Concordia Healthcare Corp. dealing with debt and headlines

Apr 6th, 2016 – 1 Comment

Tarred with the same brush as VRX


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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CXR LOGO

Hi Lou,
I own a small amount of Concordia Healthcare and would like to get your view on the stock. Some analysts are suggesting that the stock is undervalued and has upside potential.
Thanks.
Tom

 

Hey Tom,

Thanks for the assignment. This will be my first examination of Concordia Healthcare Corp. (CXR TSX). The company owns and markets pharmaceutical products, medical devices, and orphan drugs. The concern that has dominated the conversation with respect to CXR is the level of debt it has taken on to fund its acquisition strategy. There is also the view that it has been tarred, perhaps unjustly, with the same brush as Valeant Pharmaceuticals International Inc.(VRX TSX).

I think that you have to separate the signal from the noise when it comes to your stock picks and technical analysis can help filter out the noise. Technical analysts use the price of the stock as a way to focus their efforts on the only thing that really matters when it comes to investing. The direction of the stock.

An inspection of the charts will add another element for your consideration.

 

 

 

CXR

The three-year chart indicates that the stock had a great run from January of 2014 until September of 2015 when it started to pull back from its 52-week high of $118.10. The MACD and the RSI both generated sell signals near the highs and ahead of comments made by Democratic Presidential Candidate Hillary Clinton voicing her concerns about the rising cost of drugs.

The headline risk motivated investors to hit the sell buttons which took CXR down and through the 50 and the 200-day moving averages. In October of last year a death cross surfaced as the shares hit a 52-week low of $25.04. There wasn’t a ton of time but there was enough time to get off this ride and preserve capital.

 

CXR2

The six-month chart highlights the buy signals generated by the MACD and the RSI as the stock bounced off the lows moving out of an oversold situation. The leg up met resistance at $57.50 early in 2016 and has been in retreat since.

CXR has to hold support at $30.00 or it runs the risk of finding itself with very little support below these levels.

What is evident is that in the last week CXR has bounced off of $30.00 and run towards $35.00 where there is come resistance to consider. Above that the next test will come in along the 50-day moving average.

If you like the story be prepared to trade this stock for profit. Until there is significant evidence that the downtrend has been broken don’t be tempted into buying and not monitoring your holdings.

 

Next time I will re-examine AGT Food & Ingredients Inc. (AGT TSX) for Bill.

 

Make it a profitable day and happy capitalism!

 

Categories: Health Care
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