Horizon Pharma (HZNP) Stock Reinstated With 'Buy' Rating at Jefferies

Horizon Pharma (HZNP) stock was reinstated with a 'buy' rating at Jefferies on Monday.
By Amanda Albright ,

NEW YORK (TheStreet) -- Jefferies reinstated coverage of Horizon Pharma (HZNP) - Get Report stock with a "buy" rating and a $32 price target on Monday.

The Irish biopharmaceutical company abandoned its hostile takeover attempt of Depomed (DEPO) last week, but near-term M&A is still likely, Jefferies said. Horizon is likely to complete at least one acquisition of the next six months, the firm noted.

Horizon has delivered two consecutive quarters of strong revenue growth and has raised its fiscal 2015 earnings guidance twice, according to Jefferies. 

Horizon is currently embroiled in a legal battle between Express Scripts (ESRX), which announced earlier this month that it was suing Horizon for withholding rebates and ending its relationship with Linden Care pharmacy. 

"One of the most notable events was the announcement that Express Scripts was cutting ties with Linden Care - a spec pharmacy partner of Horizon's - which led to a 20% selloff on November 11," Jefferies said. "The potential financial impact of these developments remains unclear, but management has since reiterated its fiscal 2016 guidance - suggesting it may be less than feared."

Shares of Horizon are up by 0.58% to $21.73 in after-hours trading on Monday. 

Separately, TheStreet Ratings team rates HORIZON PHARMA PLC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

We rate HORIZON PHARMA PLC (HZNP) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its feeble growth in its earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, HORIZON PHARMA PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • HORIZON PHARMA PLC reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, HORIZON PHARMA PLC reported poor results of -$3.70 versus -$2.29 in the prior year. This year, the market expects an improvement in earnings ($1.81 versus -$3.70).
  • HZNP's debt-to-equity ratio of 0.91 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.82 is very high and demonstrates very strong liquidity.
  • The gross profit margin for HORIZON PHARMA PLC is currently very high, coming in at 93.90%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, HZNP's net profit margin of 1.44% significantly trails the industry average.
  • Net operating cash flow has significantly increased by 5928.85% to $88.38 million when compared to the same quarter last year. In addition, HORIZON PHARMA PLC has also vastly surpassed the industry average cash flow growth rate of -0.80%.
  • You can view the full analysis from the report here: HZNP

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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