Should you Buy Codexis Despite Lofty Valuations?

Codexis Inc. (NASDAQ:CDXS) has stunned investors with the massive growth of 68% in the last twelve months, soaring significantly by 213% in the last five years. CDXS stock is currently trading around $8.5 a share, the highest level in the last seven years. Its recent partnership with Nestlé Health Science shows the importance of its CodeEvolver® protein engineering technology platform for biotherapeutic drug discovery.

Moreover, the company expects collaboration with Nestlé Health Science to be assertive for its upcoming financial results.

The company’s latest financial results also impressed investors. Its product sales surged 71% in the third quarter, compared to the prior year period, while gross margin was also hovering at the high end of its guidance range. The higher demand for enzymes led it to post massive gains in product sales.

Furthermore, Codexis expects its fourth-quarter sales to hit the highest level in history. Full-year sales are likely to stand around $53 million, higher from $49 million in the last year.

Its CEO stated, “Delivering on our 2017 revenue guidance will be an exceptional accomplishment by the Codexis team, especially given that over $20 million of last year’s revenues were from non-recurring milestone payments and deferred revenues related to the completion of our two pharmaceutical partners’ platform license technology transfers. “

Looking at research and developments activities, Jefferies has reiterated its Buy rating on Codexis shares and they suggest traders to buy the stock after collaboration with Nestle. Analysts expect 15% revenue CAGR growth through 2020, as Codexis continues to expand into new several big new markets.  Moreover, analysts expect sales growth of almost 25% in FY2018.

Its market capitalization is currently hovering around $403.28 million after hitting 52-weeks high. Its 50-day SMA was $6.85 and a 200-day SMA was $5.56. Although some investors suggest selling the stock after hitting the 52-week high, bullish investors have strong confidence in their future fundamentals. Bullish investors expect its price to extend the momentum amid higher sales and earnings expectations for FY 2018. Overall, Cordexis looks in a solid position to support its share price through its sales growth and new partnerships.

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About the author: Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.