Novice Investing - Having the King at Your Side

Date: Friday 29th 2008f August 2008 09:51:01 PM

Having the King at Your Side - 10/18/2007

By: Hari Wibowo

Our quest to discover undervalued investment stops at King Pharmaceuticals Inc. (KG). This is not the first time we stumbled upon King Pharmaceuticals. Back in 2005, we featured King as one of stocks with decent balance sheet and good profit potential. At the time, it was trading at $ 10.75 per share. After watching it rise as high as $ 22 per share, King is now back at $ 10.75 per share it fetched two years ago. Is it our second chance of owning King Pharmaceuticals?

Earning per share for King is expected to be $ 1.81 and $ 1.38 for fiscal year 2007 and 2008 respectively. Meanwhile for 2006, King Pharmaceuticals earned $ 288.9 Million or $ 1.18 per share. Thus, it is safe to say that King would probably earn at least $ 1.18 per share annually for the foreseeable future.

Meanwhile, balance sheet for King has improved since we last talked about them. This is due to the continuing profitable operation. Positive net cash stands at $ 600 Million (or $ 2.45 per share) which is around 20% of its market capitalization.

How about business operations? What does King Pharmaceuticals actually do? We do not research them thorough enough at this point but a little description from Yahoo! Finance indicates that " King Pharmaceuticals, Inc. develops, manufactures, markets, and sells branded prescription pharmaceutical products. It primarily focuses on cardiovascular/metabolic, neuroscience, and hospital/acute care products." This is a pretty wide descriptions and it does not help us identify what is revenue driver for King. Next step, we will examine King's 2006 annual report and try to deduce whether current price is undervalued for our stock portfolio.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding King Pharmaceuticals Inc.. (KG) or any other securities.

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