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Basic overview

Teva Pharmaceutical Industries Limited (TEVA), a pharmaceutical company, develops, produces, and markets generic drugs; and proprietary branded pharmaceuticals in various therapeutic categories and active pharmaceutical ingredients worldwide. The company's provides generic drug portfolio of approximately 1,450 molecules and a direct presence in 60 countries. It offers generic pharmaceutical products in a range of dosage forms, such as tablets, capsules, ointments, creams, liquids, injectables, and inhalants. The company sells its generic injectable products to hospitals, clinics, and other institutional channels, primarily in the United States and Europe, as well as in Latin America and Eastern Europe

Reasons to be bullish on Teva Pharmaceutical Industries:

  • It has a strong free cash flow of $2.78 billion.
  • A good revenue growth rate of 28.5%
  • A decent five year total return of 35%
  • Net income has generally been trending upwards for the past few years; it took a bit of a hit in 2011, though sales came in roughly 2 billion higher than 2010.
  • Operating cash flow remained unchanged in 2011, but it has generally been trending upwards for the past few years; even though unchanged from 2010 levels, it was roughly 800 million higher than 2009.
  • It has an incredibly low payout ratio of 16%
  • The 5 year average payout ratio is only 16%
  • It sports a good free cash flow yield of 8.85%
  • Even though the quick ratio is weak at 0.68, the strong interest coverage ratio of 12.64 makes up for this shortfall to large degree.
  • It has a decent current ratio of 1.04.
  • It has a very good LT debt to equity ratio of 0.46.
  • A good five year dividend growth rate of 19.86%
  • The 5 year dividend average is low at 1.13%, but it has more than made up for this via capital gains.
  • It has consecutively increased its dividend for 12 years.
  • 4th quarter revenues increased by almost 29% to $5.7 billion.
  • Generic sales should improve with the launch of a generic version of Zyprexa and if approval for a generic version of Lovenox would be a huge plus for the company.
  • The acquisition of Cephalon should also help Teva its branded business.
  • Earnings for the full year increased by 9.5% to $4.97 per share.
  • Sales in the US hit $ 3 billion, a 32% rise in the 4th quarter.
  • Management expects sales of generic products to increase in the US. Management feels that new-product launches in 2012 will bring in an additional $650 million.
  • Management also expects to generate more than $20 million from the launch of its generic version of Forest's labs lexapro.
  • Branded products are expected to bring in $8.2 billion in 2012.
  • 100K invested for 15 years would have grown to 712K.

Teva Pharmaceutical Industries (NASDAQ: TEVA)

Industry : Pharmaceuticals

Free cash flow=$2.78 billion

Performance

Qtrly Earnings Growth = -34.4%

Qtrly Revenue Growth = 28.5%

Total return for the past 3 years = 5.86%

Total return for the past 5 years = 34.88%

Total return for the past 12 months = -8.31%

Consecutive dividend increases = 12 years

Growth

Net income for the past three years

Net Income - 2011 = $2004 million

Net Income - 2010 = $3339 million

Net Income - 2009 = $2768 million

EBITDA ($mil) 12/2011 = $4025

EBITDA ($mil) 12/2010 = $3646

EBITDA ($mil) 12/2009 = $3111

Sales ($mil) 12/2011 = $18312

Sales ($mil) 12/2010 = $16121

Sales ($mil) 12/2009 = $13899

Dividend Sustainability

Total cash flow from operating activities

2009 = $3.38 billion

2010 = $4.14 billion

2011 = $4.14 billion

Payout Ratio 12/2011 = 16%

Payout Ratio 5 Yr Avg 12/2011 = 16%

Change in Payout Ratio = 0%

Other Key Important Ratios

Price to Sales = 2.17

Price to Book = 1.78

Price to Tangible Book = -6.19

Price to Cash Flow = 7.23

Price to Free Cash Flow = -9.3

Quick Ratio = 0.68

Current Ratio = 1.04

LT Debt to Equity = 0.46

Total Debt to Equity = 0.46

Interest Coverage = 12.64

Inventory Turnover = 1.92

Asset Turnover = 0.37

Dividend yield 5 year average = 1.13

Dividend rate = $ 0.78

Dividend growth rate 3 year avg = 22.7%

Dividend growth rate 5 year avg = 19.86

Consecutive dividend increases = 12 years

Paying dividends since = 1990

Total return last 3 years = 5.86%

Total return last 5 years = 34.88%

Related companies (Peer Group analysis)

