Valeant Pharmaceuticals Case Study Answers

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SECTION 7 – GROWTH RATES

Item Current Year Previous Year Growth Rate
Sales 98.61 % 98.38 % .2 %
Net Income 1.86 % 13.44 % -86 %
Total Assets 48,455 26,353 83.8 %
Total Liabilities 42112 21041 100 %
Total Equity 6342 5312 19.39 %

Comments on growth rates:

Sales has increased from last year by 0.2 %, Net income decreased from last year by 86 %.

This might be a warning sign for the business. VRX Assets have almost doubled from previous year.

Total liabilities are the liabilities that the company has to pay others. It is a part of the balance sheet of a company that shareholders do not own, and would be obligated to pay back if the company liquidated. Liabilities increased by 100 % is not a good sign.

Total Equity refers to the net
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Valeant Pharmaceuticals (VRX) lowered its financial guidance for the fourth quarter and full year and issued a more pessimistic outlook for 2016.
Valeant said it now expects fourth-quarter earnings per share between $2.55 and $2.65, down from the $4.00 to $4.20 previously forecast. The forecast fell well short of the $3.47 per share expected by Wall Street analysts.
Valeant projected total revenue of $2.7 billion to $2.8 billion for the quarter, lower than the $3.25 billion to $3.45 billion guidance previously issued.
The drug maker forecast full-year adjusted earnings per share of $10.23 and $10.33 on total revenue of $10.4 to $10.5 billion. The projection marked a drop from earlier guidance of $11.67 to $11.87 earnings per share on total revenue of $11 billion to $11.2 billion.
Looking toward 2016, Valeant said it expects total revenue of $12.5 billion to $12.7 billion, with adjusted earnings per share of $13.25 to $13.75. Financial analysts had expected $12.55 billion in projected revenue and earnings per share of
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b) WOULD YOU RECOMMEND BUYING STOCK IN THE COMPANY?
Wells Fargo initiated coverage on VRX with a "sell" rating and price target between $65 and $68. Valeant's strengths such as its robust revenue growth, good cash flow from operations and expanding profit margins are countered by weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and generally higher debt management risk. I recommend a sell or short the stock.

c) IF YOU WERE A COMMERCIAL BANKER, WOULD YOU LEND MONEY TO THIS

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