Guggenheim Says Valeant Pharma (VRX) is Still a Good Investment; Raises Price Target to $300

Guggenheim reiterates a Buy rating on Valeant Pharmaceuticals (NYSE: VRX), and raised the price target to $300.00 (from $250.00), driven by multiple expansion. Analyst Louise Chen thinks VRX represents a good investment opportunity even at current levels.

Chen commented, "With VRX shares up 58% YTD versus 2% for the S&P 500, it is not surprising that some investors have been taking profits, but we still think VRX represents a good investment opportunity even at current levels. Therefore, we are raising our PT to $300 from $250. The increase in our PT is driven by multiple expansion as the quality and visibility of VRX’s earnings continue to improve. We think that VRX’s forward P/E multiple will expand from 15x to 20x as the Street's appreciation for the sustainability of VRX’s organic and inorganic growth prospects increases. Based on our scenario analyses, VRX’s EBITDA could increase from $7.5B in ’16 ($16.61 in EPS) to $11.0B by ’18 (~$27.00 in EPS, we are at $20.80, consensus is at $19.94). This is a 21% CAGR – above industry growth rates of 10%-15%. Also, this implies a $408 stock price for VRX (20x P/ E, discounted back two years by 15%). We get to these numbers in the absence of any large-scale M&A deals. That being said, we believe VRX’s appointment of new CFO Robert Rosiello, previously head of M&A at McKinsey, supports our view that M&A (both large and small deals) will continue to be an integral part of the company’s strategy going forward, and thus our estimates may prove conservative."

For an analyst ratings summary and ratings history on Valeant Pharmaceuticals click here. For more ratings news on Valeant Pharmaceuticals click here.

Shares of Valeant Pharmaceuticals closed at $228.70 yesterday.

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