Is Teva Pharmaceutical Industries (TEVA) Still Attractive After A 49% One Year Share Price Jump

• If you are wondering whether Teva Pharmaceutical Industries at around US$32.11 is offering good value today, you will want to look past the headlines and into how its current price lines up with different valuation checks.
• The stock has posted returns of 2.5% over the last 7 days, 12.8% over the past month, 3.7% year to date and 48.7% over the past year, with a 3 year return of 192.2% and a 5 year return of 174.0%. This naturally raises questions about what is already baked into the price.
• Recent news around Teva has largely focused on its position as a major global generic and specialty pharmaceutical company and ongoing attention on its role in key therapeutic areas such as central nervous system and respiratory treatments. This context helps frame how investors think about the risk and opportunity that may sit behind those recent share price moves.
• On our simple valuation checklist, Teva currently scores 2 out of 6. This means some methods suggest the stock is undervalued while others do not. Next, we will run through those approaches in more detail and then finish with a way of pulling them together that can give you a clearer overall valuation picture.

Teva Pharmaceutical Industries scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Teva Pharmaceutical Industries Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of the cash a company could generate in the future and discounts those projections back to today to arrive at an intrinsic value per share.

For Teva Pharmaceutical Industries, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month Free Cash Flow is about $542 million. Analyst and extrapolated estimates then project Free Cash Flow reaching $4.8 billion by 2030, with interim annual projections between 2026 and 2035 ranging from around $2.9 billion to $5.8 billion before discounting. Simply Wall St estimates and discounts these future cash flows in dollars to reflect their value in today's terms.

Pulling all of this together, the DCF model arrives at an estimated intrinsic value of about $70.03 per share, compared with the recent share price around $32.11. That implied gap translates to a 54.1% discount, which indicates that the shares are trading materially below this cash flow based estimate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Teva Pharmaceutical Industries is undervalued by 54.1%. Track this in your watchlist or portfolio, or discover 875 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Teva Pharmaceutical Industries.

Approach 2: Teva Pharmaceutical Industries Price vs Earnings

For profitable companies, the P/E ratio is a straightforward way to see how much you are paying for each dollar of earnings. It links directly to what the business is currently generating, which is often easier to interpret than cash flow models on their own.

A higher or lower P/E often reflects what the market is factoring in around growth potential and risk. Companies with stronger expected earnings growth or lower perceived risk usually trade on higher P/E multiples, while slower growth or higher risk often lines up with lower P/E levels.

Teva Pharmaceutical Industries currently trades on a P/E of 51.67x. That sits well above the Pharmaceuticals industry average of 19.64x and the peer average of 19.33x. Simply Wall St also calculates a “Fair Ratio” of 25.31x for Teva, which is the P/E level it might typically trade on given factors such as its earnings profile, industry, profit margins, size and risk characteristics. This Fair Ratio aims to be more tailored than a simple comparison with peers or the broad industry because it blends these company specific inputs. Comparing Teva’s current P/E of 51.67x with the Fair Ratio of 25.31x suggests the shares are trading at a richer earnings multiple than this framework would imply.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1447 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Teva Pharmaceutical Industries Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St's Community page you can use Narratives, where you set out your story for Teva Pharmaceutical Industries, plug that story into a simple forecast for revenue, earnings and margins, translate it into a fair value, then compare that fair value to the current price. The Narrative automatically updates as fresh news or earnings arrive. This can help you decide what action, if any, makes sense for you, whether you see Teva closer to the higher analyst price target around US$29 or nearer the lower end around US$18.

Do you think there's more to the story for Teva Pharmaceutical Industries? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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