Lilly (Eli) & Co. (NYSE: LLY)

Industry : Pharmaceuticals

It has a free cash flow rate of $5.07B and a current ratio of 1.77 and an interest coverage ratio of 66.61

Net income for the past three years

Net Income - 2011 = $4329 million

Net Income - 2010 = $5070 million

Net Income - 2009 = $4348 million

Total cash flow from operating activities

2008 = $7.3 billion

2009 = $4.34 billion

2010 = $6.86 billion

Dividend yield 5 year average = 4.79

Dividend rate = $ 1.96

Dividend growth rate 3 year avg = 1.05%

Dividend growth rate 5 year avg = 3.19

Consecutive dividend increases = 0 years

Paying dividends since = 1885

Total return last 3 years = 54.12%

Total return last 5 years = -6.97%

GlaxoSmithKline Plc (NYSE: GSK)

Industry : Pharmaceuticals

It has a free cash flow rate of $7.38B and a current ratio of 1.08 and an interest coverage ratio of N/A

Net income for the past three years

Net Income - 2011 = $8877 million

Net Income - 2010 = $2865 million

Net Income - 2009 = $8757 million

Total cash flow from operating activities

2007 = $12.31 billion

2008 = $10.44 billion

2009 = $12.67 billion

Dividend yield 5 year average = 4.89

Dividend rate = $ 2.25

Dividend growth rate 3 year avg = 6.69%

Dividend growth rate 5 year avg = 1.21

Consecutive dividend increases = 0 years

Paying dividends since = 2001

Total return last 3 years = 70.15%

Total return last 5 years = -1.3%

Merck & Co., Inc (NYSE: MRK)

Industry : Pharmaceuticals

It has a free cash flow rate of $N/A and a current ratio of 2.06 and an interest coverage ratio of N/A

Net income for the past three years

Net Income - 2011 = $12899 million

Net Income - 2010 = $861 million

Net Income - 2009 = $6272 million

Total cash flow from operating activities

2008 = $3.37 billion

2009 = $3.4 billion

2010 = $10.83 billion

Dividend yield 5 year average = 4.25

Dividend rate = $ 1.68

Dividend growth rate 3 year avg = 0%

Dividend growth rate 5 year avg = 0.57

Consecutive dividend increases = 0 years

Paying dividends since = 1935

Total return last 3 years = 77.77%

Total return last 5 years = 4.33%

Johnson & Johnson (NYSE: JNJ)

Industry : Pharmaceuticals

It has a free cash flow rate of $8.19B and a current ratio of 2.38 and an interest coverage ratio of 4.46

Net income for the past three years

Net Income - 2011 = $12266 million

Net Income - 2010 = $13334 million

Net Income - 2009 = $9672 million

Total cash flow from operating activities

2008 = $14.98 billion

2010 = $16.58 billion

2011 = $16.39 billion

Dividend yield 5 year average = 3.11

Dividend rate = $ 2.28

Dividend growth rate 3 year avg = 7.43%

Dividend growth rate 5 year avg = 8.62

Consecutive dividend increases = 49 years

Paying dividends since = 1944

Total return last 3 years = 43.16%

Total return last 5 years = 19.31%

Conclusion

The markets are extremely overbought and looking for any reason to mount a strong pull back; long term investors should wait for a strong pullback before committing fresh money to this market.

Free cash flow yield, and revenue growth charts sourced from Ycharts. EPS, EPS surprise, broker recommendations and price and consensus charts sourced from zacks.com. Earnings Vs expectations sourced from smartmoney.com. Earnings estimates and growth rate charts for TEVA sourced from dailyfinance.com.

Source: Teva Pharmaceutical Industries, A Great Long-Term Play?

Additional disclosure: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.