Concordia Healthcare Corp. T.CXR.R

Will CXR's results be as good as Scotiabank is predicting?

[Scruggstyle]

Scotiabank Equity Research Spotlight CXR

2015 Expected

Cash earnings per share:  $4.79
Cash flow per share:  $4.33
Revenues (M):  $425
Adjusted EBIT-DA (M):  $282
EV/Adj EBIT-DA:  17.3x 
Total Debt (M):  $3,520
Net Debt/EBIT-DA:  5.6x

2016 Expected

Cash earnings per share:  $6.74
Cash flow per share:  $6.99
Revenues (M):  $1,018
Adjusted EBIT-DA (M):  $630
EV/Adj EBIT-DA:  7.5x
Total Debt (M):  $3,479
Net Debt/EBIT-DA:  4.9x

2017 Expected

Cash earnings per share:  $7.60
Cash flow per share:  $7.66
Revenues (M):  $1,081
Adjusted EBIT-DA (M):  $676
EV/Adj EBIT-DA:  7.0x
Total Debt (M):  $3,325
Net Debt/EBIT-DA:  4.2x

Recommendation:

We believe Concordia's shares will likely trade higher as the market becomes more comfortable with the growth potential of AMCo, which should become apparent as the company reports results over the next 3-4 months. As a result, we maintain our $75 price target, Sector Outperform. 

[Scruggstyle]

I am betting they will.

[adamchess]

hi Scruggstyle, I was wondering - should we not be expecting a larger paydown of the debt in 2017? I was expecting closer to 300m. Probably more with greater than expected revenues, etc. Cheers

[Scruggstyle]

You are forgetting that the goal isn't to pay off the debt. You want to use cheap credit to finance growth and earnings, in order to maximize EPS. The goal is to reduce the debt to an optimal level, which very well may be in the 4x to 5X EBITDA range. For anyone that is confused by this or is being confused by some of the posts on here that appear to disagree with the above statements, I

[sunshine7]

With the recent increase in Donnatal sales force in the US from 75 to 175 persons, I think they saw an opportunity that did not exist when original 2016 guidance was written. 100 sales should generate over $100M sales, so yes, I believe they will surprise to the up side in 2016 and beyond. Regarding the debt ratios, there are 2 ways to address: pay down debt or increase sales. I think they will be