Valeant? VRX


  1. "A large Canadian specialty pharmaceutical company was a market darling wherein its debt funded acquisition led growth was cheered and rewarded by the market. Our QoE analysis in April 2015 focused on:
    1. Aggressive B/S: Alarming Debt to Equity ratio, poor AZS 1, poor debt servicing ratios etc.
    2. Change in revenue recognition policy (at one acquired company): From ‘at the time of shipments to ultimate customer’ earlier to ‘at the time of shipments to wholesalers’.
    3. High Intangibles on B/S: ~ 4 times its Net Worth; potential w/off in offing. Suggestive of aggressive capital allocation policy.
    4. Deterioration in M-Score 2 from mid 2000s.
    5. Recurring and large restructuring charges.
    6. Hard to decipher sustainable/applicable tax rate.
    7. Aggressive acquisition bid of another US based specialty pharmaceutical company, with similar QoE and Corporate Governance issues.
    Grade assigned by Multi-Act Research Report: B-

    (Ranges from A, B+, B, B- and C; wherein A is best and C is worst)."
    upload_2016-2-8_18-45-36.png
Source: http://multi-act.com/quality-of-earnings-a-sound-filter-board-to-avoid-permanent-loss-of-capital/
 
NoVoodooHere said:
Well, well, what do we have here?

Surprised nobody has posted on this subject as it seems to be all the talk in media-land... I'll start then
More...

They are burdened by a heavy debt load - if I were to buy a drug stock I'd choose one with less leverage and less bankruptcy risk.

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