AbbVie (ABBV) is a tremendous free cash flow generator and with the huge tax benefits it will achieve by switching to becoming a European based company, through its purchase of Shire plc.(SHPG), the two combined entities will be even stronger (or in this case 1+1=3). Before we show you a great video explaining all the benefits that will be gained if this deal does in fact go through, here is my company's research on AbbVie :
As you can see with a Free Cash Flow Return on Invested Capital (FROIC) of 31% and a CapFlow (capital expenditures/cash flow from operations) of just 5% and with the new combined firm paying just a combined 13% tax rate, will make the new combined company even that much more profitable from a free cash flow point of view. Though AbbVie will be paying a high premium to what I believe the fully valued price of Shire is, I still believe in the long run the combined firms will make the new AbbVie the most profitable large pharmaceutical concern anywhere from a FROIC point of view. Here are my numbers on Shire:
Finally here is a great video explaining the benefits.
Comments
Log in or sign up to join the conversation.