MYL - Mylan Laboratories

I have been following a lot of stocks lately, so I thought I would do a post that I thought was primed for some action last Thursday, Mylan Laboratories.

At one (random) point during intraday trading on Thursday, Mylan was at 14.05, and I thought of it as a buy. Why? Well, first of all, Mylan's PEG was an incredibly low 0.67. For perspective, a stock that has a PEG over 2.00 is considered expensive, and institutional investors won't buy it. PEG, by the way, is the stocks price to earnings ration (P/E) divided by the stocks growth rate. A PEG under one usually indicates a cheap stock. During the sell off that occurred on Thursday, there were probably a lot of cheap stocks out there, but this one really jumped out at me.

Of course, I think anyone that knows more than I do would say that you cannot buy a stock based on PEG alone. So let's take a look at the company to see if it has real value.

Mylan makes money by making generic brand pharmaceuticals. Taking a long view, I think that the demand for these (cheap!) drugs will grow as the baby boomer generation continues to age. In the short term, I think the stock will go up because it is available at a cheap price.

What affects performance in Mylan's sector (healthcare)? Aside from the above mentioned obvious maxim concerning the baby boomer generation, I would have to say not much. An economist would say that health care is relatively inelastic, meaning that people will continue to purchase it despite changes in economic factors or the business cycle.

To reaffirm that the stock is cheap, I looked at two other major pharmaceutical companies as well: Merck and Pfizer, both of which are also included in the S&P 500, as is Mylan. Merck had a not so bad PEG of 1.53, while Pfizer had a lofty PEG of 2.56 (as of friday's close).

Now, before we can buy the stock we also have to look at it's balance sheet and cash flow statement. Their balance sheet demonstrates that they have total assets of 4.2B, and total liabilities of 2.6B. So the company is solvent (always a good start). The company also has 700M in current liabilities (debt they have to pay this year). To find out whether this will be a problem, we have to check the companies cash flow statement. This shows that the company has a total cash flow of 1.1B. The company can pay it's debts and is currently making money.

Further the company has a 5 year average dividend of 0.7%...which is being bumped by the dividend they paid this year of 1.7%. This is a company that is raising it's annual dividend, usually a good sign for investors.

Overall, I would rate this company a big fat BUY. Of course, I have no idea what the market will do, or whether we're at a bottom...I don't know much. I did win my fantasy football league last year, but I don't know how much credibility that gives me as a stock picker.

In other news, the Cards dropped a heartbreaker to the Cubs today. The loss put them 4 games back whereas a win would have narrowed the margin to 2 games. They really know how to break my heart.

Good luck if anyone out there decides to buy Mylan.