Allergan PLC (NYSE:AGN)

An analysis of the valuation multiples from 2015 to 2019 reveals a general contraction in market valuation relative to earnings, sales, and book value, followed by a partial recovery in the final year of the period.

Price to Earnings (P/E) Ratio

A sharp contraction is observed between 2015 and 2016, with the ratio falling from 31.94 to 5.60. Data for the remaining period is unavailable.

Price to Sales (P/S) Ratio

A consistent downward trend occurred from 2015 to 2018, during which the ratio declined from 7.81 to a low of 2.93. This trajectory reversed in 2019, as the ratio increased to 4.05.

Price to Book Value (P/BV) Ratio

The ratio experienced a steady decline from 1.54 in 2015 to 0.71 in 2018. The drop below the 1.0 threshold in 2017 and 2018 indicates a period where the market capitalized the company at less than its accounting book value. A rebound was recorded in 2019, with the ratio rising to 1.12.

The valuation profile exhibits significant volatility characterized by a sharp transition from profitability to sustained net losses between 2015 and 2019. This shift is reflected in both the share price trajectory and the availability of price-to-earnings multiples.

Share Price Trends

The share price experienced a consistent decline over the first four years of the period, falling from a peak of 298.07 US$ in 2015 to a low of 139.07 US$ in 2018. A partial recovery occurred in 2019, with the price rising to 198.00 US$, although it remained significantly below 2015 levels.

Earnings per Share (EPS) Performance

Earnings demonstrated extreme variance, shifting from a positive 9.33 US$ in 2015 to a peak of 43.84 US$ in 2016. However, a critical reversal occurred in 2017, when EPS turned negative at -13.33 US$. These losses intensified through 2018 and 2019, reaching -16.02 US$ by the end of the period.

Price-to-Earnings (P/E) Ratio Analysis

A substantial compression in the P/E ratio is observed between 2015 and 2016, dropping from 31.94 to 5.60. This contraction occurred despite the increase in EPS, suggesting a decrease in investor confidence or a shift in market valuation of the company's earnings quality. From 2017 through 2019, the P/E ratio became non-calculable due to the persistence of negative earnings.

The convergence of declining share prices and negative earnings from 2017 onwards indicates a period of significant financial distress or structural reorganization, where traditional valuation multiples ceased to be applicable metrics for analyzing equity value.

The financial data indicates a period of significant equity price volatility coupled with persistent operating losses. The share price exhibited a pronounced downward trajectory from 2015 through 2018, before experiencing a partial recovery in 2019. Simultaneously, the entity reported negative operating profit per share for every year within the observed five-year timeframe.

Share Price Volatility

The equity value declined from a peak of US$ 298.07 in 2015 to a low of US$ 139.07 in 2018, representing a cumulative decrease of approximately 53.4%. A recovery occurred in 2019, with the price rising to US$ 198.00.

Operating Profit Performance

Operating profit per share remained consistently negative, indicating that operating costs exceeded gross income throughout the period. While losses narrowed slightly between 2015 and 2016, they widened substantially in 2017 and 2018, reaching a maximum deficit of -US$ 18.78 per share before improving to -US$ 13.51 in 2019.

Price to Operating Profit (P/OP) Analysis

The P/OP ratio cannot be meaningfully calculated or utilized as a valuation metric for this period. Due to the persistent negative values of the operating profit per share, the resulting ratio would be negative, which provides no standard interpretative value for traditional multiple-based equity valuation.

The analysis of valuation multiples from 2015 to 2019 reveals a significant compression and subsequent partial rebound of the Price to Sales (P/S) ratio. This period is characterized by a distinct divergence between the company's revenue performance and its market valuation.

Valuation Multiple Compression

The P/S ratio experienced a steady decline over a four-year period, falling from 7.81 in 2015 to a minimum of 2.93 in 2018. This represents a substantial reduction in the multiple the market was willing to pay for each dollar of sales, suggesting a period of valuation contraction before a recovery to 4.05 in 2019.

Share Price Volatility

The downward movement in the P/S ratio was predominantly driven by a sharp decrease in the share price, which fell from 298.07 in 2015 to a low of 139.07 in 2018. A recovery phase is evident in 2019, with the share price ascending to 198.00, which directly contributed to the rebound in the P/S ratio.

Revenue Performance per Share

In contrast to the share price trajectory, sales per share demonstrated consistent growth for much of the period, rising from 38.18 in 2015 to 48.90 in 2019. The increase in sales per share during the years when the share price was declining intensified the compression of the P/S ratio, as the revenue base grew while the market capitalization decreased.

The Price to Book Value (P/BV) ratio exhibited significant volatility over the five-year period ending December 31, 2019. A distinct U-shaped trend is observed, characterized by a sharp contraction in valuation multiples from 2015 to 2018, followed by a partial recovery in 2019.

Price to Book Value (P/BV) Ratio Trend

The P/BV ratio declined from a high of 1.54 in 2015 to a low of 0.71 in 2018. Between 2017 and 2018, the ratio remained below 1.0, indicating that the market valued the company's equity at a discount to its accounting book value. This trend reversed in 2019, with the ratio increasing to 1.12, returning the valuation to a premium position.

Share Price Influence

The fluctuations in the P/BV ratio were primarily driven by significant movements in the share price. A consistent downward trajectory was observed from 2015, when the price was US$ 298.07, to 2018, when it reached a minimum of US$ 139.07. The subsequent recovery in 2019 to US$ 198.00 was the main catalyst for the increase in the P/BV ratio.

Book Value per Share (BVPS) Behavior

The BVPS showed a different trajectory than the market price. After an initial increase from US$ 194.06 in 2015 to a peak of US$ 227.29 in 2016, the BVPS entered a period of gradual decline, ending at US$ 176.82 in 2019. The compression of the P/BV ratio between 2015 and 2016 was accelerated by the divergence of a falling share price and a rising book value.