John Zechnerhttps://www.bnn.ca/Video/player.aspx?vid=742034
Last purchased at $29.00.
Concordia has gotten swept into the ‘Valeant vortex’ which saw its stock drop as much as 70 percent in just over a month as worries about drug pricing, roll-up acquisitions, high debt leverage and health care accounting drove valuations in the sector lower. The company has completed the acquisition AMCo for US$2.1 billion but has also put in place the debt and equity financing for this transaction, which will add substantially to its global product portfolio, lessen its dependence on any single product and generate more overseas sales. Debt is high post the deal but free cash flow is also strong and we expect the Debt/Ebitda ratio to drop below 5 times by the end of 2016. The stock valuation is extremely attractive on a free cash flow yield and forward earnings basis. As the current panic over the sector subsides, we expect the stock to outperform the market.
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2015-11-03 |
TOP PICK |
John Zechner |
When he sees a stock down 60%-70%, he has to have a look at it. He did and realized that it was obviously getting swept up in the Valiant vortex of worry of fraud, etc. The timing of their acquisition was obviously not that good, but the deal was financed. The equity financing and debt financing is going to give them a broader product portfolio. They are not dependent on any price increases. Basically trading at 5 to 6 times next year’s earnings on a pro forma basis. Debt levels are high right now but they will be generating a lot of free cash flow. Dividend yield of 1.05%.
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Price:
$41.910
Subject:
NORTH AMERICAN - LARGE
Bias:
BEARISH
Owned:
Yes |