[Updated: 10/7/2021] PRGO Stock Rise
A couple of months back we discussed that Perrigo stock (NASDAQ: PRGO) can see higher levels after it fell 15% following a Q2 miss. PRGO stock has since risen over 17% to levels of $48 currently. In fact, PRGO stock is up 16% over the last twenty-one trading days, while it is up 12% in just five trading days. This can be attributed to its settlement of a tax assessment made by Ireland for Euro 297 million. Now, why this is important is that the earlier estimates of tax liabilities to Ireland were feared to be Euro 1.6 billion, while the final amount has come out to be a fraction of that, cheering the investors.
However, now that PRGO stock has seen a rise of 16% in twenty-one trading days, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of a decline in PRGO stock over the next month. Out of 67 instances in the last ten years that PRGO stock saw a twenty-one day rise of 16% or more, 50 of them resulted in PRGO stock declining over the subsequent one month period (twenty-one trading days). This historical pattern reflects 50 out of 67, or about 75% chance of a drop in PRGO stock over the coming month. See our analysis on Perrigo Stock Chance of A Rise for more details.
So, if this follows historical performance, it is likely that PRGO stock will fall to lower levels going forward. However, if you are considering PRGO stock as an investment over a longer time frame, you can explore our forecast for Perrigo valuation of $52 per share, implying over 8% premium from its current levels of around $48.
Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data
- After moving 12% or more over a five-day period, the stock rose in the next five days on 47% of the occasions.
- After moving 13% or more over a ten-day period, the stock rose in the next ten days on 50% of the occasions
- After moving 16% or more over a twenty-one-day period, the stock rose in the next twenty-one days only on 25% of the occasions.
Predict average return on Perrigo Stock Return: AI Predicts PRGO Average and Excess Return After a Fall or Rise
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Perrigo Stock Return (Recent) Comparison With Peers
- Five-Day Return: PRGO highest at 12%; ALKS lowest at -3.9%
- Ten-Day Return: PRGO highest at 13%; LIVN lowest at -1.6%
- Twenty-One Day Return: PRGO highest at 16%; TARO lowest at -9.6%
[Updated: 8/23/2021] PRGO Stock Decline
We believe that Perrigo stock (NASDAQ: PRGO), a healthcare company that provides over-the-counter self-care products, looks like a good buying opportunity at the present time. PRGO stock trades near $41 currently and it is, in fact, down 33% from its pre-Covid high of around $61 in February 2020 – before the coronavirus pandemic hit the world. The company’s stock price has seen a decline of over 15% since it reported its Q2 results, missing the street estimates. The company reported revenues of $981 million, compared to the consensus estimate of a little over $1 billion. The bottom-line was also a miss, with Perrigo reporting $0.50 EPS compared to the consensus estimate of $0.61. Both sales and profits were actually down y-o-y, due to a weak flu season.
However, the company has maintained its full-year 2021 guidance of low single-digit revenue growth and mid-to-high single-digit earnings growth. The company expects a strong recovery in consumer demand over the coming quarters, and it will likely bolster the overall OTC products sales. Now that the stock has corrected following the Q2 results, we find it attractive at the current levels of around $41. With the recent cash infusion of over $1.5 billion from divestiture of its generic prescription pharmaceuticals business, the company can focus on the core consumer products business.
While PRGO stock has seen lower levels during the current Covid-19 crisis, how did it fare in the 2008 crisis? In this note we focus on a comparative analysis of Perrigo stock performance during the current financial crisis with that during the 2008 recession in our interactive dashboard.
Timeline of 2020 Coronavirus Crisis:
- 12/12/2019: Coronavirus cases first reported in China
- 1/31/2020: WHO declares a global health emergency.
- 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
- 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, 2020, as Covid-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
- Since 3/24/2020: S&P 500 rallies 99% from the lows seen on Mar 23, 2020, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.
In contrast, here is how PRGO stock and the broader market fared during the 2007-08 crisis
Timeline of 2007-08 Crisis
- 10/1/2007: Approximate pre-crisis peak in S&P 500 index
- 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
- 3/1/2009: Approximate bottoming out of S&P 500 index
- 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)
PRGO and S&P 500 Performance Over 2007-08 Financial Crisis
PRGO stock grew from from levels of about $22 in August 2007 (pre-crisis peak for the broader markets) to levels of $38 in September 2008 before plunging to $20 in March 2009 (as the markets bottomed out), implying PRGO stock lost 47% from levels of $38, but only 7% from its August 2007 levels. It staged a stellar recovery immediately post the 2008 crisis, to levels of $40 by January 2010. In comparison, the S&P 500 Index saw a decline of 51% from its peak in September 2007 to its bottom in March 2009, followed by a sharp recovery of 48% by January 2010.
Perrigo Fundamentals Over Recent Years Have Been Lackluster
Perrigo’s revenues decreased from $4.7 billion in 2018 to $4.5 billion over the last twelve-month period, partly due to a weak flu season this year. The company has also seen a decline in its net margins over the recent years, weighing on its bottom-line, which declined from earnings of $0.95 per share in 2018 to a loss of $2.55 per share over the last twelve-month period. This can partly be attributed to impairment charges associated with the prescription drugs business, which the company divested last month.
Does Perrigo Have Sufficient Cash Cushion To Meet Its Obligations Through The Current Crisis?
Perrigo total debt increased from $3.2 billion in 2016 to $3.6 billion currently, while its total cash decreased from $551 million to $317 million over the same period. Perrigo garnered $91 million cash for its operations over the last twelve-months period. The company has a sufficient liquidity cushion to weather the current crisis, and the company’s recent divestiture has provided a cash infusion of $1.5 billion.
Phases of Covid-19 Crisis:
- Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
- Late-March 2020 onward: Social distancing measures + lockdowns
- April 2020: Fed stimulus suppresses near-term survival anxiety
- May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
- Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment. Multiple countries have undertaken large-scale vaccine programs for Covid-19, though new variants of coronavirus resulted in an uptick in active cases.
As the global economy opens up and restrictions are lifted in phases, consumer demand is expected to pick up, boding well for Perrigo’s business. This could be reflected in the form of higher total revenues in 2021, which could be a positive for PRGO stock in the near term.
While PRGO stock can see a rebound, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for AMD vs Etsy.
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