Sometimes, the best deals pop up when things look a bit gloomy. Bausch Health (TSX:BHC) on the TSX might be one of those chances. It’s faced some tough times lately, but if you look at how the company is doing now and its money situation, there could be potential for investors who are thinking long term.
Image source: Getty Images
What happened?
As of writing, the TSX stock is now trading at around $6. That’s quite a drop from its highest point in the last year, which was $13.74. That’s a decrease of about 56%! Because of this drop, the TSX stock’s total value on the stock market is around $2.2 billion. However, if we look at the company’s earnings report for the last three months of 2024, things look a little brighter.
Bausch Health reported revenue of $3.63 billion. That was actually a bit higher than what analysts were expecting, which was $3.60 billion. The earnings per share (EPS) matched what analysts predicted at $1.62. Looking at the whole year, the TSX stock’s total revenue was $13.85 billion. However, it reported a net loss of $66.19 million for the year, which means a loss of $0.18 per share. Even with this loss, the company managed to generate a good amount of free cash flow, $1.81 billion, to be exact. This shows that even though it had a net loss, the TSX stock is still good at bringing in cash.
Bausch Health has different parts of its business. These include Salix, Solta Medical, and Bausch + Lomb. Having these different segments helps the TSX stock spread out its risks. If one area isn’t doing so well, the others might help balance things out.
Future outlook
Looking at some of the TSX stock’s financial numbers, the gross profit margin is pretty high at 71.10%. The operating margin, which is the profit after operating expenses, is also decent at 19.40%. The profit margin, which is the actual profit after all expenses, is down 0.48%. However, the earnings before interest, taxes, depreciation, and amortization (EBITDA) is a healthy 32.56%. These numbers suggest that Bausch Health is actually pretty efficient and profitable in its operations before taking into account things like debt and taxes.
Now, let’s talk about the debt. The company has a total debt of $31.42 billion. Compared to its cash and equivalents of $1.70 billion, that’s a net debt of $29.72 billion. That’s a significant amount of debt, which is definitely a concern for investors. However, the fact that the TSX stock consistently generates a good amount of free cash flow gives some comfort that it should be able to handle its debt payments.
What do the experts think? Well, analysts seem cautiously optimistic. The average price target from six analysts is $8.58. That suggests the stock price could go up from where it is now. Also, the company’s forward price-to-earnings (P/E) ratio is at 0.99. A P/E ratio that low can indicate that the stock might be undervalued compared to how much money it’s expected to make.
Bottom line
So, to sum it up, Bausch Health definitely has some big challenges, especially with that high level of debt and the recent drop in its stock price. However, the TSX stock is still bringing in a lot of revenue, seems to be operating efficiently, and has different business areas. This could make a case for investors who are willing to think long term. As always, though, if you’re thinking about investing, it’s super important to do your own research and figure out how much risk you’re comfortable with before making any decisions.
