Why Valeant Pharmaceuticals (VRX) Stock Is Down

NEW YORK (TheStreet) -- Shares of Valeant Pharmaceuticals Int'l (VRX) are down -1.27% to $129.50 after it was reported that Allergan, Inc. (AGN) rejected Valeant's unsolicited takeover proposal, saying the offer "substantially undervalues" the maker of the Botox wrinkle treatment, Bloomberg reports.

Allergan's stock is down -1.12% to $159.50

The bid valued Allergan at $45.7 billion in cash and stock when it was announced.

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It creates "significant risks and uncertainties," Alllergan said as the company expects earnings per share to increase 20% to 25% next year, with double-digit revenue growth.

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, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good."

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

  • VRX's very impressive revenue growth greatly exceeded the industry average of 5.2%. Since the same quarter one year prior, revenues leaped by 76.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 77.59% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the Pharmaceuticals industry average, but is less than that of the S&P 500. The net income increased by 17.9% when compared to the same quarter one year prior, going from -$27.53 million to -$22.60 million.
  • VALEANT PHARMACEUTICALS INTL has improved earnings per share by 22.2% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, VALEANT PHARMACEUTICALS INTL reported poor results of -$2.62 versus -$0.38 in the prior year.
  • The gross profit margin for VALEANT PHARMACEUTICALS INTL is rather high; currently it is at 54.52%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, VRX's net profit margin of -1.19% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: VRX Ratings Report

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