Up 30% in the Last Year, Bausch Health Companies (TSX:BHC) Shows Continued Progress

Bausch Health Companies Inc. (TSX:BHC) (NYSE:BHC) outperforms as the company continues to beat expectations and to slowly work down its massive debtload.

| More on:
Index funds

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

In a year that has brought investors both financial and emotional stress, as the market has been extremely volatile, Bausch Health Companies Inc. (TSX:BHC)(NYSE:BHC) has been an outstanding top performer with a one-year return of 30%.

While Bausch Health Companies is not one we tend to consider when we talk about outperformance these days, the company has made strides in improving its business in the hopes that it can get back to the basics of driving shareholder value while delivering quality health care to patients.

And things are certainly continuing to go in the right direction.

Debt reduction

After a very difficult last few years, things are improving nicely with the new CEO at the helm and a focus on reducing the company’s massive debt load and regaining investor confidence.

The net debt level remains extremely high, at $23 billion, but it is being worked down, slowly but surely. Three years ago the company’s debt levels were north of $30 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.

Better-than-expected results

The company has been performing well ahead of expectations in the last few quarters, and the stock clearly has momentum behind it.

In the latest quarter, the fourth quarter of 2018, EPS came in at $1.03, well ahead of expectations in yet another quarter of better-than-expected results.

2018 cash flow was $1.5 billion, and free cash flow was $1.3 billion.

Hurdles remain

Promising news notwithstanding, this stock continues to be a comeback story, with many hurdles left, such as the company’s oversized debt burden and legal issues.

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 worked 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, the psoriasis drug Duobrii, expected to be launched in 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, and for those investors willing to have faith in this comeback story, there are definitely some good signs to latch onto.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karen Thomas has no position in any of the stocks mentioned. The Motley Fool owns shares of Bausch Health Companies.

More on Investing

money cash dividends
Dividend Stocks

2 Passive-Income ETFs to Buy in 2022

Unlike stocks, distribution-focused ETFs may not offer an equally healthy capital-appreciation potential, but they might still be worth buying.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

RRSP Investors: 2 Top Total-Return Stocks to Build Retirement Wealth

These top TSX dividend stocks offer high yields and currently trade at discounted prices.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

The 3 Best TSX Dividend Stocks That Pay Cash Monthly

Looking to earn monthly passive income from top dividend stocks? Here are three fresh ideas for July 2022.

Read more »

Cogs turning against each other
Dividend Stocks

2 Resilient Value Stocks That Could Weather the Storm

The resilient businesses of two value stocks can help you endure recessionary pressures and deliver superior returns in 2022.

Read more »

exchange traded funds
Investing

3 Must-Buy Bank of Montreal ETFs to Ride Out a Recession

Passive investors may wish to buy BMO Covered Call Canadian Banks ETF (TSX:ZWB) and two other incredible ETFs that right…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

Retirees: Fortify Your Portfolio by Building a 2nd Pension

One of the best ways to utilize your retirement savings without depleting them is to invest them in dividend stocks.…

Read more »

Man holding magnifying glass over a document
Stocks for Beginners

The Valuation Conundrum: P/E Ratio vs. P/S Ratio

Did you buy a stock with low P/S ratio and make a loss? Most investors fall prey to the valuation…

Read more »

growing plant shoots on stacked coins
Energy Stocks

Buy the Dip? 2 TSX Energy Stocks With Fast-Growing Dividends

TSX energy stocks have seen a double-digit decline in June. Here are two stocks with incredibly fast-growing dividends to consider…

Read more »