Valens Research Weekly Equity Idea Highlight for October 4, 2017 – Valeant Pharmaceuticals International, Inc.
This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
Overblown concerns about Valeant’s credit risk and operational risk mask a recovering business, liquidity to navigate issues, improved management alignment and a management team that has control of perceived issues
Current market expectations for VRX are overly pessimistic. The company’s business practices and leverage overhang from ex-CEO Pearson’s period running the firm continue to act as a drag on valuation in the market. While VRX has for the most part sustained continued robust returns over the past 15 years, and even after crisis hit in 2015-2016, the market is pricing the company to have ROA’ decline to levels not seen other than in the 2008 period, and to have dramatically slower growth. While VRX continues to have a robust portfolio of operating businesses, even after having sold some of their assets to improve liquidity and de-lever, the market is pricing the company as though the underlying fundamentals of the business have changed dramatically.