Is The Best Investment in Valeant Stock The One You Make in the Future?

Valeant StockWhat more could go wrong with Valeant Pharmaceuticals Intl Inc (NYSE:VRX)? A year ago, Valeant stock was trading at about $230.00 a share. Currently, they are a tad better than one-tenth that price. VRX stock has fallen by more than 87% in the last 12 months.

The Offices of the United States Attorneys in Manhattan is pursuing a criminal investigation of Valeant for defrauding insurers. Mutual fund operator T. Row Price Group Inc (NASDAQ:TROW) has a separate civil suit pending over the same matter.  TIAA-CREF and CalPERS have filed securities fraud lawsuits against Valeant. The U.S. Department of Justice and the United States Attorneys’ Office Eastern District of Pennsylvania have a separate ongoing fraud investigation. And, while space prohibits my including here of each of the other open (and known pending) civil lawsuits, class action lawsuits, congressional investigations, and other criminal investigations—both in the United States and Canada—suffice it to say, there are more than 20 others. (Source: “Valeant Pharmaceuticals International, Inc. (Filer) CIK: 0000885590,” U.S. Securities and Exchange Commission, last accessed September 1, 2016.)

Valeant failed to file its 2015 annual report with the U.S. Securities Exchange Commission when it was due last February—the report was finally filed at the end of April—but not before the company received a notice of default by creditors. (Source: Valeant Pharmaceuticals Receives Notice of Default from Bondholders Due To Delayed 10-K Filing, Valeant Pharmaceuticals Intl Inc, April 12, 2016.)

VRX Stock Chart

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In its most recent earnings announcement, Valeant stock reported a 34.6% decline in earnings per share (EPS) on revenues that declined by more than 11% year-over-year. And while both metrics missed analysts’ targets for Valeant stock, the company’s management affirmed its full-year 2016 revenue and earnings targets. (Source: “Valeant Pharmaceuticals Reports Second Quarter 2016 Financial Results,” Valeant Pharmaceuticals Intl Inc, August 9, 2016.)

The Worst May Be Over For VRX Stock, But the Best May Be Far Off

Here’s the problem: unless Valeant shows real improvement in both revenues and earnings when they report next, Valeant stock could be in for more selling pressure.

So, while the worst may be over for VRX stock in terms of having all the bad news being out and in the open, getting through all of their legal woes will take time and money. And there is no guarantee that the company will have the money to survive one or two big judgments. After all, they have just a little over $850.0 million in cash and nearly $31.0 billion in debt. (Source: “U.S. Securities and Exchange Commission, op cit.)

The Bottom Line for VRX Stock

The silver lining in all of this is that Valeant owns some great brands like “PreserVision” and “Ocuvite.”  But, their most valuable brand in my opinion is the eyecare company, Bausch & Lomb. If Valeant can get through its current trouble, and can do it without selling off some of its recognized brands, there may be a time when an investment in VRX stock won’t seem as scary as it does right now. But, heaven only knows how far off that might be.