Endo Pharmaceuticals Should Thrive as Boomers Age

Jun.24.09 | About: Endo International (ENDP)

Another drug stock that I really like is Endo Pharmaceuticals (NASDAQ:ENDP). Endo Pharmaceuticals is a midcap biotechnology company that is known for developing and selling pain management drugs and therapies. This company may be a good investment as a play on an aging baby boomer population. The generic pharmaceutical market is a highly profitable market as drug patents expire from bigger name players. Endo also has a strong drug development division along with established money makers Percocet, Percodan and Endocent.

Endo currently trades at just over $17 per share. Based on the average earnings estimates of $2.64 for the current fiscal year the stock has a PE of 6.4. EPS has grown at an impressive rate of 18.63% over the last five years. EPS should grow at about 10% for the next 5 years. Endo has a ROE of 20.78% and a ROA of 14.20% over the past 5 years. Endo recently used its strong cash position to acquire Indevus Pharmaceuticals. Since the acquisition Endo has less cash and more debt but the company still has a solid balance sheet with almost $400 million in cash alone. This is a sizable amount for a company with a $2 billion market cap.

I have recently started buying shares of Endo in the $16’s. The company’s long term prospects appear bright with many of their drugs in Phase III trials and existing cash cow drugs not expiring till 2019. Many analysts also deem the company to be a good takeover candidate. If earnings growth remains strong this stock could easily see the mid 20’s over the course of the next year.