Perrigo Stock Skyrockets Due to Takeover Talks



Perrigo stock skyrockets

On June 14, 2016, Perrigo (PRGO) was the top performer within the Health Care Select Sector SPDR ETF (XLV). It gained 9.2% and outperformed the SPDR S&P 500 ETF (SPY). SPY fell by 0.2%. Nearly 8.4 million of Perrigo shares were traded—compared to the three-month average trading volume of ~2.7 million shares per day.

Perrigo went up based on a report that it’s close to an agreement to be taken over by a United Kingdom company for $20 billion. Perrigo closed at $108.13 and traded above the 20-day moving average price of $96.10. It’s important to note that ~4.6% of Perrigo’s total equity float is in a short position. However, the stock has fallen by 25.3% on a year-to-date basis. Perrigo has a relative strength index of 50. This indicates that the stock isn’t overbought or oversold. As of the closing price on June 14, the stock was trading at a 2016 forward price-to-earnings multiple of ~13.1. Perrigo has a book value of $68.77 per share. At its current price, the stock is trading at a price-to-book value of ~1.60x. Some of its other peers such as Pfizer (PFE), Bristol-Myers Squibb (BMY), and Eli Lilly (LLY) are trading at a price-to-book value of ~3.4x, 8.4x, and 5.50x, respectively. Perrigo is trading at a discount compared to its peers.

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Analysts’ expectations and recommendations

Analysts’ consensus estimate for Perrigo’s 12-month target price is $117.20—a potential return of ~8.3% from its current price. Seven or 33.3% of analysts recommended the stock as a “buy,” 12 or 57.1% of analysts recommended the as a “hold,” and two or 9.5% of analysts recommended the stock as a “sell.” Perrigo carries a weight of ~0.5% in XLV’s portfolio.


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