As Mylan (MYL) has quietly outperformed the market over the past year, it has flown under the radar as there are much more notable pharmaceutical companies. However, the company has continued to execute and the most recent case was MYL's announcement earlier this month. On May 10, Mylan increased its EPS guidance range for 2012 to $2.45 to $2.55 in adjusted diluted earnings per share. Mylan's previous guidance range for 2012 was $2.30 to $2.50 per share. Mylan also announced that its Board of Directors has approved the repurchase of up to $500 million of the company's common stock in the open market.
That, in combination with the fact that analysts are bullish on the stock and its relative undervaluation to other companies in the generics space, suggests that the stock has bright prospects. Below is an in depth look at the valuation metrics and stock chart.
Valuation: Mylan's trailing 5 year valuation metrics suggest that the stock is fairly valued as there is a mixed message about the valuation metrics compared to their 5 year averages. Mylan's current P/B ratio is 2.4 and it has averaged 1.9 over the past 5 years with a high of 2.8 and low of 1.1. Mylan's current P/S ratio is 1.4 and it has averaged 1.2 over the past 5 years with a high of 2 and low of 0.6. Mylan's current P/E ratio is 16.4 and it has averaged 38 over the past 5 years with a high of 84.1 and low of 15.5.
Price Target: The consensus price target for the analysts who follow Mylan is $27. That is upside of 29% from today's stock price of $21.21 and suggests that the stock has room to run from current levels.
Forward Valuation: Mylan is currently trading at about $21 a share with analysts expecting EPS of $2.72 next year, an earnings increase of 11% y/y, for a forward P/E ratio of 7.8. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Teva (TEVA) is currently trading at about $39 a share with analysts expecting EPS of $5.99 next year, an earnings increase of 7% y/y, for a forward P/E ratio of 6.5. Watson (WPI) is currently trading at about $70 a share with analysts expecting EPS of $6.18 next year, an earnings increase of 7% y/y, for a forward P/E ratio of 11.4. Perrigo (PRGO) is currently trading at about $101 a share with analysts expecting EPS of $5.4 next year, an earnings increase of 9% y/y, for a forward P/E ratio of 18.6. The mean forward P/E of Mylan's competitors is 12.2 which suggests that Mylan is undervalued relative to its publicly traded competitors.
Earnings Estimates: Mylan has beat EPS estimates every time in the past 4 quarters. The company's EPS figures have come in between 2 cents and 7 cents from consensus estimates or about 4% to 15.6% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Price Action: Mylan is down 9.0% over the past year, underperforming the S&P 500, which is up 0.9%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $22.18 and above its 200 day moving average, which sits at $20.60.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.