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Is Teva Pharmaceutical Industries Limited Stock a Bargain?

By George Budwell - Updated Apr 18, 2019 at 8:27PM

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Teva's shares were unfairly punished last month.

What happened

December turned out to be a historically turbulent month for big-pharma stocks, and generic-drug king Teva Pharmaceutical Industries Limited ( TEVA -2.56% ) was no exception. In fact, Teva's shares fell by a whopping 28.4% over the course of December, according to data from S&P Global Market Intelligence.

What drove this marked decline? Teva, like most of its biopharma peers, sank because of the market's overall downturn last month, as well as Johnson & Johnson's ( JNJ -1.41% ) so-called baby powder controversy.

Person in a suit holding a toy bear in one hand and a toy bull in the other.

Image Source: Getty Images.

So what

The fact that Teva's shares were punished mightily for J&J's troubles -- even though this alleged scandal has no bearing on Teva's outlook whatsoever -- shows just how moody the market was last month. In turn, bargain hunters have apparently started to take note of this unwarranted sell-off, causing the drugmaker's shares to rise by a healthy 19% over the first two weeks of the new year.

Despite this double-digit rally in early 2019, however, Teva's shares are still among the cheapest in the large-cap pharma space. At current levels, for instance, Teva's stock sports a rock-bottom price-to-sales ratio of 1.02.

Now what

Should investors take advantage of Teva's dirt-cheap valuation this year? The answer to this question is arguably a resounding yes. Teva's new management team has done a stellar job at trimming the fat and getting the company's debt problem under control over the last year. These efforts have thus attracted sizable investments from blue-chip investors, such as Warren Buffett. All told, Teva's days of cellar dwelling seem to be close to an end, making now a perfect time to buy this deeply undervalued pharma stock.

Check out the latest Teva Pharmaceutical earnings call transcript.

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.

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Stocks Mentioned

Teva Pharmaceutical Industries Limited Stock Quote
Teva Pharmaceutical Industries Limited
$8.37 (-2.56%) $0.22
Johnson & Johnson Stock Quote
Johnson & Johnson
$157.50 (-1.41%) $-2.25

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