Why Endo International plc Stock Gained 19.2% in August

By Cory RenauerMarketsFool.com

Image source: Getty Images.

Continue Reading Below

What happened

Shares of Endo International plc(NASDAQ: ENDP), aglobal specialty pharmaceutical company, gained 19.2% in August, according to data from S&P Global Market Intelligence. A stronger-than-expected second-quarter earnings report provided investors some much-needed pain relief.

ENDP data by YCharts.

More From Fool.com

So what

The troubled purveyor of pain meds Opana and Percocet finally has something to feel good about. Second-quarter revenue rose25% compared to the prior-year period, mostly due to the $8.05 billion acquisition of Par Pharmaceuticals last September.

Bottom-line results provided further encouragement. The company reported a gain of $1.54 per share in the second quarter. This was a vast improvement over the loss of $1.35 per share in the prior-year period, and the more recent loss of $0.60 per share during the first three months of the year.

Now what

A positive bottom line is something Endo International investors haven't seen in a while, but it isn't out of the woods just yet. Adjusted pre-tax profit from its U.S.-branded pharmaceutical segment, which includes Lidoderm, Opana ER, and Percocet, plummeted27.6% over the prior-year period to $122.42 million.The recent withdrawal of an application to include specific abuse deterrent labelling for Opana ER following discussions with the FDA doesn't bode well for the segment's future.

Despite last month's lift, Endo International stock is still about 72% lower than where it stood a year ago. It may be trading at an ultra-low price of about 4.5 times this year's earnings estimates, but I wouldn't recommend trying to catch this falling knife just yet.

ENDP Total Interest Expense (Quarterly) data by YCharts.

Last year's share dilution and increased debt load used to acquire Par Pharmaceutical may have diversified its revenue stream somewhat, but Endo's operations are still posting losses. The company finished June with about $667 million in unrestricted cash on the books,but servicing its debt load is awfully expensive. Further share dilutions may be necessary just to keep the lights on if its performance doesn't improve drastically in the quarters ahead.

A secret billion-dollar stock opportunity The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Cory Renauer has no position in any stocks mentioned. You can follow Cory on Twitter @TMFang4apples or connect with him on LinkedIn for more healthcare industry insight.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.