Teva Pharmaceutical (TEVA) has jumped from $9.60 to $12.36 in less than a month. However, as is the case with most pharmaceutical stocks, especially generics, a lot depends on the company’s ability to continually commercialize treatments.

Will TEVA’s run continue or will profit-takers send the stock lower as we segue to the second month of the year?

Let’s peer into our crystal ball to get a sense of what the future might hold for TEVA.

TEVA’s Business

TEVA is an Israel-based pharmaceuticals company with a worldwide market. The company develops, makes, and markets generic and branded drugs along with active pharmaceutical ingredients. TEVA sells its products to Israelis, Indians, Latin Americans, Europeans, and those living in North America. Examples of TEVA products include injectables, ointments, inhalants, creams, liquids, capsules, and tablets such as Copaxone for the treatment of multiple sclerosis. The company also makes Qvar, Ajovy, and ProAir for the treatment of respiratory conditions and migraine headaches.

TEVA by the Numbers

TEVA was trading above $13 when the pandemic first started. The panic-induced selling caused the stock to dip down below $7. TEVA quickly rebounded, moving back to $13. The stock dipped back down below $9 in late August only to bounce right back to life, jumping toward $12 in January.

TEVA has priced a dollar and changes below its 52-week high of $13.76 yet its forward P/E ratio is an astonishingly low 4.55. Stock market experts insist a reasonable forward P/E ratio is around 20, a considerable jump from the ideal P/E ratio of 12 back in the 90s. It should surprise no one if TEVA spikes even higher, continuing to ascend until its forward P/E is more in line with the rest of the stocks in the pharmaceutical sector.

TEVA has trailing revenues of nearly $17 billion. In fact, TEVA products fill 10% of the United States’ drug prescriptions. However, TEVA is barely making it into the black despite its widespread reach. Furthermore, TEVA has nearly $27 billion of debt. Nearly $2 billion of this debt is due in the upcoming year. Add in the fact that revenue has tailed off since ’16 and there is even more cause for concern. However, there is the potential for TEVA to restructure its debt and remain in the black.

TEVA According to the POWR Ratings

The POWR Ratings reveal TEVA has “A” grades in the Industry Rank and Trade Grade components. The stock has “B” grades in the Peer Grade and Buy & Hold Grade components. Of the 239 publicly traded companies in the Medical – Pharmaceuticals industry, TEVA is ranked 47th. In short, TEVA is a POWR Ratings superstar.

TEVA has Potential

TEVA’s CEO is Kare Schultz, an executive with a reputation for turning around businesses. Schultz is working to lower TEVA’s yearly operating costs by $3 billion while simultaneously reducing the company’s debt by $10 billion. What matters most is the fact that its target customer, the American baby boomer, is aging. That many more baby boomers will pay for TEVA’s pharmaceutical products in the years ahead. Even if TEVA slowly pays off its debt, the bottom line is the company will remain one of the top drugmakers for the foreseeable future.

The Verdict

TEVA’s success will largely hinge on whether its CEO can work some magic with the company’s balance sheet. There is clearly a demand for TEVA’s products yet the company’s massive debt load is making it challenging to remain profitable. However, the aging baby boomer cohort bodes well for TEVA’s future.

The bottom line is this is a solid business. If TEVA meets analysts’ expectations for earnings of $2.63 per share in the year ahead, it will likely move toward the $10 mark.

Stay tuned. As long as TEVA posts respectable numbers in the quarter ahead, there is a good chance investors will flock to this pharmaceutical company as ’21 unfolds.