PRGO

Perrigo ($PRGO) CEO's 'Bottom-Fishing' Buy After 20% Plunge...Turnaround Signal?

08/08/2025 15:48

Perrigo Company plc's ($PRGO) CEO Patrick Lockwood-taylor's purchase of 4,460 shares at $22.37 per share (approximately $100,000) on August 8th has drawn market attention. This purchase came immediately after the company's stock plummeted over 20% following disappointing Q2 results, signaling strong confidence from the top executive. Established in 1887 and headquartered in Dublin, Ireland, Perrigo is a global healthcare company specializing in over-the-counter (OTC) medicines, infant formula, and nutritional supplements. The mid-cap company, with a market capitalization of $3.5 billion, serves major retail chains like CVS and H-E-B in the US and European markets. Key products include Opill (oral contraceptive) and infant formulas, competing with industry players like Teva Pharmaceutical and Viatris. This CEO purchase contrasts sharply with recent insider trading patterns. Former CEO Svend Andersen sold shares worth $964,831 in August 2024, while EVP Ronald Craig Janish disposed of $382,245 worth of stock. Janish continued selling in March 2025 with another $214,032 transaction. However, the trend shifted when Director Geoffrey Parker purchased $94,850 worth of shares in May, followed by the CEO's recent purchase. The timing of the CEO's buy immediately after the stock's sharp decline suggests strong management conviction about current valuation levels. The catalyst for the CEO's purchase was the disappointing Q2 2025 results announced on August 6th. Revenue declined 0.9% year-over-year to $1.06 billion, missing analyst consensus estimates of $1.087 billion by 2.6%. Adjusted EPS of $0.57 also fell short of the $0.59 consensus. The core Consumer Self-Care Americas segment revenue dropped 1.9% to $622 million, pressuring overall performance. Management also lowered its annual revenue growth outlook to 0-3%. Despite revenue challenges, financial health metrics show positive aspects. Operating cash flow remains solid at $366 million, while levered free cash flow reaches $776 million. Cash holdings of $454 million provide adequate short-term liquidity. However, the debt-to-equity ratio of 86.5% indicates elevated financial leverage that requires careful management. The company announced a "Strategic Organizational Update to Drive Sustainable Growth and Performance" on July 1st, demonstrating turnaround commitment. The "Three-S" plan (Stabilize, Streamline, Strengthen) aims to enhance operational efficiency and accelerate innovation. The divestiture of the Dermacosmetics business to KKR-backed Kairos Bidco for €327 million aligns with the strategy to focus on core consumer self-care products. Current valuation metrics suggest the stock trades at a discount. With P/B ratio of 0.70x and P/S ratio of 0.73x, shares appear undervalued relative to industry peers. The forward P/E of 7.51x indicates significant rerating potential if profitability improves. The dividend yield of 5.08% appears attractive, though sustainability concerns arise given negative net income. Analyst sentiment remains mixed. Zacks maintains a "Buy" rating with price targets implying ~35% upside from current levels, while Piper Sandler downgraded price targets in January. The market awaits signs of operational improvement in upcoming quarters. For investors, while the CEO's bottom-fishing purchase provides a positive signal, confirming an actual turnaround remains crucial. Key monitoring points include Consumer Self-Care Americas segment improvement, organizational restructuring effectiveness, and sustained cash flow stability in the next quarterly results.