Summary
- Teva's debt continues to come down, now at less than 5x its net debt to EBITDA -- first time since Q1 2018.
- Teva reiterates its 2020 guidance for $2 billion of free cash flow.
- This stock should not trade for just 6 times its 2020 free cash flow. This is incredibly cheap.
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Investment Thesis
Teva (TEVA) continues to deliver against all its indicators, that it has been setting for itself over the past two years.
Put another way, Teva continues to cut back on expenses, pay down debt, generate strong free cash flow, and have an attractive future ahead.
Nevertheless, for now, despite soaring more than 70% from its March lows, the stock is still in bargain basement at just 6 times forward free cash flow.
I believe that Teva should be worth at least 10x its free cash flow, which is not an exuberant valuation, particularly given the stability of its operations. Put another way, Teva's market cap should be worth at least 40% more, or closer to $20 billion.
