A look at Allergan
Allergan is a global pharmaceutical company focused on the development, manufacturing, and commercialization of pharmaceuticals, devices, and biologic products worldwide. Allergan’s headquarters are in Dublin, Ireland.
The company reported growth of 8.8% in its 2Q17 revenues to $4.01 billion as compared to $3.68 billion in 2Q16. The company surpassed analysts’ estimates for earnings per share (or EPS) with reported EPS of $4.02 against estimates of $3.93 for 2Q17. The above chart shows the company’s revenues and EPS over the last few quarters.
PE multiples represent what one share can buy for an equity investor. As of August 17, 2017, Allergan (AGN) was trading at a forward PE multiple of ~13.1x as compared to the industry average of 10.7x. Other competitors like Bristol-Myers Squibb (BMY), Eli Lilly and Co. (LLY), and Merck (MRK) are trading at forward PE multiples of 18.4x, 18.3x, and 15.4x, respectively.
On a capital-structure-neutral and excess-cash-adjusted basis, Allergan currently trades at ~12.8x, which is higher than the industry’s average of ~9.4x. Other competitors such as Bristol-Myers Squibb (BMY), Eli Lilly (LLY), and Merck (MRK) have forward EV-to-EBITDA multiples of 15.4x, 13.7x, and 11.6x, respectively.
As per the data on August 17, 2017, Allergan’s stock value has fallen ~10.0% over the last 12 months, while the stock has risen 8.2% in 2017 year-to-date. Analysts estimate that the stock has the potential to return ~18.0% over the next 12 months. Analysts’ recommendations show a 12-month targeted price of $268.12 per share compared to the last price of $227.99 per share as of August 16, 2017. A total of 21 analysts are tracking Allergan’s stock. Of these, 15 analysts recommend a “buy,” and six analysts recommend a “hold.” None of the analysts recommended a “sell.” The consensus rating for Allergan stands at 2.1, which represents a “buy” for long-term growth investors.
To divest company-specific risks, investors can consider ETFs like the VanEck Vectors Biotech ETF (BBH), which holds 7.1% of its total assets in Allergan. BBH also holds 6.1% in Biogen (BIIB), 10.3% in Gilead Sciences (GILD), and 11.2% in Celgene (CELG).