Every investor should have pharmaceutical and biotechnology sector exposure given the gains they offer from both global demographics and economic development. Israel’s Teva Pharmaceutical Industries (TEVA, quote) is one pharma stock that offers the opportunity to profit from both growth and income modes of investing.
For the growth features, earnings-per-share have risen 36.75% for Teva over the last five years. Quarterly sales growth is up 28.47%. The price-to-earnings ratio is slightly better than average at 14.28, and projected to improve to 7.29 over the next year.
In terms of income, Teva has a fairly typical dividend yield of 2.13%. However, the average historical payout ratio for a stock is around 50%, while Teva’s is just 31.26%.
This is significant for several reasons. It shows there is cash available to raise the dividend or implement a stock buyback program. It also indicates company management that is fiscally prudent and protective of the rights of individual shareholders.
Teva is trading above its 20-day and 200-day moving averages, but in a very narrow range. Recent candlestick patterns have been long, negative and engulfing, which is very bearish. Bollinger Band trends have also been negative. Relative volume has also been weak; also bearish. These have been reflected in the share price of Teva which is down for the last week, month, and quarter.
The professional analyst and investor community is positioned to buy. TEVA has a minuscule short float, and the company receives a very strong mean analyst rating of 1.90. Now trading around $44 a share, the mean analyst price target for Teva over the next year is $53.90.
Teva is the world’s largest generic drug manufacturer, and is likely to gain as the global population gets older and spends more money on health care. Its current sagging price should be viewed as a opportunity to accumulate shares at a discount.