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Valeant Pharmaceuticals (VRX) Appoints New CFO, Stock Gains 7.2%

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Shares of Valeant Pharmaceuticals were up over 7% in midday trading on Monday after the company announced the appointment of a new Chief Financial Officer (CFO). Monday’s stock movement reflects is yet another continuation in the company’s rollercoaster story.

Earlier in August, shares of Valeant soared after the company reported an earnings miss but issued a positive outlook.  Two days later, shares plunged following reports that the company is under criminal investigation.

The investigation concerns Valeant’s relationship with specialty pharmacy Philidor Rx, with claims that it worked with the company to boost sales but hid the relationship from insurers, defrauding them in the process.

Investigations aren’t new for Valeant, which has seen its stock decline over 90% over the last 12 months due to multiple SEC and congressional probes into its price hikes for drug products.

Still, many see the arrival of a new CFO as the beginning of a turnaround for the troubled company. Mad Money on CNBC’s Jim Cramer stated that bringing in a high-quality CFO “could change things” and that “Valeant shareholders should cheer this move.”

Regardless, it is difficult to remain optimistic on a company that has been blighted by successive challenges. The company has seen two upward and one downward earnings estimate revision for the current quarter, representing a consensus estimate of $1.79 in earnings per share. This however, is still six cents lower than the consensus estimate of 60 days ago.

Furthermore, the company has seen multiple downward earnings estimate revisions for the current fiscal-year. Current estimate stand at $6.64 in earnings per share, down from the $6.86 estimate of 60 days ago.

The chart below reflects the many woes that have plagued the company in recent times.

While the move to bring in new executive management is to be welcomed, investors still have plenty of reason to remain skeptical of Valeant’s future prospects. The company did receive lender approval to amend its credit facility, a move that will help improve its financial condition. However, the aforementioned investigation is ongoing.

Investors should maintain a watchful eye for new developments before deciding on a potential play.

Valeant currently sits at a Zacks Rank #3 (Hold).

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