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Aggressive Growth

Brian Bolan

Valeant Pharmaceuticals

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Valeant Pharmaceuticals (VRX) has posted four straight positive earnings surprises and is now a Zacks #1 Rank (Strong Buy).

Company Description

Valeant Pharmaceuticals International, Inc., a specialty pharmaceutical company develops pharmaceutical products in the areas of neurology, dermatology, and branded generics. It offers Wellbutrin XL to treat depressive disorders and Xenazine to treat chorea associated with Huntington's disease. Other drugs include CeraVe to rebuild and repair skin barrier and Kinerase, a cosmetic product. The company was formerly known as Biovail Corporation and changed its name to Valeant Pharmaceuticals International, Inc. in September 2010. The company was founded in 1960 and is headquartered in Montreal, Canada.

Valeant Pharmaceuticals Tops Estimates in Four Straight Quarters

Valeant Pharmaceuticals topped the Zacks Consensus Estimate in each of the last four quarters. The average beat has been $0.07.5 above the Zacks Consensus Estimate which works out to be an average beat of 9.2%. In the session following the earniings release has seen VRX move higher two times and lower two times in the last four reports. The average of these four moves is a decrease of 3.4%.

The largest positive price movement in the stock came the day after the company reported the September 2011 quarter. Valeant Pharmaceuticals meet the topline estimate of $570 million, a year over year increase of 174%. EPS of $0.62 was $0.05 higher than the $0.57 Zacks Consensus Estimate and the stock moved higher by more than 15%.

Valeant Pharmaceuticals - ticker VRX>
 
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Valeant Pharmaceuticals Most Recent Reported Earnings

On May 3, 2012 Valeant Pharmaceuticals reported revenue of $856 million, about $55 million more than the Zacks Consensus Estimate and up from $565 million reported in year ago quarter, an increase of 55%. Earnings per share came in at $1.14, $0.17 higher than the Zacks Consensus Estimate of $0.97. The beat of 17.5% didn't do much for the stock as investors sold forcing the stock lower by 9.8% in the session following earnings.

Valeant Pharmaceuticals Sees Estimates Moving Higher

Valeant Pharmaceuticals has seen earnings estimates move higher following the recent positive earnings surprise. The Zacks Consensus Estimate for 2012 was as low as a loss of $4.00 in January 2012 and has since moved higher to $4.40.

Similarly, estimates for 2013 have moved from $4.58 to $4.82 over the same time frame.

Valuation

Valeant Pharmaceuticals has a very attractive valuation. While trailing twelve months PE multiple of 14x is great than the 11.8x industry average, the forward PE multiple of 10.7x is below that of the industry average at 11.8x. Price to book of 3.5x is in line what you would expect for a growth company, but is higher than the industry average of 1.9x. Similarly, a price to sales ration of 5.3x is much higher than the 1.9x industry average.

The Chart

A look at the price and consensus chart shows a stock that was ahead of estimates throughout most of 2010 and 2011. Earnings have only recently caught up with the stock, but earnings continue to grow. This implies that the stock will likely continue on a higher trend over the next several quarters. The large gap between 2011 and 2012 estimates is the type of growth the aggressive growth investors tend to look for. Valeant Pharmaceuticals is a Zacks #1 Rank (Strong Buy).

Valeant Pharmaceuticals - ticker VRX>
 
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Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

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