is now an expensive prospect for investors looking to get into the stock. The star rating that Morningstar applies to stocks under coverage is both quantitative and qualitative, and is designed to be forward-looking. If a stock has a high star rating, that means we think the shares have good upside potential and that prospective investors might want to keep them on their radar. Shire currently trades in excess of 35% above Morningstar's long-term fair value estimate and as such is carrying a two-star rating at present.

Karen Andersen, the Morningstar analyst covering Shire, believes that the company's growing portfolio will provide strong top-line growth during the next few years. However, Andersen also think that future generic competition in the ADHD market and the closing window to capitalise on Genzyme's drug shortages prevents a more aggressive stance on the firm's prospects.

Read Andersen's recently-updated research report and fair value estimate for Shire--and check its Star Rating, which is updated daily according to the closing share price--here.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Shire PLC3,984.50 GBX-1.31
About Author Holly Cook

Holly Cook  is Managing Editor of