Forest Laboratories, Inc. (FRX)

health care will be leading sector in 2010, this company is positioned nicely to benefit

Great balance sheet, good product line and a diversified product line with licenses with a number of major drugmakers. Screaming buy.

Around 5-yr low, easily worth 2x current price, and a decent drug pipeline.

PE=11.41, ROE=19% suggest undervalued

My first foray into Pharma. I'm not a biotech believer. However, FRX seems to have a low enough valuation that I'm willing to take a flyer. Low debt is good, as is the steady stream of earnings.

Has been underperforming for a year or two and will depend on the recovery and pipeline in order to come back big time. I don't understand why Lexapro isn't selling as well as it should. It is a good medicine and is prescribed quite often by doctors in the clinic where I work.

From http://lonelyvalue.blogspot.com/2009/06/see-forest-labs-for-its-cash.html

As the blogger at Lonely Value puts it:

"Even if Lexipro disappears in a few years, Forest Labs is ridiculously valued. It's priced for liquidation (or worse). What is the investment community missing? Can they count? Does anyone read financial statements anymore? There is no cleaner balance sheet in Corporate America."

This company's valuation is too compelling to pass up, especially when you consider that the company has zero debt and tons of free cashflow. As a successful pharmaceutical company their margins are incredible.

There are two clouds of uncertainty hanging over this company as I see it. One is the outcome of the DOJ probe into their marketing practices which will likely result in a substantial cash settlement. Their cash and short term investments of $2.2B+ should be more then adequate to deal with this and they've already accrued $170M at 12/31 to cover a potential settlement.

The second cloud of uncertainty is the patent expiration of Lexapro in Spring of 2012. Lexapro does account for about 60% of their revenue so this isn't insignificant. They do have a promising pipeline and some of their other approved drugs are early enough in their lifecycle to partly offset some of the lost Lexapro revenue.

With 6 compounds in Phase III clinical trials at the moment and 3 years to go before they begin to lose Lexapro revenue, I think managment can close the gap. They also have the cash to do niche acquisitions if necessary to round out the pipeline.

Once these uncertainties resolve themselves I see this stock doubling in the next 3 years which should soundly beat the market performance over that period.

Also, pharamceuticals make good defensive investments during slow growth periods like I think we'll be experiencing over the next 3+ years.

I'll take this company's cashflow over a consumer cyclical right now hands down.

Consistently increasing sales, net income and cash flow.
Healthy cash&equivalents at about 12% of capitalisation.
Zero debt.
Sales increasing on average 7.52% over last 5 years. EPS increase 6.07%. Earnings increased even during recession and likely to continue to do so.
PE ratio of 9.10.
Industry beating ratios.
Target price:$35-36
Products:
1)Lexapro
2)Bystolic
3)Benicar
4)Campral

Principal customers including:
1)McKesson Drug Company
2)Cardinal Health, Inc
3)AmeriSource Bergen Corporation

Risk Factors to consider:
1)Substantially dependent on sales of Lexapro and Namenda products.
2)Pharmaceutical research is costly and uncertain.
3)Competition from other drugs companies.

Drug makers that stay true their core profitable business models will prosper in the long-term. Medium growth at reasonable price.

Like the industry, like the fundamentals here.

no brainer -- 1/3 of its market cap is cash, no dept, showing profit through the year ...

great stock to by now

Low relative PE, good star ranking, PEG & 09 PE still below normal - bottom fishing 4/20 picks.

bottomed out give or take 10%...

Hmmm, $3.5 B of tangible assets (of which most is in cash and investments) and no debt vs a market cap of $6.5 B. A non-stop onslaught of positive operating cash flow for the past several years (and quarters) with very little capex (so the company is throwing off a bunch of free cash flow). Sales have risen for the past several years (although are mostly flat for the past 4 quarters), so its not all a bed of roses... but what really is in this economy. The company's PE is about 8, which will probably stay flatish for the next year or so given the economy, even in the drug industry, but with the cash on hand and industry it is in, this may not be a bad investment.

High percentage All-Star Outperform picks. According to the high scores, appears to be a good pick to grow even at $37. So at $22.75 it's a steal, near it's bottom price. Mid-cap stock at Small-cap price. Healthcare generics and over-the counter products look promising for long term growth.

Adding this one to deep value portfolio. Signficant cash position and free cash flow, management guiding to around $3.40 or forward p/e under 7 - another one that appears cheap for patient longs.

Great long term play at this price, in addition to the need for generics as the economy tightens and America gets gray (hair that is).