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What Allergan's Latest Developments Tell Us

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Part 7
What Allergan's Latest Developments Tell Us PART 7 OF 7

What Happened to Allergan’s Valuation after 2Q17?

Allergan’s valuation

Allergan (AGN) reported EPS (earnings per share) of $4.02 on revenues of $4.01 billion for 2Q17—an 8.8% YoY (year-over-year) rise in revenues—compared with $3.68 billion in 2Q16. Wall Street analysts now estimate that AGN will see EPS of $4.13 on revenues of $4.05 billion in 3Q17.

What Happened to Allergan’s Valuation after 2Q17?

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Forward PE

PE (price-to-earnings) multiples represent what one share can buy for an equity investor. On September 21, 2017, Allergan (AGN) was trading at a forward PE multiple of ~12.1x, compared with the industry average of 10.8x.

Peers Bristol-Myers Squibb (BMY), Eli Lilly (LLY), and GlaxoSmithKline (GSK) are trading at forward PE multiples of 20.1x, 18.1x, and 12.9x, respectively.

Forward EV-to-EBITDA

On a capital-structure-neutral and excess cash-adjusted basis, Allergan is now trading at a forward EV-to-EBITDA (earnings before interest, tax, depreciation, and amortization) multiple of ~12.0x, which is higher than the industry’s average of ~9.4x.

Peers Bristol-Myers Squibb (BMY), Eli Lilly (LLY), and GlaxoSmithKline (GSK) are trading at forward EV-to-EBITDA multiples of 16.8x, 13.4x, and 8.6x, respectively.

Analyst recommendations

As of September 21, 2017, Allergan’s stock value has fallen ~12.0% over last 12 months, while the stock has remained nearly flat in 2017 YTD (year-to-date). Analysts estimate that the stock has the potential to return ~28.9% over the next 12 months.

The analysts’ recommendations show a 12-month target price of $270.78 per share for AGN stock, compared with its price of $210.00 on September 20, 2017. Of the 21 analysts tracking the stock, 14 recommend a “buy,” and seven analysts recommend a “hold.” None recommends a “sell.”

The consensus rating for Allergan stands at 2.14, which represents a moderate “buy” for long-term growth investors.

Notably, the Vanguard Growth ETF (VUG) has 0.8% of its total assets in Allergan (AGN). VUG also has 0.9% in Bristol-Myers Squibb (BMY).

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