| BUSINESSWEEK ONLINE : APRIL 26, 1999 ISSUE | ||||||||
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| INSIDE WALL STREET
Barr Labs, for a Cheap Drug Buy Although things are looking up for Barr Laboratories (BRL), two forces are working against its stock: It is a small-cap issue, and the company is in generic drugs. Both have been out of favor for some time. No matter, says money manager Michael Connor, who runs C-B Partners, a New York hedge fund. He sees small caps picking up soon and Barr shining as drug stocks emerge from the shadows. The immediate boost, he says, will come on Apr. 21 when Barr reports fiscal-third-quarter earnings. Analysts' consensus forecast is 53 cents a share, vs. 1998's 31 cents. Connor thinks Barr will beat the estimate. He thinks Barr stock, now at 31 1/2, will hit 50 this year. David Saks of Gruntal, a New York investment bank, is high on Barr, which he describes as ''one of the fastest-growing and most undervalued issues among mid-cap drugs.'' He notes that Barr has staged a turnaround, based on new products and a strategy of challenging patents of top-selling branded drugs. Barr's leading product is tamoxifen, a top-selling estrogen for breast cancer. Barr also makes warfarin, a generic version of Coumadin, the leading anticoagulant therapy. Saks notes that, at 31 1/2, the stock is trading at 11 times his estimated 2000 earnings of $2.85 and 14.6 times his 1999 forecast of $2.15. The stock is at a depressed price-earnings ratio even though Barr's ''earnings outlook has never been brighter,'' says Saks. Salomon Smith Barney analyst Michael Tong says that Barr is way undervalued compared with specialty drug firms, whose stocks trade at 22 to 25 times current-year earnings. ''Thus Barr's valuation represents a 40% discount to the peer group,'' notes Tong. BY GENE G. MARCIAL _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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