Mallinckrodt (NYSE:MNK) [Trend Analysis] is another one of those stocks in the hot pharma industry that investors will no douby be considering. We look at 3 reasons just why investors are so hot on MNK which has lead to the run up in the share price of the stock.
1. Attractice Price to Earnings Multiple
Mallinckrodt (NYSE:MNK) is trading on a forward P/E multiple of 14.41. This multiple is very low when we compare it to the current market average P/R multiple of around 19. This means that on a value basis MNK looks cheaply priced, even after the stock has had such a run upward in the last 6 months.
2. Attractive Growth Estimates
Analysts are estimating earnings per share growth over the next 5 years for Mallinckrodt of between 18% and 28% per year. This translates to a price to earnings to growth (PEG) ratio for MNK of between 0.5 and 0.96. As a general rule of thumb, the market generally considers a stock trading on a PEG ratio of under 1 to be underpriced, as such, from a growth perspective Mallinckrodt looks like a good cheap buy.
3. An M&A Target
A report came out today suggesting that with the recent M&A boom going on in the pharmaceutical sector, Mallinckrodt presents itself as a significant takeover target for some of the larger pharma players. As noted by Barron’s Teva Pharmaceuticals may consider MNK as an acquisition to help build out their “controlled substance generics” as well as possibly adding up to 20% to their earnings.
Noting the above points with Mallinckrodt (NYSE:MNK) set to start producing positive earnings, the company certainly looks like one investors should keep on their buying radars.