During the interim, the NBI s lowest close was 678.47 on April 3. The safest bets in biotech are the heavyweights of the sector. They re big, profitable, reliable performers that usually meet Street earnings estimates quarter after quarter. And at April 30 s closing prices, Immunex and Chiron are the best values among biotech s leading companies, as measured by price to sales ratio. There are good reasons to give sales as much attention as earnings, which tend to hog the investing news limelight.
Sales represent an important measure of a company's intrinsic, or internal, value.
Arguably, sales are more important than earnings, a subset of sales that can fluctuate seasonally. When earnings fall, it's time to worry about performance, expenditures and management strategies. But when sales fall, it might be time to worry about the company's future. Also, a substantial move up or down in sales usually means a company is gaining or losing market share, while a change in earnings may or may not mean the same thing. A company's price-earnings ratio can skyrocket when a temporary problem cuts earnings for a quarter or two.