BHC – Although management has concerns about growth rates, market expectations are far too bearish, suggesting longer-term upside may be warranted

• Bausch Health Companies Inc. (BHC:USA)currently trades well below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 12.0x Uniform P/E. At these levels, markets are pricing in bearish expectations for the firm, and while management may lack confidence in their ability to sustain current robust growth rates, long-term equity upside remains warranted should BHC simply maintain current profitability levels
• Specifically, management may be concerned about their ability to sustain current robust growth rates within their top ten products. Specifically, they may be concerned about B+L/International segment growth rates, particularly related to Global Vision Care. Additionally, they may lack confidence in their ability to maintain strong sales of their prescription and branded generic products, and high sales volume through Amazon. Finally, they may have concerns about the slow sales growth of their SILIQ product
• However, management is confident in their goal to reduce leverage of the company, potentially through an equity raise, in order to free up capital for value accretive investments. Moreover, market expectations for Uniform ROA to decline to levels not seen since the Great Recession are far too bearish. As such, longer-term equity upside and multiple expansion are warranted.