Thursday, May 20, 2010

Growth in generic drugs

Financial Tides likes Watson Pharmaceuticals, Inc. ( WPI ) a pharmaceutical company primarily engaged in the development, production, marketing and distribution of both branded and off-patent pharmaceutical products. The company's branded pharmaceutical business operates primarily in three specialty areas: Dermatology, Women's Health and General Products. The company's products include therapeutic and preventive agents generally sold by prescription or over-the-counter for the treatment of human diseases and disorders.


The big story is in the acquisition of the Arrow Group. Although the acquisition required the issuance of 17 million shares that dilutes earning per share, overall sales should benefit because it will allow the company to enter new over seas markets. Growth will come in new offerings of generic drugs in the areas of urology, birth control and a new generic version of Lipitor one of the largest selling brand names on the planet.


This is a momentum play and the stock hit 6 new highs in the last 30 days even in this soft market. The growth in price has been steady so it earned a 100% overall Barchart buy signal having buy signals on all 13 technical indicators. The stock appreciated 2.58% in the last 30 days and trades around 43.73 with a 50 day moving average of 42.18.

Investor sentiment is high as measured on Motley Fool with the CAPS members voting 148 to 17 that the stock will beat the market. The All Stars have similar feelings with a vote of 55 to 4.

Wall Street analysts have noticed this stock and have 5 buy and 9 hold reports published. They look for double digit growth in both sales and earnings. Sales are predicted to increase 25.80% this year and 11.10% next year. Earnings growth is forcasted to be 25.20% this year, 11.50% next year and a 5 year compounded growth rate of 10.42% annually.

This stock deserves your attention because:
  • The acquisition of Arrow group opens new foreign markets for distribution

  • New offerings of generic drugs are coming on line

  • Barchart technical indicators have recognized solid and consistent price appreciation with a 100% over all technical buy signal

  • Investor sentiment is positive

  • Fundamental Wall Street analysts have predicted double digit increases in sales and earnings

Jim Van Meerten is an investor who writes on investing on Financial Tides and Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.

Disclosure: No positions in WPI at the time of publication

Other analyses by the same author:


Baidu -- BIDU


VeriSign -- VRSN


Chico's -- CHS


No comments:

Post a Comment