NEW YORK (TheStreet) -- Valeant Pharmaceuticals (VRX) is dropping its growth-by-acquisitions strategy for the time being to try to reduce debt, boost its stock price and one day return to its traditional deal-making in a stronger position, sources told Reuters.
After spending $19 billion on 40 acquisitions since 2008, the Canadian drugmaker is regrouping after failing last month to acquire Botox-maker Allergan (AGN) , sources said.
The new strategy, targeted for the next two to three quarters, may surprise some investors accustomed to Valeant's usual way of doing business.
Speculation about Valeant's next takeover target has driven up shares in generic drugmaker Mylan (MYL) , medical device maker Cooper Cos. (COO) and Teva Pharmaceuticals Industries (TEVA) , Reuters said.
Shares of Valeant Pharmaceuticals closed down 0.66% to $143.94 yesterday.
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, compelling growth in net income, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 8.8%. Since the same quarter one year prior, revenues rose by 33.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 128.3% when compared to the same quarter one year prior, rising from -$973.24 million to $275.40 million.
- Net operating cash flow has significantly increased by 206.72% to $618.70 million 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 -19.49%.
- The gross profit margin for VALEANT PHARMACEUTICALS INTL is currently very high, coming in at 75.57%. 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 13.39% trails the industry average.
- Powered by its strong earnings growth of 127.73% and other important driving factors, this stock has surged by 33.76% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
- You can view the full analysis from the report here: VRX Ratings Report