Is Bausch Health (BHC) Pricing Reflect Long Term Potential After 81% Five Year Share Slump

• If you are wondering whether Bausch Health Companies at around US$5.88 is a bargain or a value trap, you are not alone. This article is built to help you weigh that up with a clear look at the numbers.
• The stock has seen mixed recent returns, with a 2.4% gain over the last 7 days, a 20.6% decline over the past month, and returns of 18.4% lower year to date and 8.8% lower over the past year, set against a much steeper 81.2% decline over five years.
• Recent news coverage around Bausch Health Companies has focused on its ongoing efforts to manage debt and reshape its portfolio, alongside ongoing attention on the performance of its key product lines and business segments. Together, these themes help explain why the share price has been volatile as investors reassess both risk and potential value.
• On our valuation framework, Bausch Health Companies scores 5 out of 6 on undervaluation checks, giving it a 5/6 valuation score. Next, we will walk through the standard valuation methods that lead to this number, before finishing with a more complete way to think about what the stock might be worth.

Find out why Bausch Health Companies’s -8.8% return over the last year is lagging behind its peers.

Approach 1: Bausch Health Companies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company could be worth today by projecting its future cash flows and then discounting them back to a present value.

For Bausch Health Companies, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $1.14b. Analysts and extrapolations underpin a series of ten year projections, with forecast free cash flow of $2.37b in 2030. Simply Wall St uses analyst inputs where available. It then extends the forecast path beyond that using its own assumptions.

When all those projected cash flows are discounted back and summed, the result is an estimated intrinsic value of about $66.06 per share. Compared with the recent share price of around $5.88, this implies the stock screens as about 91.1% undervalued on this DCF output.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Bausch Health Companies is undervalued by 91.1%. Track this in your watchlist or portfolio, or discover 52 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Bausch Health Companies.

Approach 2: Bausch Health Companies Price vs Earnings

For a profitable company, the P/E ratio is a useful yardstick because it directly links what you pay for the stock to the earnings it is currently generating. Investors typically accept a higher or lower P/E depending on what they expect for future earnings growth and how risky those earnings appear.

Bausch Health Companies currently trades on a P/E of about 6.0x. That sits well below the Pharmaceuticals industry average P/E of about 21.2x and also below the peer average of around 14.0x. On simple comparisons with industry and peers, the shares screen as inexpensive relative to current earnings.

Simply Wall St also estimates a proprietary “Fair Ratio” for the stock, which in this case is a P/E of about 18.3x. This Fair Ratio is designed to be a more tailored benchmark than a straight industry or peer comparison because it considers factors like earnings growth, profit margins, market cap, industry characteristics and company specific risks. Setting that Fair Ratio of 18.3x against the current P/E of 6.0x suggests the shares are trading below the level implied by those fundamentals.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Bausch Health Companies Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company linked directly to your assumptions for fair value, future revenue, earnings and margins. On Simply Wall St, millions of investors use Narratives on the Community page to connect what they believe about a company, such as Bausch Health Companies managing its debt and reshaping its portfolio, to a financial forecast and then a fair value that they can compare with the current share price to help decide whether it looks more like a buy, a hold or a sell for their own plan. Narratives on the platform update automatically when new information like news or earnings is added, so your story and your numbers stay in sync. For example, one Bausch Health Companies Narrative might assume a relatively high fair value based on strong confidence in key product lines, while another might set a much lower fair value if the author focuses more on debt and execution risks.

Do you think there’s more to the story for Bausch Health Companies? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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