Viatris Inc
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Health Care : Pharmaceuticals | Mid Cap Value
Company profile

Viatris Inc. (Viatris) is a healthcare company. The Company operates through four segments: Developed Markets, Greater China, JANZ, and Emerging Markets. The Developed Markets segment comprises its operations primarily in North America and Europe. The Greater China segment includes its operations in China, Taiwan, and Hong Kong. The JANZ segment includes its operations in Japan, Australia, and New Zealand. The Emerging Markets segment encompasses its operations in Asia, the Middle East, South and Central America, Africa, and Eastern Europe, and also includes the Company’s anti-retroviral franchise. The Company's portfolio comprises of approximately 1,400 approved molecules across a range of key therapeutic areas including generic, complex generic, and biosimilar products. The Company operates approximately 50 manufacturing sites worldwide that produces oral solid doses, injectables, complex dosage forms and active pharmaceutical ingredients (APIs).

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0.20 (1.33%)
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A bargain you can't ignore: Small-cap stocks are trading at their second-biggest discount in 20 years

7:07 am ET November 10, 2021 (MarketWatch)

By Philip van Doorn

Small-caps as a group appear set for a much better 2022 than large-cap equities

Small-cap stocks, as a group, are bargain-priced relative to more popular large-caps, but you may be surprised at just how cheap they are. And wait until you see their performance from similar valuation levels.

Look at this 20-year chart, which shows the weighted forward price-to-earnings ratio for the S&P Small Cap 600 Index versus the large-cap benchmark S&P 500 Index :

William Watts reported on what appears to be a breakout for small-cap stocks after eight months of relatively flat performance. That is based on the movement of the Russell 2000 Index .

In this article, we are focusing on the S&P Small Cap 600 Index, which is far more selective than the Russell 2000 because because most of its companies are profitable. Standard & Poor's criteria for initial inclusion in the index includes positive earnings for the most recent quarter and for the sum of the most recent four quarters.

Aside from the early coronavirus pandemic doldrums of March 2020, the S&P 600 Small Cap Index hasn't traded this low, relative to the S&P 500, in 20 years.

Here's a breakdown of the relationship between current and average forward P/E ratios for the two indexes, using weighted data compiled by FactSet:

                                                  Forward price-to-earnings ratios 
Index                                      Current  3-year average  5-year average  10-year average  15-year average  20-year average 
S&P Small Cap 600                            15.63           16.69           16.60            15.81            15.32            15.34 
S&P 500                                      21.59           19.49           18.69            16.72            15.54            15.72 
Valuation of S&P Small Cap 600 to S&P 500      72%             86%             89%              95%              99%              98% 

The small-cap group typically trades much closer to the valuation of the large-caps than it does today.

Now take a look at a 20-year comparison of total returns for the two indexes:

In an extended bull market, driven in part by historically low interest rates, it is understandable that the best-known stocks (the large-caps) have had the most benefit. But all of the above argue for adding exposure to small-caps for the long term, as part of a diversified portfolio, especially if you have a lot of money in an S&P 500 index fund or exchange traded fund.

For a shorter-term case, see this comparison of aggregate consensus 2022 estimates among analysts polled by FactSet for the two indexes:

                     Sales per share 
                        2021       2022  Expected increase 
S&P Small Cap 600  $1,170.21  $1,261.61               7.8% 
S&P 500            $1,547.09  $1,650.78               6.7% 
                  Earnings per share 
                       2021     2022  Expected increase 
S&P Small Cap 600    $82.41   $94.04              14.1% 
S&P 500             $202.11  $218.74               8.2% 
                 Free cash flow per share 
                            2021    2022  Expected increase 
S&P Small Cap 600          74.46   89.86              20.7% 
S&P 500                   171.63  195.76              14.1% 

Good numbers across the board -- but the estimates are higher for the small-cap group.

For both groups, the free-cash-flow estimates are comforting. Free cash flow is a company's remaining cash flow after planned capital expenditures. It is money that can be used for expansion, dividend increases, stock buybacks or other corporate purposes.

