How Will Allergan (AGN) Stock Be Affected By Poison Pill Stance Against Valeant (VRX), Ackman?

NEW YORK (TheStreet) -- Shares of Allergan Inc. (AGN) are slightly higher in pre-market trade after the health care company adopted a poison pill defense against the unsolicited $46 billion takeover bid from Valeant Pharmaceuticals (VRX) and activist investor Bill Ackman.

Allergan shares closed up 15.25% to $163.65 yesterday, while Valeant's stock closed up 7.46% to $135.41.

Ackman told CNBC that Allergan's poison pill defense doesn't necessarily make the takeover that he and Valeant are pursuing more difficult.

He said he supports the poison pill as a way for Allergan to figure out its alternatives.

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TheStreet Ratings team rates ALLERGAN INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALLERGAN INC (AGN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, notable return on equity, good cash flow from operations and expanding profit margins. 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 0.7%. Since the same quarter one year prior, revenues rose by 14.4%. 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, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.64, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Pharmaceuticals industry and the overall market, ALLERGAN INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $515.30 million or 3.08% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.34%.
  • ALLERGAN INC reported flat earnings per share in the most recent quarter. 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, ALLERGAN INC increased its bottom line by earning $4.20 versus $3.57 in the prior year. This year, the market expects an improvement in earnings ($5.46 versus $4.20).
  • You can view the full analysis from the report here: AGN Ratings Report
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