Mallinckrodt PLC (MNK), Covidien plc (COV): When Should Investors Buy This New Pharma Company?

Long-Term Outlook and Investment Thesis

This is an attractive thesis. Mallinckrodt PLC (NYSE:MNK)’s solid fundamentals and promising growth prospects endear it to value-minded investors, and its potentially revolutionary imaging business adds a bit of speculative flair to the mix. By nearly every valuation metric, the company compares favorably to its peers. At the same time, it has exhibited financial performance that meets or exceeds the standards of the broader medical device and pharmaceutical industries.

Of course, Mallinckrodt PLC (NYSE:MNK) has a few weaknesses that could impact its growth prospects and relative performance. The company probably lacks the capacity to produce a blockbuster device or process within the next several years. Accordingly, it will have to rely on income and growth from legacy operations, including its generic drug business. Unfortunately, generic drug segments can be vulnerable to cost pressures and competition. As such, prospective investors must perform careful due diligence before taking a long position in Mallinckrodt. Given its negative price momentum, patient investors may wish to wait for an even more attractive entry point.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool recommends Becton Dickinson, Covidien, and Mallinckrodt plc.

The article When Should Investors Buy This New Pharma Company? originally appeared on Fool.com.

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