Comparative Valuation for TARO

TARO**(Q4Annualized) 44.53 1980.00 44.7 258.8 1765.90 318.00 876.15 SUN's Offer 24.5 AreTARO's metrics superior to Perrigo ? What does this indicate ? 45.08 42460.00 14520.00 1100.00 55880.00 4174.00

PRGO(ttm) Price per share in m Market Cap Debt Cash Enterprise Value=EV Adj EBIDTA 105.68 9860.00 1453.00 531.41 10781.59 666.604

TARO(ttm) 44.53 1980.00 46.11 242.72 1783.39 222.69

TEVA

Indicates TARO is significantly mispriced in the market (reasons explained later). Roughly 40% of TEVA's current earnings constitute Brand Copaxone's earnings, which is slated to become generic in 2014.

EV/EBIDTA

16.17

8.01

5.55

2.76

13.39 TARO mispriced?

If TARO were to just trade based of Perrigo's market multiple , From TTM earnings, TARO should be ~$85 per share. From Q4-annualized earnings, TARO should be ~$120 per share.
Higher Operating margin indicates the strength of Taro's business and the limited competition it enjoys for its products. Hence TARO deserves much higher market multiple

Operating Margin% Debt/Equity Debt/EBIDTA 3 YR %OI Growth Rt*** 3 YR %Sales Growth Rt ROE EPS P/E

17.79 58.39 2.18 45% 19% 25.99 3.7 28.56

40.33 7.88 0.21 64.83% 15.40% 38.61 4.11 10.83

50.3

16.98 65.4

0.14

3.48 39.51% 18.21% 12.5 3.09 14.6

Perrigo Debt/Ebidta is ~10 times more leveraged than TARO which constrains its future growth. Taro carries almost zero Financial risk and has significant leeway to grow organically & inorganically in future by taking on Debt. Hence Taro deserves higher market multiple than Perrigo

TARO's growth rate has exceeded Perrigo's. TEVA is expected to lose 40% of its earnings in 2014.

Roughly 40% of TEVA's current earnings constitute Brand Copaxone's earnings, which is slated to become generic in 2014. Hence Teva is trading at lower market multiple . Taro is severly mispriced in the market

http://www.bloomberg.com/news/2012-01-02/teva-says-jeremy-levin-named-to-succeed-shlomo-yanai-as-ceo.html Note: Price based of April 20th closing All data TTM All numbers taken from sec filings and perrigo investor presentation