In the September 2010 issue of the Investor Advisory Service we recommended Perrigo Company, a Michigan-based maker of store-brand medicines. This midsized company had revenues in 2010 of $2.3 billion, and had grown earnings per share at an annualized rate of 17.2% since 2001. How have the company and its stock performed in the year since it was recommended?
When we profiled Perrigo Company (Ticker: PRGO) in the September 2010 issue of the Investor Advisory Service, shares were trading under $57. The manufacturer of generic medications, most of which are sold over-the-counter, was benefiting as squeezed shoppers abandoned name-brand drugs in favor to the cheaper store brands. Organic growth from both new products and better pricing was bolstered by three recent acquisitions. We estimated the company could earn $3.50 in 2011, lending shares a forward P/E of about 16.
Shares soon started to rise along with the broader stock market. The stock price came down briefly after November’s earnings, but rallied again to trade between $60 and $70. In January, Perrigo announced the purchase of Paddock Labs. We considered the price a little rich, but investors cheered, sending PRGO shares up a leg from $66 to $74.
In March, the company reported growth of 23%, 11% of which was organic. Earnings grew 43% year-over-year to $0.93. The company raised their full-year earnings guidance to $3.82, ahead of our original estimates. We were happy with the quarter but warned that the company’s nutritionals segment was benefiting from shutdowns at competitor’s plants, and that these shutdowns would be temporary. Shares advanced to more than $90 before pulling back to $85.
June brought more blowout numbers, with sales and earnings up 29% and 48% respectively. Most of the growth came from acquisitions, however, and with competition returning in the nutritionals, we warned that shares were looking pricey. Since then, after crossing $94 in July, the stock has come down with the rest of the market to a recent price of $84.55, a 49% increase since we originally profiled the company. Perrigo will report Fiscal year-end results on August 16, 2011.
Disclaimer: This company was selected for review in part because of its performance over the past year. Its outperformance relative to the broader market is not necessarily indicative of performance of the broaderInvestor Advisory Service.