Concordia Healthcare Fell More Than Its Peers...But These Analysts Think It's Coming Back

Concordia Healthcare’s stock fell more than 46 percent over the past month and more than 34 percent over the past five trading days.

However, the selloff seems overdone, RBC analysts Douglas Miehm and Joel Hurren assured. The company has apparently fallen victim to several stumbling blocks, including: “deal related concerns, Hillary Clinton's commentary related to drug sector pricing, higher than normal forecast debt levels, and a vaccuum [sic] of information leading to what appears to be panic selling.”

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As such, the firm would recommend buying the stock, especially given its current P/E multiples of 5.1 times the 2016 estimate and 4.5x times the 2017 estimate compared to its peers’ 13x and 10x multiples for 2016 and 2017, respectively.

The experts pointed out that Concordia’s stock should trade at a discount. However, the current stock price does not value the company adequately.

The AMCo Acquisition

Concordia recently announced it will acquire Amdipharm Mercury Company Limited (AMCo Ltd.) for $3.5 billion, including a $0.2 billion potential earn out). RBC sees this transaction as “the next logical step” in the company’s evolution. Moreover, the analysts think the purchase will be EPS accretive immediately and will create value over the longer term.

The acquisition also provides the small-cap healthcare company with a global platform to expand its reach and the experts think that AMCo’s presence in over 100 countries will certainly be beneficial for Concordia.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.