Teva pays consistent dividends
Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) has a market cap of $35 billion and an enterprise value of $45 billion. With a five-year expected PEG ratio of 1.1, Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) maybe walking into the overpriced territory. Goldman Sachsdowngraded Teva from a neutral rating to sell. The analysts noted that the company has been relatively quiet and that it faces a lot of pressure as it has fewer options with regard to capital allocation.
Going forward, the company’s revenue is expected to fall 1% year-over-year. A sell rating does not automatically mean a company is bad investment option. It just means in the short term, it may not see its revenue grow. In the long term, Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) will eventually increase its revenue thanks to rising demand for generic drugs in countries like China, India and even across the African continent.
Talking about generic and branded-generic drug manufacturers, Actavis Inc (NYSE:ACT) is another option that one can consider. Its OTC and prescription drugs are sold in more than 60 countries and most importantly, it is an American company.
If you are skeptical about investing in foreign companies, but would still like to try your hand in the generic drug industry, Actavis Inc (NYSE:ACT) may be a good option. Actavis Inc (NYSE:ACT) has a market cap of $17 billion and an enterprise value of $22.1 billion. With a PEG ratio of approximately 1.1, it is almost treading into the overpriced territory. Its profit margin is on the negative side, at nearly -1.0%.
On the upside, Actavis Inc (NYSE:ACT) may merge with Warner Chilcott, which sells branded drugs. Actavis Inc (NYSE:ACT) was also upgraded to outperform from market perform by analyst firm Leerink Swann. The company’s new formulations for patients with tension headaches include Fioricet and Fioricet with codeine. Both contain a lower dose of acetaminophen, making them relatively safer. These positive signs show that going forward, Actavis Inc (NYSE:ACT) may prove to be a very good investment option.
Take home
While Taro may not be a familiar name to most people in the U.S. or Canada, it is one of the largest generic drug manufacturers out there. It is supported by its parent Sun Pharmaceuticals, which is the third-largest pharmaceutical company in India and also the most profitable in that country. This ensures that Taro investors always have the buffer of the Indian market in the long term. If you prefer an American stock, Actavis is a good option.
Jaiyant Cavale has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Jaiyant is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Conquer the Generic Drug Market With Taro originally appeared on Fool.com is written by Jaiyant Cavale.
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