Peter Ashton is vice-president of client services at Recognia Inc.
What are we looking for?
In the United States, the S&P 500 and the Dow Jones industrial average are currently sitting near all-time highs. For the year-to-date, the utility and health sectors have been responsible for much of this growth.
With several pharmaceutical-related M&A deals currently in the news, we want to search for U.S. pharmaceutical companies that are still trading at reasonable valuations.
Using Recognia’s Strategy Builder tool, we begin by setting a minimum market capitalization threshold of $500-million (U.S.) to focus on larger, more established companies in the sector. Next, we will look for companies trading at reasonable valuations by selecting only companies with a forward price-to-earnings ratio of less than 30.
Finally, in order to focus on stocks with room to move higher, we will select only companies trading at least 10 per cent below their 52-week highs. Strategy Builder ranks stocks based on how closely each stock matches all the various criteria in the strategy.
More about Recognia
Recognia is a global leader in actionable technical and quantitative analysis. Accessible by more than 20 million traders and investors globally, Recognia covers 85 exchanges worldwide, and analyzes 65,000 instruments daily including stocks, indexes, ETFs, foreign exchange currencies and futures.
What did we find?
Pfizer Corp. ranks No. 1 on our screen, has the largest market cap at $188.7-billion and the lowest forward P/E at 13.1. Pfizer’s stock was hit hard in the month of May as a result of its aborted takeover attempt of AstraZeneca.
The screen also pulls up Quebec-based Valeant Pharmaceuticals International Inc., which is currently pursuing a hostile takeover of Allergan. The stock has a market cap of $44.3-billion and is trading down more than 13 per cent from its 52-week high.
Pennsylvania-based Auxilium Pharmaceuticals is a provider of men’s health drugs has the smallest market cap on our screen at just over $1-billion. It is off almost 35 per cent from its 52-week high.
Recognia Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had a 20.8 per cent annualized return compared to 15.4 per cent for the S&P 500 and 13.8 per cent for the Dow.
The investment ideas presented here are for information only. Investors should conduct further research before investing.
U.S. pharmaceutical companies trading at reasonable valuations
|4||Jazz Pharma. PLC||JAZZ-Q||8.6||17.8||-18.3|
|5||Perrigo Co. PLC||PRGO-N||18.4||20.6||-18.3|
|6||Endo Int'l PLC||ENDP-Q||10.4||19.3||-15.6|
|7||Taro Pharma. Ind.||TARO-N||4.6||18.2||-13.2|
|8||Valeant Pharma. Int'l||VRX-N||44.3||21.0||-13.6|
|9||Auxilium Pharma. Inc.||AUXL-Q||1.1||21.8||-34.6|
- Valeant Pharmaceuticals International Inc$34.64-0.61(-1.72%)
- Pfizer Inc$32.81-0.10(-0.30%)
- United Therapeutics Corp$106.69+1.85(+1.76%)
- Mylan NV$41.75-0.85(-2.00%)
- Jazz Pharmaceuticals PLC$150.18-1.82(-1.20%)
- Perrigo Company PLC$95.21-1.24(-1.29%)
- Endo International PLC$27.52-0.75(-2.65%)
- Taro Pharmaceutical Industries Ltd$137.67-1.40(-1.01%)
- ICON PLC$65.69-1.45(-2.16%)
- Bristol-Myers Squibb Co$72.41+0.15(+0.21%)
- Updated April 29 10:29 AM EDT. Delayed by at least 15 minutes.