Concordia Healthcare Corp. T.CXR.R

earnings multiple

[d_trump]

why does everyone keep saying this is trading at 3 or 4 times earnings?  If you are using EBITDA as your measure of earnings (as opposed to EPS), then you have to deduct debt from the P x E value because EBITDA excludes interest cost.  Assuming $600M USD EBITDA , the current multiple is 7.75 times:

600US x 7.75 = $4,650 less 3,300 debt = 1,350 divide by 54M shares = $25USD

Similarly I fail to see the rationale for a buyout for more than $45USD.  Yet there are many here expecting a buyout at double or triple the current share price.  I just don't get it.....

BTW I am long with a $33ish average.  I see value at these levels but nowhere near the apparent concensus here.

[adamchess]

If EBITDA is greater than $10 a share and multiple is 7.75 as you say, isn't the price then simple $77.50? USD of course. If it was $25 USD why would others have paid $65 USD?

[d_trump]

No, if you are using EBITDA to value the company then you have to deduct the debt from the total value to arrive at the equity value..  Either that or use EBTDA (EBITDA less interest expense).  Equity value + debt = enterprise value.  That's how all M&A is done.

[CookieMonster]

The debt is $65 U.S. Per share.

[fdfd12]

One problem, there are only 51M shares not 54M. Also using this, most pharmas in this sector are trading at 12 to 12 times and getting buyouts at 13-14 times.

[CookieMonster]

Apollo tend to be contrarion and value buyers.  They took ADT private earlier this year at less than 8x. Ev/ebitda.

[d_trump]

My point is that CXR is not trading at 3 or 4 times earnings.  Closer to 8.  A strategic buyer might pay 13-14 times but its doubtful that Private Equity would pay that much expecially since the balance sheet is already levered.  

[fdfd12]

Donald Trump, of course it is trading at 4 times earnings. They will do $6.50US this year and the stock is 24.50 NOW!!. 24.5/6.50=  3.77 times earnings. Get a calculator and then win the presidency.

[wallop13]

Yeah, so they will need to pay 11x. Where else will they get a drug company for that price? It's a value buy.

[wallop13]

I just ran the numbers. 55 CAD price per share would be 9.2x adjusted EBITDA. (5.5B USD divided by $600M).

[CookieMonster]

Cxr paid 11x ev/ebitda for Amco

[d_trump]

Yes as a strategic buy, 11x is reasonable.  Private Equity however would not pay 11 times IMHO.

[wallop13]

Well they won't get it for 8X, so end this leaky sale sh*t. Pay 50% of the debt off over the next 4 years and let the stock tripple. I also doubt any UK price change will happen. The UK exhibits one of the highest prices for branded products and the lowest prices for generics in Europe. UK generics pricing levels have long been admired by many other European countries

[notwrong]

This post has been removed in accordance with Community Policy

[Zdragunov]

Notwrong if I am going with your calculations then we assume that there isn't any future growt right? 3400million /330 is around 10, but if there is growt and safe to say there will be the debt could be paid off much faster right?

[fdfd12]

Sorry Notwrong. The cashflow looks like it will be close to $400M and the debt is 3.3B. The 3.5B will get paid in 7 or 8 years. Here is the video. https://www.bnn.ca/Video/player.aspx?vid=739294

[wallop13]

Yes. But as you pay off the debt you save interest. So if in year one you pay off 10% of the principal, then next year you have $27.2 Million extra to put towords the debt. So the debt could be paid in full in 7.5 years if we compound. I would also hope for some sort of sales growth.

[Ellesse]

It suck to see the down 5% everyday.... Imagine if they reject the deal... the we will not be surprised to see sp drop below $25.00.... So speculate at time now..... I want to buy more but getting scary now....