Tuesday, March 27, 2012

Teva Pharmaceutical (TEVA) 2012 Review

Teva Pharmaceutical Industries (TEVA) is an Israeli based global pharmaceutical company that develops, manufactures and markets generic and proprietary branded drugs and active pharmaceutical ingredients.

The company has grown profits and dividends at a 20%+ rate over the last ten years earning a 14-18% return on equity. The company was little impacted by the recent recession and should continue to expand as a result of:

(1) plentiful growth opportunities in generic drugs. The company currently has 83 product applications pending before the FDA,

(2) a significant and growing branded pharmaceutical business,

(3) the company has a very successful at resolving patent challenges which is a key part of generic product selections and development strategy,

(4) it is also building its OTC market presence,

(5) a major R&D effort in the biopharmaceutical and biogeneric markets.


(1) the pharmaceutical industry is very competitive and the generic segment is highly crowded,

(2) gaining approval for drugs is becoming more difficult in an increasingly tough regulatory environment,

(3) the FDA recently sent a warning letter on two of its manufacturing facilities.
TEVA is rated A by Value Line, has a 16% debt to equity ratio and its stock yields 2.1%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
TEVA 2.1% 11% 16% 10
IND 3.2 6* 42 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
TEVA 16% 18% 0 23% A
IND 15 15 NA 20 NA

*many companies in TEVA industry do not pay a dividend


Note: TEVA stock made great initial progress off its October 2008 low, quickly surpassing the down trend off its February 2008 high (red line) and the November 2008 trading high (green line). Long term, the stock is in a trading range (straight blue lines). You can see that it reversed the strong up trend off its October 2008 and returned to the October 2008 level. That puts it in an intermediate term down trend (purple lines). Short term it is an up trend (brown lines). The wiggly blue line is on balance volume. The Aggressive Growth Portfolio owns a full position in TEVA, though it has traded the stock several times. Its current position was made at $40. Shares would be Added at $38. The lower boundary of its Sell Half Range is $59.


Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.