At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the worst ...
At first glance, it appeared to be good news. Echoing Wedbush Morgan's enthusiastic endorsement of Celgene (Nasdaq: CELG) from April, fellow Wall Street banker Jefferies upped its opinion of the stock to "buy" as well yesterday. And with Celgene coming off a quarter in which sales grew 31% and profits spiked 44%, I can see why the analysts are enthusiastic, especially in light of positive clinical data released over the weekend: Celgene's blockbuster Revlimid anti-cancer drug was shown to have beneficial effects in a phase 2 trial with patients suffering from indolent B-cell non-Hodgkin's lymphoma, when combined with Rituxan from Roche and Biogen Idec (Nasdaq: BIIB). Further, in a phase 3 study, it showed beneficial effects on progression free survival for melanoma patients following a bone marrow stem cell transplant.

Jefferies sees these results as boosting the case for Revlimid's use as both a "maintenance drug" and as a lymphoma treatment. Combined with the stock's recent steep decline in price, the analyst thinks now's a great time to reup on Celgene.

But is that right?

Let's go to the tape
Initial indications don't look promising. Reviewing Jefferies' record in the biotech and pharmaceutical industries, we find the analyst getting fewer than half its picks right in the former, and barely one-in-four right in the latter. In quick succession, Jefferies has made bad calls on everything from bigger companies like Genzyme (Nasdaq: GENZ) and Pfizer (NYSE: PFE), all the way down to tiny Mannkind (Nasdaq: MNKD) -- twice, in fact! Between its March 2007 endorsement, and its March 2008 advice to sell the stock, Jefferies has accumulated a startling record of 84 percentage points worth of underperformance on Mannkind.

And yet, if you recall, Wedbush's record wasn't so wonderful, either. And Jefferies does have one thing going for it that Wedbush did not: It's been right before on Celgene (outperforming the market by 23 points on two past recommendations.) And you know what? I think it just might be right again today.

Olly olly cancer free!
Not because of the weekend's test results, mind you. Actually, the way I read them they sound like rather weak tea -- nothing like the mythical "silver bullet" cancer-cure. And indeed, Jefferies doesn't seem all that impressed, either. In making its upgrade, it also reduced its price target on Celgene's stock.

Fortunately, my optimism about Celgene is based on a much simpler thesis: value. You see, when I declared myself "not sold on Celgene" back in April, my reasons had less to do with the company's products or its prospects, and more to do with the fact that the stock price seemed to already incorporate these factors -- and to be priced for perfection.

It seems I was right about that. But after watching Celgene's stock price tumble 13%, I'm beginning to agree with Jefferies that the time is right to reenter the stock. Here's how I come to that conclusion:

Last night, Celgene closed at for $53.81 a share -- $24.8 billion in market cap. This works out to a 29 P/E ratio, a multiple that prices Celgene far in excess of larger biotech rival Amgen (Nasdaq: AMGN). But because Celgene is such a stellar cash-producer, and sports so much cash on its balance sheet in consequence, its enterprise value-to-free cash flow ratio works out to a much more reasonable 22.4x multiple.

Foolish takeaway
Is Celgene destined to become "the next Genentech," as Wedbush predicted all those weeks ago? Maybe, but for now I remain unconvinced. That said, relative to the company's earnings growth prospects, which most analysts peg at better than 22.5% per year going forward, Celgene looks slightly undervalued to me today.

It's not so cheap that I'm going to join Wedbush and Jefferies in urging you to rush right out and buy it today, mind you. But it is getting there. And I am getting interested.

But are you? Tell us why, or why not, on Motley Fool CAPS.

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