Valeant Pharmaceuticals (VRX) Stock Climbs on Potential Sale
NEW YORK (TheStreet) -- Valeant Pharmaceuticals (VRX) stock is advancing by 4.15% to $82.02 in pre-market trading on Friday, as the pharmaceutical company explores the idea of selling itself.
After the stock collapsed to two-year lows yesterday, activist investor Bill Ackman, one of the largest shareholders of the company, sent Valeant CEO Michael Pearson an email in which he noted: "You have assured me that you and the rest of the board are considering any and all alternatives that would benefit shareholders and other stakeholders. "
"Alternatives" could refer to a sale or breakup, according to the New York Post.
Ackman previously hinted at a sale during a call on Friday, when he noted that the Pfizer (PFE) and Allergan (AGN) merger or Merck (MRK) could be ideal buyers, the New York Post adds.
Valeant stock came under pressure yesterday following a Wall Street Journalarticle that revealed Ackman has doubted whether Pearson is fit to lead the company. The pharmaceutical company also faces a number of investigations, including a Senate probe, into its drug pricing practices.
Separately, TheStreet Ratings team rates VALEANT PHARMACEUTICALS INTL as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate VALEANT PHARMACEUTICALS INTL (VRX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and generally higher debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 35.5%. 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.
- Net operating cash flow has increased to $736.40 million or 19.02% when compared to the same quarter last year. In addition, VALEANT PHARMACEUTICALS INTL has also vastly surpassed the industry average cash flow growth rate of -58.99%.
- VALEANT PHARMACEUTICALS INTL 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, VALEANT PHARMACEUTICALS INTL turned its bottom line around by earning $2.67 versus -$2.62 in the prior year. This year, the market expects an improvement in earnings ($11.72 versus $2.67).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Pharmaceuticals industry and the overall market, VALEANT PHARMACEUTICALS INTL's return on equity is below that of both the industry average and the S&P 500.
- The share price of VALEANT PHARMACEUTICALS INTL has not done very well: it is down 14.08% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: VRX
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.