How to get exposure to small-caps

If you are fortunate enough to have access to an employer-sponsored retirement account, the most important piece of advice anyone can give you is to contribute at least as much as your employer's maximum contribution. If you do that, you have an immediate 100% return on your contributions.

Then you should look at the fees charged by the mutual funds available within the 401(k) or similar plan. Index funds, which typically have lower expenses than actively managed funds, may be available, and these may include a small-cap fund. Your plan may also allow you to put money into a brokerage account, within which you can select exchange traded index funds that also have low expenses.

Here are a few ETFs that track the S&P Small Cap 600 Index:

Small-stock screen: Analysts' favorites for 2022

Among the S&P Small Cap 600, there are 24 stocks with 100% "buy" or equivalent ratings that are each covered by at least five analysts polled by FactSet. Here they are, sorted by the 12-month upside potential implied by the consensus price targets:

Company                                  Industry                          Closing price -- Nov. 3  Consensus price  target  Implied 12-month upside potential 
QuinStreet Inc. QNST                     Advertising/Marketing Services                    $13.44                   $26.80                                99% 
Tactile Systems Technology Inc. TCMD     Medical Specialties                               $36.90                   $69.25                                88% 
LendingTree Inc. TREE                    Finance/Rental/Leasing                           $151.37                  $238.75                                58% 
Talos Energy Inc. TALO                   Oil & Gas Production                              $13.22                   $19.25                                46% 
Cytokinetics Inc. CYTK                   Biotechnology                                     $36.67                   $52.50                                43% 
Ichor Holdings Ltd. ICHR                 Semiconductors                                    $46.04                   $60.40                                31% 
Ultra Clean Holdings Inc. UCTT           Semiconductors                                    $55.35                   $72.58                                31% 
Ligand Pharmaceuticals Inc. LGND         Biotechnology                                    $159.96                  $207.86                                30% 
Smart Global Holdings Inc. SGH           Semiconductors                                    $56.22                   $72.00                                28% 
TTM Technologies Inc. TTMI               Electronic Components                             $13.99                   $17.79                                27% 
Vista Outdoor Inc. VSTO                  Recreational Products                             $43.41                   $54.89                                26% 
Harmony Biosciences Holdings Inc. HRMY   Pharmaceuticals: Major                            $42.93                   $53.80                                25% 
Civitas Resources Inc. CIVI              Integrated Oil                                    $53.89                   $66.17                                23% 
Griffon Corp. GFF                        Building Products                                 $27.22                   $33.33                                22% 
Korn Ferry KFY                           Personnel Services                                $79.98                   $97.75                                22% 
NeoGenomics Inc. NEO                     Medical/Nursing Services                          $46.53                   $56.45                                21% 
SPX Corp. SPXC                           Industrial Conglomerates                          $62.09                   $75.25                                21% 
LCI Industries LCII                      Miscellaneous Manufacturing                      $149.50                  $178.00                                19% 
Green Plains Inc. GPRE                   Chemicals: Specialty                              $38.89                   $45.89                                18% 
Digi International Inc. DGII             Computer Peripherals                              $23.13                   $27.10                                17% 
Summit Hotel Properties Inc. INN         Real Estate Investment Trusts                     $10.44                   $11.60                                11% 
Veritex Holdings Inc. VBTX               Regional Banks                                    $42.75                   $46.50                                 9% 
Onto Innovation Inc. ONTO                Electronic Production Equipment                   $84.29                   $90.20                                 7% 
Axcelis Technologies Inc. ACLS           Electronic Production Equipment                   $59.04                   $57.17                                -3% 
                                                                                                                                              Source: FactSet 

Click on the tickers for more about each company. Click here for Tomi Kilgore's detailed guide to the wealth of information for free on the MarketWatch quote page.

Don't miss:These are the four solar stocks to own for the long run

-Philip van Doorn


(END) Dow Jones Newswires

November 10, 2021 07:07 ET (12:07 GMT)

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