Brahman Capital Owns 5.7% of Endo Health Solutions Inc (ENDP)

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Other pharmaceutical companies include Abbott Laboratories (NYSE:ABT), Pfizer Inc. (NYSE:PFE), Gilead Sciences, Inc. (NASDAQ:GILD), and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). Of these four names, Pfizer and Teva have the lowest forward earnings multiples- specifically, they trade at 12 and 7 times respective forward earnings estimates. These two stocks also stand out from the two other peers- as well as Endo Health Solutions Inc (NASDAQ:ENDP) itself- in featuring dividend yields of about 3% (and higher in the case of Pfizer). We’d note, however, that both Pfizer Inc. (NYSE:PFE) and Teva Pharmaceuticals experienced a decline in revenue in the first quarter of 2013 versus a year earlier and in Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)’s case this contributed to a 27% fall in earnings.

Abbott and Gilead, meanwhile, at least managed to increase their sales in their most recent quarter compared to the same period in their previous year though Abbott seems to have had trouble with its margins leading to a drop in net income. The sell-side is expecting Abbott Laboratories (NYSE:ABT) to continue to struggle: its trailing P/E of 11 and forward P/E of 16 show that analyst consensus is for a decline in earnings per share over the next year and a half, after which the market would be pricing in a recovery in EPS that we might not want to count on. Gilead Sciences, Inc. (NASDAQ:GILD) has more than doubled in price over the last year, placing it at a premium to its peers at a valuation of 18 times consensus earnings for 2014, but it has managed to improve on both top and bottom lines.

As a result Gilead might be worth looking into as a growth stock although the current pricing does already include quite a bit of expected increases in EPS next year. Endo Health Solutions Inc (NASDAQ:ENDP), and some of the other companies we’ve covered here, are closer to the value end of the spectrum though business conditions are not expected to be that good over the next several years. While Brahman, Blue Ridge, and others are banking on the decrease in earnings being less than what analysts expect there is also significant short interest and so we would not be too excited about the stock.

Disclosure: I own no shares of any stocks mentioned in this article.

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