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What’s Allergan’s Valuation after 2Q17 Earnings?


Aug. 21 2017, Published 3:11 p.m. ET

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.

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Forward PE

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.

Forward EV-to-EBITDA

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.

Analyst recommendations

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).


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