Teva’s forward valuation multiples
On June 13, Teva Pharmaceutical Industries (TEVA) was trading at a forward PE (price-to-earnings) ratio of 8.8x, compared to the industry average PE of 12.3x. The company’s forward EV-to-EBITDA,[1. enterprise value to earnings before interest, tax, depreciation, and amortization] which is a capital structure–neutral valuation measure, is 11.2x. This multiple is higher than the industry average of 10.3x.
The forward PE ratio of a stock is calculated by dividing its current stock price by the company’s next-12-month earnings estimate. It measures a company’s growth potential over the next 12 months. Generally, a high-growth entity or an overvalued stock has a high forward PE.
The PEG (PE-to-growth) ratio is a growth-adjusted metric and is a better valuation multiple for comparing companies with different growth rates. On June 13, Teva had a 12-month forward PEG ratio of ~1.5x.
Teva’s valuation has been rising steadily after a major slump triggered by significant sales declines in fiscal 2017. The company has shown steady recovery, followed by its clear restructuring and balance sheet deleveraging plans, which were detailed by the company in December 2017.
TEVA stock has risen ~24.4% over the last month, triggered by several positive events. On June 11, TEVA stock rose ~3.7%, triggered by good news from its two partner firms. For further details, please read Teva Stock Could Jump after Good News from Partner Manufacturers.
On June 13, Teva’s peers Novartis (NVS), Biogen (BIIB), and Mylan (MYL) had forward PEs of 13.9x, 12.2x, and 7.4x, respectively. NVS, BIIB, and MYL had forward PEG ratios of 1.9x, 1.4x, and 0.67x, respectively. The iShares MSCI EAFE ETF (EFA) holds 0.16% of its total investments in Teva Pharmaceutical Industries.
In the next article, we’ll discuss Teva’s recent stock performance.
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