Pharmaceutical Industries Ltd. Hila Kollnesher Ronald Adler Eugene Katchalov Erin Goglick Lisa Vortsman. What to expect from us:. What makes this grass greener Why its crucial to spot investment opportunities in Emerging Markets Unexpected Outcomes. Investing in Israel.
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Pharmaceutical Industries Ltd.
"The land of the prophets is becoming the land of profits"
Israel: the land of milk and money(what makes our project unique – its major contributions)
Sometimes it pays to search troubled regions for investment ideas
With Iraq out of the way, the Bush Administration will be more likely to prioritize resolving the Israeli-Palestinian conflict
Take advantage of Israel's Free Trade Agreements with the EU and with the US
The taxation climate is quite favorable
Generic Pharmaceuticals Industry
(ranked by sales)
Israel’s Macroeconomic State and Structure
1999 – 2000
Transition from a consumption
growth pushed by Russian
immigrants to a expert
influenced growth period.
GDP in 2000: US$17,000
Higher than Portugal,
Greece and New Zealand.
Deficit as % of GDP
Before 1996 Domestic Deficit after Total
the total deficit from US$
2.9 Billion in 1999 to US$ .7
billion in 2000. Deficits to
Asia and the EU, however,
continued to increase.
Nominal Interest Rate
In comparison to more stable economies, the interest rate for residents is relatively high despite a decrease in the nominal rate as of 2001.
Three factors that influenced Israel’s Recession:
The final regression equation is:
Price Close = 10.2 + 0.34 Neg5 + 1.63 Neg4 + 0.84 Neg3 + 0.07 Neg2 + 1.69 Neg1 + 1.90 Pos1 - 0.03 Pos2 - 0.17 Pos3 + 0.26 Pos4 - 0.04 Pos5 + 0.181 PE + 2.07 Growth - 0.76 P/S + 209 Net Margin - 43.2 Beta
Predictor Coef SE Coef T P
Constant 12.956 8.479 1.53 0.130
Neg5 0.358 3.576 0.10 0.921
Neg4 1.593 3.208 0.50 0.621
Neg3 0.736 3.150 0.23 0.816
Neg2 -0.221 3.345 -0.07 0.947
Neg1 1.387 3.166 0.44 0.662
Pos1 1.837 3.255 0.56 0.574
Pos2 -0.406 3.277 -0.12 0.902
Pos3 -0.491 3.314 -0.15 0.883
Pos4 0.179 3.348 0.05 0.957
Pos5 0.292 3.623 0.08 0.936
PE 0.11323 0.02015 5.62 0.000
Net Marg 168.56 29.63 5.69 0.000
Beta -40.047 9.430 -4.25 0.000
S = 3.033 R-Sq = 53.9% R-Sq(adj) = 47.2%
Analysis of Variance
Source DF SS MS F P
Regression 13 958.125 73.702 8.01 0.000
Residual Error 89 818.955 9.202
Total 102 1777.080
Teva, S%P 500 and NASDAQ 1998 - 2003
Simple Relative P/S Valuation Conclusions:
Fundamentally investors should look for stocks that have low Price to sales multiples with high net margins. By analyzing the simple valuation result we see that Teva has a price to sales multiple slightly higher than the median and a net margin slightly below the median. We can therefore conclude that Teva is neither an extremely attractive or unattractive investment.
Regression Predicted Price:
Given a regression equation of: y = 20.009x + 0.6615
And Price to Sales Multiple of : 3.4
Predicted Price = 20.009*3.4+.6615 = $68.69
By analyzing Teva’s current price fluctuations we can conclude that Teva is under-valued. Our recommendation, considering Teva’s ability to maintain economic stability and consistently beat the market is a strong buy.