Valeant is down 20% today on missed earnings, slashed guidance, and is trading a few bucks off of its book value, and something like 4x forward earnings.
There are some interesting articles floating around, posturing that the value of the underlying Valeant businesses is greater than Valeant's current market cap.
What do you guys think about investing in this company as a pure value play? I'd love to hear some original thoughts/opinions.
It will take some time for the company to turn around, considering all the hate towards the pharma companies. If you gonna invest it will certainly be for the long term as you probably won't get great returns right away.
Personally I would never label a company like Valeant as a "value play", regardless of how cheap it gets. Just because a company trades at a significant discount to its historical valuation doesn't mean it's a good buy-- in fact, these are exactly the value traps you should look out for. Instead, a restructuring/activist play is likely the only way this company's stock will see a rebound.
Ackman's back is against the wall, and with increasing scrutiny placed on big pharma these days alongside the heaps of debt the company acquired through inorganic growth, he's going to have a tough time digging himself out of this one. The reason why Valeant will never be a value play in my eyes is shady accounting practices, uncertainty of management moving forward and I honestly don't see this Valeant's price gouging to be sustainable given the publicity Clinton/Shkreli/et al has brought upon over the last year or so. Perhaps Valeant could be a good speculative play if you have an opinion on a price floor for the company's stock, but I can see this stock either going to 0 or rallying 100-200%. Personally staying out of this one myself.
I have read that at it's current valuation, there is a non-negligible chance that sometime in the future the company could potentially be an M&A target. This is because there are probably at least one or two good and extremely cheap businesses (haven't personally done the research) rolled up in Valeant.
I think that contingent upon either 1) long-term price rebound potential, or 2) possibility of being acquired, it could be an interesting buy and hold. I agree with you that it would probably teeter more into speculation than investing.
dumpster fire != fire sale
No, because of the business model. Valeant looks to acquire other pharma companies, strip them of the R&D, and sell them off. It's not sustainable.
I predict Bk
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