PRGO

Perrigo ($PRGO) CEO and Executives' Consecutive Buying Spree: Turnaround Signal from Extreme Undervaluation?

09/09/2025 19:52

Perrigo ($PRGO), headquartered in Dublin, Ireland, is a global over-the-counter (OTC) pharmaceutical manufacturer producing diverse consumer healthcare products ranging from cold remedies to nutritional supplements and women's health products. Founded in 1887, the company operates across North America, Europe, and Australia, generating $4.3 billion in annual revenue as a mid-cap pharmaceutical company. Key brands include Compeed, Mederma, and Prevacid24HR, distributed through major retailers like CVS. Investors should pay immediate attention for one clear reason: following the Q2 earnings-driven stock plunge in August 2025, company executives including the CEO have been consecutively purchasing shares, signaling their belief that the current stock price is severely undervalued. Starting with CEO Patrick Lockwood-taylor's purchase of 4,460 shares at $22.37 on August 8th, EVP Eduardo Bezerra bought 3,000 shares at $22.74 on August 18th, EVP Robert Willis purchased 1,488 shares at $24.10 on August 22nd, and EVP Charles Atkinson acquired 1,000 shares at $23.20 on September 5th. This contrasts sharply with the selling pattern by executives in the second half of 2024. This insider buying spree isn't coincidental. Perrigo reported Q2 results in early August showing revenue declined 0.9% year-over-year to $1.06 billion. The core U.S. market particularly disappointed with a 1.9% revenue decline, missing analyst estimates. The company also lowered its full-year 2025 revenue growth guidance to 0-3%. The stock plummeted over 25% from the high-$28 range in late July to the low-$21 range in mid-August. However, management's consecutive buying goes beyond simple stock price defense. Perrigo's valuation is extremely depressed, with a price-to-sales ratio of just 0.71x and price-to-book ratio of 0.69x. The forward P/E ratio of 6.8-10.2x suggests market expectations for profitability recovery. Financially, the picture is mixed. While the 86% debt-to-equity ratio raises leverage concerns, operating cash flow remains solid. Levered free cash flow over the trailing twelve months reached $775.95 million, supporting dividend payments and debt servicing. Cash holdings of $454.2 million ensure adequate short-term liquidity. The 5.19% dividend yield is particularly attractive in the current market environment. Despite recording net losses, the company maintains its dividend based on stable cash flows, appealing to income-focused investors. A beta of 0.48 indicates lower volatility relative to the broader market, adding defensive investment appeal. From an industry perspective, Perrigo benefits from several tailwinds. The Biden administration's 2024 proposal for free over-the-counter birth control directly benefits Perrigo's Opill product. Additionally, aging demographics and improved healthcare accessibility support continued OTC market growth. However, several risk factors warrant attention. The Teamsters strike in New York that began in early September raises production concerns. Product safety issues, exemplified by the August 2024 infant formula recall, could recur. The high debt burden may increase interest expenses during rising rate environments, requiring continuous monitoring. Analyst sentiment remains cautiously optimistic. Full-year 2025 EPS estimates stand at $2.99, rising to $3.16 for 2026. This implies significant upside potential from current price levels. Average price targets around $27 suggest over 20% upside potential from current levels. For investors, how should this situation be interpreted? Management's consecutive buying is clearly positive, but investment decisions shouldn't rely solely on this signal. Key monitoring points include whether revenue deceleration reverses in the next quarter, the production impact of the Teamsters strike, and cash flow sustainability under high leverage. In a positive scenario, current temporary performance issues could resolve, normalizing the undervalued stock price. U.S. healthcare policy benefits, stable cash flows, and attractive dividend yields could drive share price recovery. Conversely, a negative scenario might see continued revenue weakness, increased financial burden from high leverage, and recurring operational issues like labor disputes or product recalls. Ultimately, Perrigo presents an undervalued situation with strong management buying signals, but investors must prepare for volatility while structural challenges are addressed. Those attracted to long-term dividend income and valuation re-rating potential may find it worth considering, but continuous monitoring of near-term performance changes and debt management capabilities remains essential.