Weekly Equity Idea Highlight - 2020 04 20
The market is expecting BHC to see a fundamental collapse in the company's business in the coming years. The market does not appear to respect the company's strong economic moats, especially in areas like in eye care, and is overly focused on legacy perceptions of accounting and credit issues.The market expects the company, which has seen UAFRS-based (Uniform) ROA maintain strong levels, and recently recover to north of 45% levels to decline by over half going forward, not recognizing the company's strong business model that is unlikely to be disrupted.
Credit and equity analysis of the firm highlights safe credit that does not warrant recent panic-level pricing, and fundamentals that warrant more premium equity valuations.
Furthermore, management alignment, especially after the CEO change several years ago, is favorable, focused on growth and margin improvement and preservation, the key drivers of the company bucking pessimistic market expectations.
Considering pessimistic market expectations, the company's strong strategy and economic moats, and strong management alignment, there is significant equity upside for BHC.
Valeant Pharmaceuticals International is a pharmaceutical and medical device company that develops, manufactures, and markets a range of branded, generic and branded generic pharmaceuticals, over-the-counter (OTC) products, and medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices). Co. has two operating and reportable segments: Developed Markets, which focuses in dermatology, neurology, gastrointestinal disorders, and eye health therapeutic; and Emerging Markets, which focuses primarily on branded generics, OTC products, and medical devices.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.