Perrigo: I'm Taking Profits

Mar.15.10 | About: Perrigo Company (PRGO)

When we first recommended Perrigo Company (NDQ: PRGO) on June 21, 2009, it was trading at $26.81. Happily, it closed on Friday at $50.68 for a nice gain of 89% in nine months. (All prices in U.S. dollars.)

The company's second-quarter 2010 profits were up more than 50% year-over-year to 70c a share (adjusted), sales were higher, and they raised their earnings guidance for the year (see conference call transcript here). Despite all this good news, I think it's time to take profits here based purely on valuations.

I still like the premise that this manufacturer of generic pharmaceutical and nutrition products will continue to benefit from a slowly recovering economy but any time you almost double your investment is a good time to take some profits and start playing with the house's money.

Recently, the company has been downgraded by a couple of analysts for the same reason I'm citing and the dividend yield is a very modest 0.5%. The P/E ratio has grown to nearly 22 times earnings. Ring the register and be happy with your gains.

Action now: Take half profits.

Disclosure: No position