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What happened

Valeant Pharmaceuticals Intl Inc (NYSE:BHC) stock dropped by more than 10% today in pre-marketing trading after the company posted weaker-than-expected third-quarter results. Specifically, Valeant posted non-GAAP earnings per share of $1.55 for the third quarter, missing consensus by $0.20. On the revenue side of the equation, Valeant came in $10 million light compared to the Street's expectations for the three-month period. While these quarterly numbers aren't pretty, the bigger issue is that the company also dramatically lowered its full-year earnings guidance to $5.30 to $5.50 a share, from $6.60 to $7 previously. 

So what

Valeant's stock has been pummeled this year by the combination of the ongoing drug-pricing controversy, its sky-high debt level that now stands at $30.3 billion, and questionable internal controls that forced it to restate its past earnings earlier this year. As such, the company certainly didn't need to give investors any additional reasons to continue fleeing to the sidelines.

Now what

On the bright side, Valeant's stock appears to be ridiculously cheap based on its forward price-to-earnings ratio of 2.5. That being said, there's a good chance that this enticing forward P/E ratio is an entirely misleading indicator regarding the company's value proposition moving forward.

Valeant, after all, is probably going to be forced to part with some of its best assets at fire-sale prices. For example, there are reports that drugmaker is already in talks to sell its Salix portfolio of gastrointestinal drugs to Japan's Takeda Pharmaceutical Co. for a mere $10 billion -- even though the company acquired Salix in 2015 for $14.5 billion. If this deal goes through, Valeant's earnings power is obviously going to take a major hit as a result.  

All in all, I personally wouldn't touch this falling knife right now, despite its bargain-basement valuation on a forward-looking basis.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. 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.