Opinions
Paul MacDonald
Viatris
VTRS-Q
COMMENT
Feb 11, 2021
Stock price when the opinion was issued
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Premium contentThe pharma company produces Lipitor as one of its brands. It has embarked on a divestiture strategy that is allowing it to focus on core competencies and reduce costs. The are on target for $450 million in new product launches. It trades at 7x earnings and below book value. Cash reserves are growing as debt is aggressively retired. Its dividend is backed by a payout ratio under one-third of cash flow. We recommend placing a stop-loss at $8.50, looking to achieve $41 -- upside potential of 30%. Yield 4.5%
(Analysts’ price target is $14.11)Premium contentWe reiterate VTRS, producer of Lipitor as one of its brands, as a TOP PICK. Management has simplified its product offering portfolio and committed to returning half of free cash cash flow to shareholders through aggressive share buybacks. It trades at 8x earnings and below book value. Cash reserves are growing as debt is aggressively retired. Its dividend is backed by a payout ratio under one-third of cash flow. We recommend trailing up the stop (from $8.50) to $10.50, looking to achieve $14 -- upside potential of 19%. Yield 4.0%
(Analysts’ price target is $14.13)Premium contentPremium contentOur PAST TOP PICK with VTRS has triggered its stop at $11.50. To remain disciplined we recommend covering the position at this time. Along with previous recommendations, this will result in a net investment gain of 4%.
Proof that not every stock he buys goes up ;) He's held for years. Recent earnings were weak, and stock fell ~15%. Generating significant free cashflow, which now will be used to buy back shares incredibly cheaply. It's the best use of capital at this time. FDA investigation in one of their plants, costing about $300-400M in EBITDA. Yield is 4+%.
VTRS vs. TMO VTRS has lower growth assets with fairly consistent cashflows. TMO is into tools and diagnostics. 75% of TMO's business is consumables. It's benefitting significantly from Covid, and this should continue. They blew away estimates, and so you pay a bit more for it.