NEW YORK (TheStreet) -- I would describe the charts of Valeant Pharmaceuticals (VRX) as "textbook" bullish. In this first chart below we see a great looking uptrend the past three years with a positive on balance volume (OBV) line showing that volume has been expanding and confirming the advance.
This first chart also shows that VRX has had only relatively shallow corrections, which is very positive as investors are putting money to work on sideways to slightly lower dips.
The second chart above is even better. Stocks that breakout of big bases can make huge moves and just look at that 10-year base from 2001 until 2011! In a word -- impressive!
The third chart above is a point and figure (P&F) chart. Notice the two most recent columns on the chart. The market selloff crushed some stocks, but VRX shows a decline to around $204 -- the top of a $204 to $196 support area on this chart. Stocks that stop declining at the top of a support area are strong and show that investors are stepping into buy here instead of waiting or hoping for a deeper setback.
The last chart above, from Bloomberg, shows both the big multi-year base and an upward sloping channel. The bottom line or uptrend line of the channel is the support line and shows where buyers have come in. The top trendline or return line of the channel shows the upside potential for VRX. The next rally up in VRX could reach $300 or so. The $300 target or price objective would also be a 10-bagger from around the middle of that huge base ($30). Remember the huge base in Action Alerts PLUS holding Occidental Petroleum (OXY) - Get Occidental Petroleum Corporation Report in the 1980s and '90s around $10? It was a 10-bagger when it finally broke out.
Separately, TheStreet Ratings team rates VALEANT PHARMACEUTICALS INTL as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate VALEANT PHARMACEUTICALS INTL (VRX) a BUY. This is driven by several positive factors, 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 robust revenue growth, good cash flow from operations, expanding profit margins, solid stock price performance and notable return on equity. We feel its 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 greatly exceeded the industry average of 7.0%. Since the same quarter one year prior, revenues rose by 33.9%. 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 slightly increased to $410.50 million or 9.17% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.37%.
- The gross profit margin for VALEANT PHARMACEUTICALS INTL is currently very high, coming in at 78.66%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.93% is in-line with the industry average.
- Compared to its closing price of one year ago, VRX's share price has jumped by 102.52%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- 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 ($11.64 versus $2.67).
- You can view the full analysis from the report here: VRX Ratings Report