A Look at Allergan’s Valuation on August 16

Allergan (AGN) is a leading specialty pharmaceutical company focused on developing, manufacturing, and commercializing pharmaceutical and biological products.

In this series, we’ll discuss the company’s valuation in the wake of its second-quarter earnings results, its segment and product performances in the second quarter, its recent developments, and analysts’ latest recommendations on its stock.

The chart above compares the company’s EPS and revenues since the first quarter of 2017.

The company reported revenue of $4.1 billion in the second quarter, a 2.9% year-over-year rise compared to $4.0 billion in the second quarter of 2017.

As of August 16, Allergan is trading at a forward PE multiple of ~11.1x compared to the industry average of ~13.0x. Peers Merck & Co. (MRK), Pfizer (PFE), and Johnson & Johnson (JNJ) are trading at higher forward PE multiples of 14.7x, 13.4x, and 15.3x, respectively.

Allergan is trading at an EV-to-EBITDA (enterprise value-to-EBITDA) multiple of ~11.3x compared to the industry average of ~10.4x as of August 16. Merck & Co., Johnson & Johnson, and Pfizer are trading at higher forward EV-to-EBITDA multiples of 11.9x, 11.7x, and 11.6x, respectively.

Allergan is trading at an EV-to-revenue multiple of ~5.5x compared to the industry average of ~4.1x, as of August 16. Merck & Co., Johnson & Johnson, and Pfizer are trading at lower forward EV-to-revenue multiples of 4.5x, 4.4x, and 4.8x, respectively.

The iShares US Pharmaceuticals ETF (IHE) holds 5.7% of its total investments in Allergan, 7.9% in Merck & Co., 10.2% in Johnson & Johnson, and 9.1% in Pfizer.