| Stock (Symbol) | Stock Price | |
Actavis (ACT) |
$226 |
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| Data is as of | Expected to Report | Sector |
August 22, 2014 |
Oct 27 – Oct 31 |
Healthcare |
| Sharek’s Take | ||
 Actavis (ACT) had 70% profit growth last quarter but growth is expected to moderate 2 qtrs from now. After ACT reported last qtr it gave its 1st guidance with the Forest Labs merger, but this was less than what analysts expected, so estimates fell. I may be a little generous in saying ACT is worth 20 times earnings, but ACT could make more money than we think once Forest is fully digested in 2015. Also ACT could buy other companies in the next year and boost earnings. Actavis traces its roots back to Watson Pharmaceuticals, which in November 2012 acquired Switzerland based global generic drug company Actavis and kept its name. Then the big boost came after ACT acquired Warner Chilcott in October 2013, and reincorporated in Ireland which has a lower tax rate. Now ACT gobbles up other companies and makes them more profitable because they then pay less taxes. |
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| One-Year Chart | ||
 This stock’s been good the last year, but profit growth was humming along. Starting in Q4 ACT might only be able to deliver 15% profit growth or so. Analysts expect ACT to grow 20% a year (see Est. LTG) but this might be a high-teens grower. |
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| Earnings Table | ||
 Profit growth was 70% last quarter on a 32% increase in sales. Next quarter is the 1st with Forest Labs and sales are expected to increase 79%.Actavis beat by 5 cents last qtr but investors focused on the lower guidance. Annual Profit Estimates fell, and in the next few years patent expirations are expected to slow which will slow profit growth. Quarterly profit growth shows a perfect picture of what’s expected ahead. |
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| Fair Value | ||
 These Fair Values are bullish, maybe 20 times earnings is too much for ACT. If the company makes $17 next year and gets a 17 P/E then the stock would still be $289, up from $226 this qtr (+28%). |
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| Ten-Year Chart | ||
 I used to follow Watson a bit (which was when profits were growing fast yet the stock didn’t seem to move). I took my eye off it, missed the updates, and whoosh here’s what we have now. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
18 of 25 |
Actavis might only have one more qtr or rapid profit growth, but at 17x earnings the stock’s not overpriced. There’s good upside potential in these shares, but the recent surge in the stock might be behind us. ACT is ranked 18th in the 25 stock Growth Portfolio Power Rankings. With profit growth set to slow, this isn’t a good one for the Aggressive Growth Portfolio. |
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Aggressive Growth Portfolio
N/A |
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