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Is Taro Pharmaceutical Industries Ltd. (NYSE:TARO) Potentially Underrated?

Simply Wall St

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Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is a company with exceptional fundamental characteristics. Upon building up an investment case for a stock, we should look at various aspects. In the case of TARO, it is a company that has been able to sustain great financial health, trading at an attractive share price. Below is a brief commentary on these key aspects. For those interested in digging a bit deeper into my commentary, take a look at the report on Taro Pharmaceutical Industries here.

Very undervalued with flawless balance sheet

TARO is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This suggests prudent control over cash and cost by management, which is a crucial insight into the health of the company. TARO currently has no debt on its balance sheet. This means it is running its business only on equity capital funding, which is rather impressive for a US$3.2b market cap company. Therefore the company has plenty of headroom to grow, and the ability to raise debt should it need to in the future. TARO's share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. This mispricing gives investors the opportunity to buy into the stock at a cheap price compared to the value they will be receiving, should analysts' consensus forecast growth be correct. Also, relative to the rest of its peers with similar levels of earnings, TARO's share price is trading below the group's average. This bolsters the proposition that TARO's price is currently discounted.

NYSE:TARO Intrinsic value, July 16th 2019

Next Steps:

For Taro Pharmaceutical Industries, there are three fundamental factors you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for TARO’s future growth? Take a look at our free research report of analyst consensus for TARO’s outlook.
  2. Historical Performance: What has TARO's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of TARO? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.