NEW YORK (TheStreet) -- Perrigo (PRGO - Get Report) shares are down -2.4% to $154.97 on heavy volume today following a note by Jefferies (JEF) analysts saying that anticipation about the possible sale of the over-the-counter drug manufacturer should be tempered.
The firm notes that only a handful of companies would be willing purchase the company for the 25% premium that is reported to be its asking price.
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Of the companies that could purchase the company, many already have over-the-counter divisions and any potential tax benefits from a tax inversion deal for the Ireland-based company would be negligible, according to the analysts.
The firm maintained its "buy" rating and $160 price target on the company.
TheStreet Ratings team rates PERRIGO CO PLC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PERRIGO CO PLC (PRGO) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues slightly increased by 9.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, PRGO has a quick ratio of 1.56, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has increased to $180.50 million or 19.92% when compared to the same quarter last year. In addition, PERRIGO CO PLC has also modestly surpassed the industry average cash flow growth rate of 10.91%.
- 44.03% is the gross profit margin for PERRIGO CO PLC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PRGO's net profit margin of 4.78% significantly trails the industry average.
- PERRIGO CO PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PERRIGO CO PLC increased its bottom line by earning $4.67 versus $4.18 in the prior year. This year, the market expects an improvement in earnings ($6.20 versus $4.67).
- You can view the full analysis from the report here: PRGO Ratings Report