ACT Market Research & Analysis Report
Updated Nov 28, 2013

Growth and Balance Sheet

In the third quarter, Actavis earned $65.6 million, or 49 cents per share. That compares to $76.7 million, or 60 cents per share, in last year's quarter.  Adjusted earnings totaled $2.09 per share in the most recent quarter. Revenue jumped 57 percent to $2.01 billion compared to   last year, before the company finished an acquisition that increased its size. Analysts expected, on average, earnings of $2.09 per share on $2.03 billion in revenue.  ACT expects to finish 2013 strong and now predicts adjusted 2013 earnings to range between $9.26 and $9.39 per share after forecasting annual EPS of between $8.15 and $8.50 in July. The new outlook counts contributions from Warner Chilcott Plc, a fellow drug maker that Actavis acquired in an $8.5 billion deal that closed Oct. 1.

Valuation

ACT forward PE stands at 17.14 below the industry average of 36.87, and below the S&P 500 average of 17.83. The company is currently trading above the preferable P/E ratio of 15x. ACT's current Price/Sales of 3.70 is above the average of its industry, of 2.80. The beta of 0.35 implies lower volatility of the stock with respect to the S&P 500. ACT has shown negative earnings consistency over the last five years. Furthermore, ACT’s earnings per share over the last five years have decreased by 9.80. The current quarter earnings in comparison to the same quarter last year have decreased by 18.30% which is below the required level of 15%. The company has a total debt to equity ratio of 151.00. ACT’s current price levels are above the preferable level, 2% below the 52 week high of $166.32, and the technical indicators are bullish. The majority of the analyst ratings are Buy.  ACT has a dividend payout ratio of 0%.

About ACT

Actavis plc, an integrated pharmaceutical company, develops, manufactures, markets, and  distributes pharmaceutical products in the United States, Canada, and internationally. It offers generic, branded, branded generic, biosimilar, over-the-counter, biologic, and specialty pharmaceutical products in various formulations, including modified release, solid oral dosage, semi-solids, liquids, gels, transdermal products, and injectables; and develops and out-licenses generic pharmaceutical products to customers through its third-party business.

Competitor Comparison

Actavis plc (NYSE:ACT) N.V.

Highlights

Actavis plc is a global, integrated specialty pharmaceutical company. The stock closed yesterday’s trading session at $163.70. In the past year, the stock has hit a 52-week low of $82.02 and 52-week high of $166.32. ACT has a market cap of $28.48 billion and is part of the healthcare sector.

• Unique products 
• Cost advantages 
• Strong momentum

• High leverage
• Government regulations 
• Online presence

ACT Intrinsic Value

Stock Valuation Model & Intrinsic Value Definitions

Investors should keep an eye open for stocks that are trading within 10% of their 52 -week highs, as it is likely to continue in its upward trend.  ACT's 52 week high is $166.32 current price is $163.70, is 2% below the 52 week high.

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature.   The company has a forward P/E ratio of 17.14 below the average industry P/E ratio of 27.00 and is below the S&P 500 P/E ratio of 17.80.

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 0.80% of ACT stock. Management's representation is not large enough. This does not satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

ACT is trading in the range of $144.00 - $166.00 in the past 30 days. The stock has been showing support at $154.00 and resistance in the $165.00 range. The stock is trading above the 50-Day Moving Average and above the 200-Day Moving Average. The RSI (14) is 63.51.Our indicators give a bullish view on ACT.

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Investor’s sentiment for the stock.

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com is 9 Buy,  7 Outperform,  5  Hold,  0 Underperform and no Sell.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year.  ACT’s annual EPS for the last 5 years were 2.09, 1.95, 1.48, 2.06, and 0.76 this type of earnings action is negative.

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry. ACT’s have total debt/equity ratio of 151.00 which is negative.

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. ACT’s EPS growth for this quarter relative to the same quarter a year earlier is -18.30%, below our target.

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%.  ACT’s annual earnings growth rate over the past five years is -9.80%, below the target growth rate.

¹Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.