In a year that has brought investors both financial and emotional stress as stocks have been under tremendous selling pressure, Bausch Health Companies Inc. (TSX:BHC)(NYSE:BHC) has been a stable performer.
While Bausch Health Companies stock is not one we tend to think about when we talk about stability, the company has made strides in improving its business in hopes of driving shareholder value while delivering quality health care to patients.
Things are certainly moving in the right direction.
The company has been performing well ahead of expectations in the last few quarters, and the stock clearly has momentum behind it.
After the most recent results report, 2018 EBITDA guidance was bumped up again, by $100 million to between $3.3 billion and $3.45 billion.
The earnings release was another building block added to the small but growing tower of investor trust and confidence, as these results were once again better than expected.
Cash from operations was $522 million in the quarter, as a 3% organic growth rate in revenue was met with an increase in margins.
But this stock continues to be a comeback story, with many hurdles ahead, such as the company’s oversized debt burden and legal issues.
After a very difficult few years, things are improving nicely with the new CEO at the helm, whose focus is on reducing the company’s massive debt load and regaining investor confidence.
The net debt level remains extremely high, at $23.8 billion, but it is being worked down, slowly but surely. A year ago the company’s debt levels were $26.2 billion.
Most recently, the company announced that it will be using its cash flow generated from operations to redeem $200 million of its outstanding 5.625% senior notes due 2021.
Slowly but surely indeed.
Also, the company remains the subject of various legal investigations related to pricing and accounting, placing another overhang on the stock.
But if the new product launches go as planned in 2019 and the debt continues to be whittled down, this will serve to reduce the risk inherent in this stock, and it will increase investor confidence in the upside potential once again.
There are seven products that were recently launched, with another one, psoriasis drug Duobrii, expected to be launched in February 2019.
So while investors will be waiting to get a better idea of what the ramp up of these new products will be, it is positive that the company has this much product development, as the threat of generics always remains a risk.
The secular growth story of the healthcare industry remains in the company’s favour.