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November 4, 2019

Is Bausch Health (TSX:BCH) a Buy After Strong Earnings?

By Mathieu Litalien

November 4, 2019

Valeant Pharmaceuticals fall from grace is one of the most notorious stock collapses in Canadian history. The company’s reputation was tarnished to a point where it was not repairable.  

Once the dust settled, the Canadian healthcare company re-branded as Bausch Health (TSX:BHC) in an attempt to regain investor confidence. The move has thus far yielded tempered results. Since the name change which took place in July of 2018, the company’s stock price is up approximately 13%.  Not bad, but there are still many investors under water.

Most of those gains have come in 2019 as Bausch’s stock price is up almost 25% this year. On Monday, the company posted strong third quarter results that topped estimates.  

How did Bausch Health (TSX:BHC) perform in the third quarter?

Earnings of $1.19 per share beat by $0.10 and revenue of $2.21 billion beat by $50 million. Revenue grew 3% year over year (YOY) led by its Bausch + Lomb/International segment which delivered its 12th consecutive quarter of organic revenue growth. Its Salix segment was also strong, growing 20% over the third quarter of 2018. 

Equally as important, the company raised full-year guidance. It now expects revenue of $8.475-8.625 billion, up from $8.400-8.600 billion previously. Similarly, non-GAAP EBITDA mid-range guidance was increased by $500 million to $3.55 billion. It marks the second consecutive quarter in which guidance was raised.

Can investors finally say that the turnaround is complete? Although not complete, it does appear to be on the right track. So much so, that famed short-seller Andrew Left of Citron Research recently turned bullish on the company. 

This is a significant 180 for Citron Research which bet big against Valeant and played a role in the company’s crash. According to Left, “The new Bausch Health is not Valeant” and Bausch has undergone a “textbook turnaround”. High praise from an analyst who makes a living betting against companies. 

In early action on Monday, Bausch was up 2% which is another indication that the market likes what they see. Over the past few months, the company has enjoyed several upgrades. 

What do analysts think of Bausch Health?

Analysts have a one-year price target of $42.09 which implies 23% upside from today’s price. The company is trading at a cheap 5.79 times forward earnings and the expectation is for high single-digit growth over the next few years. 

Now that the company appears to have righted the ship, Bausch appears to be worthy of consideration once again. It is worth noting however, that it still has a ways to go as it has a significantly high debt load which will continue to be an albatross. 

The good news is that the company is focused on reducing this debt burden. In the third quarter it reduced debt by $450 million. A good chunk, but it still has more the $23.5 billion in debt on the books.  

For now, it is certainly a company worth watching.  

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Mathieu Litalien


Mathieu is an individual investor and has been investing part-time for the better part of the past 20 years. He is primarily interested in fundamental analysis, focusing on the long-term and his portfolio is composed primarily of dividend-paying equities. Mathieu has a moderate risk profile and also looks for growth and value. His passion for finance and the markets have led him to his MBA and writing for Seeking Alpha, Motley Fool and Stocktrades. Mathieu also focuses primarily on stock research and content production for Stocktrades.ca Premium and the Stocktrades blog.

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