Is Bausch Health Companies (TSX:BHC) a Buy?

Bausch Health Companies (TSX:BHC)(NYSE:BHC) has made impressive gains over the past two years, while slashing its debt. Does this mean that the company is now a solid option to consider?

| More on:

Just a few short years ago, Bausch Health Companies (TSX:BHC)(NYSE:BHC) transitioned from being known as a market darling with massive long-term potential to a stock that badly bruised investors with losses in excess of 90%. Bausch was known under a different name back then, and the company has turned itself around impressively over the years, raising the question on every investor’s mind: Is Bausch is finally a good investment?

Let’s try to answer that question by taking a closer look.

Let’s be clear: this is not the old Valeant

There are those investors that refuse to acknowledge Bausch’s former name. Whether this is because the losses from that epic collapse are still fresh or that those investors prefer to not acknowledge that past doesn’t matter.

Bausch is a completely different company today. Bausch no longer has a business model based on acquisitions and fueled on cheap loans. The company is also no longer the subject of countless lawsuits ranging from price gouging to misrepresenting financial data.

Finally, while Bausch does have a substantial amount of debt of $23 billion, it pales in comparison to the mammoth $30 billion debt the company was straddled with a few years ago.

Bausch itself has plenty to look forward to. Apart from continuing to chew away at its debt, the company has just $1.5 billion in debt obligations for fiscal 2020. While that number will swell to over $4.5 billion by 2022, Bausch has strong growth projects in line today that will significantly add to its revenue stream.

By way of example, take the company’s namesake, Bausch & Lomb. The segment has quietly outperformed other areas of the company, by posting solid organic revenue growth for 12 consecutive quarters. In the most recent quarter, this amounted to $1,175 million in revenue, or just over 50% of the company’s total $2,209 million in revenue for the quarter.

Another rising star is Bausch’s gastro segment, Salix. Strong growth and new products have allowed Salix to flourish in recent quarters. In the most recent quarter, the segment brought in $551 million in revenue, representing a 20% hike over the same period last year.

Where does this leave investors?

There’s a compelling case to be made for investing in Bausch as a small part of a larger long-term growth portfolio, but investors should know that Bausch is not without risk. Specifically, Bausch’s debt levels remain of key concern, despite the company noting that it had a goal of getting its debt down to a manageable level rather than completely eliminating it.

In my opinion, Bausch is an intriguing investment for investors with an appetite for risk. The fact that the company has seen its stock price surge by nearly 60% is also encouraging, especially considering that Bausch still has more products coming to market and continues to forecast strong growth.

Those investors with less of a tolerance for risk might prefer investing in a more defensive holding that can also provide income-earning potential.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. Tom Gardner owns shares of Bausch Health Companies. The Motley Fool owns shares of and recommends Bausch Health Companies.

More on Investing

how to save money
Investing

The Best TSX Stock for Canadians to Buy With $1,000 Right Now

iShares S&P/TSX 60 Index ETF (TSX:XIU) could be a great starter investment for new investors in Canada.

Read more »

Canadian dollars are printed
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Toronto-Dominion Bank (TSX:TD) stock could do well in the year ahead.

Read more »

monthly desk calendar
Dividend Stocks

Monthly Income: Top Dividend Stocks to Buy in November

Here are two of the best monthly dividend stocks in Canada you can buy in November 2024 and hold for…

Read more »

hand stacks coins
Investing

A Top TSX Stock to Buy Now for Real Wealth Later

Intact Financial (TSX:IFC) stock is a fantastic dividend-growth play for the next 15 years and beyond.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, November 14

The U.S. wholesale inflation data and Fed chair Jerome Powell’s remarks about the economy will remain on TSX investors’ radar…

Read more »

Man data analyze
Tech Stocks

3 Reasons Celestica Stock Is a Screaming Buy Now

These three reasons make Celestica stock a screaming buy for long-term investors.

Read more »

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »