Prestige Brands Holdings, Inc. (PBH): Should We Buy This Healthcare Stock After Its Recent Spike?

Johnson & Johnson is the biggest company among the three. The market values the company at 11.1 times its trailing EBITDA. The company recently expanded its business footprint in the oncology drug segment by spending around $1 billion to acquire Aragon Pharmaceuticals.

It has to pay $650 million in upfront cash payment, having the right to ARN-509, a prostate cancer drug in Phase II development. Having ARN-509 would be a good complement to Johnson & Johnson’s prostate cancer product pipeline. Johnson & Johnson (NYSE:JNJ) also pays investors a good dividend yield at 3%.

My Foolish take

According to Barron’s, Linda Bolton Weiser of B. Riley believes that the company could be bought at $48 per share at a price/FCF multiple of 17.4. Indeed, Prestige Brands, with a lot of good brands in its product portfolio, could be a good long-term investment for patient shareholders.

However, with the high valuation, significant amount of goodwill and intangible assets, I would rather wait for a price correction before buying the company’s shares.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.

The article Should We Buy This Healthcare Stock After Its Recent Spike? originally appeared on Fool.com and is written by Anh HOANG.

Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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