With Perrigo Stock Down 25% In A Day, How Confident Are You?

Perrigo (PRGO) stock is down 25.2% in a day. History of recovery post-dips is not on your side and there is fundamental risk – specific to growth, profitability, balance sheet and downturn resilience. Consider the following data:

• Size: Perrigo is a $2.1 Bil company with $4.3 Bil in revenue currently trading at $15.10.
• Fundamentals: Last 12 month revenue growth of -2.5% and operating margin of 9.2%.
• Liquidity: Has Debt to Equity ratio of 1.74 and Cash to Assets ratio of 0.04
• Valuation: Perrigo stock is currently trading at P/E multiple of -40.4 and P/EBIT multiple of 7.9
• Has returned (median) 2.8% within a year following sharp dips since 2010. See PRGO Dip Buy Analysis.

While we like to buy dips if the fundamentals check out – for PRGO, see Buy or Sell PRGO Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and PRGO drops another 20-30% to $11 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience. Turns out, the stock has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

A single stock can be risky, but there is a huge value to a broader, diversified approach. If you seek an upside with less volatility than holding an individual stock, consider the Trefis High Quality Portfolio (HQ). HQ has outperformed its benchmark — a combination of S&P 500, Russell, and S&P midcap index — and achieved returns exceeding 91% since its inception. Risk management is key — consider what the long-term portfolio performance could be if you blended 10% commodities, 10% gold, and 2% crypto with HQ’s performance metrics.

Below are the details, but before that, as a quick background: PRGO offers over-the-counter health and wellness products across Americas and international markets, featuring brands like Prevacid 24HR, ScarAway, Plackers, Rembrandt, and Burt’s Bees.

2022 Inflation Shock

• PRGO stock fell 45.1% from a high of $49.17 on 10 August 2021 to $26.98 on 27 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $34.14 on 8 January 2024 , and currently trades at $15.10

 
2020 Covid Pandemic

• PRGO stock fell 33.1% from a high of $60.80 on 25 February 2020 to $40.66 on 12 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high

 
2018 Correction

• PRGO stock fell 61.6% from a high of $95.15 on 26 January 2018 to $36.50 on 24 December 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high

 
2008 Global Financial Crisis

• PRGO stock fell 55.4% from a high of $42.36 on 2 May 2008 to $18.89 on 2 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 19 January 2010

 
It is a good thing to keep in mind how low PRGO could go during a downturn. And you should also check how the stock fared when compared with the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 — the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.