Bill Miller on Valeant Pharmaceuticals
Bill Miller discussed Valeant Pharmaceuticals in a recent interview with CNBC. Earlier, Miller spoke about Valeant Pharmaceuticals (VRX) at the Delivering Alpha Conference. He said that Valeant Pharmaceuticals looks like a completely different company with its new management. He also said that the stock could provide a good return in the long term. Valeant Pharmaceuticals’ new business strategy could be an important driver.
According to Bill Miller, Valeant Pharmaceuticals (VRX) is correctly valued. The stock’s price-to-earnings ratio is at 2.7x. Its net-debt-to-adjusted-EBITDA (or earnings before interest, tax, depreciation, and amortization) ratio is around 7x. Higher net debt to adjusted EBITDA reflects higher financial leverage for the stock. However, Bill Miller emphasized Valeant’s debt compared to the stock. He expects that the company could report proceeds of $2.8 billion by selling two of its business units. In September 2016, Valeant’s CEO Joseph Papa spoke with CNBC and discussed the possible sale of Valeant’s assets to reduce the company’s debt. Valeant’s new management is trying to re-establish the company in the market (VFINX) (VOO).
How has Valeant performed in the last year?
Valeant has lost about 85.3% in the last one year ending on February 3, 2017. In the last one year, the Health Care Select Sector SPDR Fund (XLV) rallied about 10.5% and the S&P 500 Index (SPX) (SPY) moved up 22.3% during the same time period. Its negative performance was mainly due to an increase in two drug prices.
In the next part of this series, we’ll analyze Bill Miller’s view on Amazon (AMZN).