Shares of Taro Pharmaceutical (TARO) have not performed well year-to-date, dropping 5.7%. For comparison, the S&P 500 Index has risen by 22% over the same period of time.
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There is, however, potential for a strong rebound in the stock price, enabling shares to grow more in line with the stock market. (See TARO stock charts on TipRanks)
The stock is not expensive, as its share price currently trades below its 200-day moving average of $72.84. Thus, I am bullish on the stock.
Based in Haifa, Israel, Taro Pharmaceutical develops pharmaceutical ingredients for capsules, drops, ointments, pastes, powders, shampoos, syrups, tablets, toothpastes, mouthwashes. These products are mainly for North America, and Israel.
In addition to healthcare institutions, hospitals, and private pharmacies, these products are also sold to wholesalers, drug stores, and grocery chains.
First Quarter of Fiscal 2022 Earnings Results
During the three months period ended June 30, 2021, Taro Pharmaceutical sold products for total revenues of $147.1 million, a 25.1% year-over-year increase.
Adjusted earnings were $1.09 per diluted share, increasing 43.4% from the same quarter of the prior fiscal year.
During the quarter, the company allocated $18.3 million to buy back shares of its common stock. Following this spending to recall nearly 255,000 shares, total funds in cash on hand and marketable securities amounted to nearly $1.6 billion. It marked a $13.5-million sequential improvement.
Growth Perspectives
The COVID-19 pandemic was an excellent stress test for the company, which not only managed to get out of the crisis, but gave proof of strong survival skills.
Management wants to increase the resilience of the business through further expansion of the product portfolio, and through mergers and acquisitions. Regarding the first strategy, there are 19 Abbreviated New Drug Applications in the queue for Food and Drug Administration approval.
Wall Street’s Take
In the past three months, only one Wall Street analyst has issued a 12-month price target for Taro Pharmaceutical. That would be H.C. Wainwright’s Ram Selvaraju, gave the stock a Buy rating, and a price target of $82 per share, implying 17.6% upside potential.
Summary
Revenues and profits of Taro Pharmaceutical have risen again, after some small uncertainty due to the pandemic crisis.
This shows that the company’s business is resilient. If management succeeds in pursuing its ongoing strategies, the share price could skyrocket.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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