Allegran (NYSE:AGN) Investors In A Fix


Allegran (NYSE:AGN) has rewarded its investors quite generously this year. This is due to Actavis’ (NYSE:ACT) bit to acquire its fellow drug manufacturer for a whopping $66 billion. This has resulted in Allegran (NYSE:AGN) stocks going up 92% in fiscal 2014.

According to the minutes of the merger, Actavis (NYSE:ACT) will pay $129.22 to Allegran (NYSE:AGN) shareholders in cash, for each share. An additional 0.3683 of an Actavis (NYSE:ACT) share will be awarded for each Allegran (NYSE:AGN) share owned. The two companies are expected to shake hands on this deal in the early part of 2015. While investors have found Allegran (NYSE:AGN) a favorable investment, they are engaging in the thought of either retaining their shares with the bigger pharma company, or sell shares to move on.

There is a lot of research and thought that investors need to engage in, before making a decision to invest in a company. It is not wise to only consider the return and revenue on invested capital. It is important to have a deeper study of a company’s history, its business ventures, and future opportunities before being compelled into investing.  This points to the fact that Allegran (NYSE:AGN)’s recent remarkable performance should not interpret the Actavis’ (NYSE:ACT) future revenue performance. It is important for the Allegran (NYSE:AGN) investors to build a new investment research based on Actavis’ ((NYSE:ACT) corporate model. There are marked difference between the two pharma companies, which are summarized here.

Both the companies have grown significantly in last ten years. In the last 12 months, Allegran (NYSE:AGN) sales have gone up to $7 billion in 2014 from its previous $2.5 billion, eight years ago. Similarly, Actavis (NYSE:ACT) sales have gone up from $5 billion in 2012 to almost $12 billion this year. Both companies have grown immensely over the past decade, but their growth and development strategies differ.

Allegran (NYSE:AGN) has generated most sales from its Botox therapy, which is used for both cosmetic as well as therapeutic treatments. Its ophthalmology range has also served the company well in terms of sales.

Actavis (NYSE:ACT) however, has engaged a different route to remarkable sales and revenue. The company engaged in acquisitions and purchased several chains and companies to attain the status of a major generic pharma company. In its wake, Actavis (NYSE:ACT) has purchased Warner Chilcott for $8.5 billion in 2013 and it paid $25 billion to acquire Forest Laboratories in 2014.

In order to judge if a company stock is a good investment, investors can look at its current ration. It’s a dividend of a company’s current assets and its short-term liabilities. This figure gives a concise look into probable revenue in the event of debtors coming to receive owed dues. Higher the number, better the investors’ share. The current ratio figures for Allegran (NYSE:AGN) and Actavis (NYSE:ACT) are 4.27 and 1.34 respectively. The operating margins for the former is 26.2% and 5.99% for the later in the past 12 months.

These alone could be a reason for the Allegran (NYSE:AGN) investors to cease investment.