Is Perrigo Co. PLC (PRGO) an Economically Resilient Company?

Heartland Advisors, an investment management company, released its “Heartland Mid Cap Value Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. A growing number of businesses appear to be priced for a significant slowdown in the first quarter, if not a recession, due to the uncertainty surrounding federal policy. The fund returned 0.67% in the quarter compared to 2.11% fall for the Russell Midcap® Value Index. As risk aversion returned and a focus on downside risk was rewarded, stock selection, which was difficult in a more speculative climate last year, rebounded in the quarter. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its first-quarter 2025 investor letter, Heartland Mid Cap Value Fund highlighted stocks such as Perrigo Company plc (NYSE:PRGO). Perrigo Company plc (NYSE:PRGO) offers over-the-counter health and wellness solutions. The one-month return of Perrigo Company plc (NYSE:PRGO) was -11.13%, and its shares lost 15.43% of their value over the last 52 weeks. On April 17, 2025, Perrigo Company plc (NYSE:PRGO) stock closed at $25.32 per share with a market capitalization of $3.46 billion.

Heartland Mid Cap Value Fund stated the following regarding Perrigo Company plc (NYSE:PRGO) in its Q1 2025 investor letter:

"Healthcare. While persistent economic concerns may provide a growing list of attractive “deep value” options in cyclical companies, Perrigo Company plc (NYSE:PRGO) is an example of heavy lifting on “self-help” bearing fruit in a company that has an economically-resilient demand profile.

The company, which enjoys a 50% share of store-branded, over-the-counter self-care and wellness products in the U.S., has stabilized its sales and pruned its line-up of low-margin items. Management plans to reinvest the healthy cash generated by this part of the business into its higher-margin, faster-growing branded lines in the U.S. and Europe. They also have a clear path, via manufacturing facility consolidation, to drive step-function improvement in the free cash flow margin of its infant formula business from low single digit to mid/high teens.

We believe self-care companies are poised to outperform and experience multiple expansion as the industry benefits from government policy and consumer preference changes. With the evolving political view of healthcare and increased interest from consumers to get and stay healthy, we are seeing a move toward preventive care and healthy aging, driving innovative new products and services such as preventive testing, personalized supplements, and food as medicine. Traditional self-care products should also see a benefit as Health and Human Services Secretary Robert F. Kennedy Jr. focuses on improved access to safe and affordable healthcare options, lowering chronic disease rates, ending childhood chronic disease, prioritizing prevention, and promoting healthy lifestyles and better nutrition.

Despite significantly improving prospects, valuations for self-care companies remain below those of consumer-packaged-goods businesses oriented toward personal care. Within self-care, we believe Perrigo is among the most attractively valued and poised to benefit as the valuation gap closes. We believe PRGO should trade at 11 times 2025 EBITDA or around 14 times earnings, which would put the stock around $40 per share, up from its current price of around $28 a share."

Perrigo Company plc (NYSE:PRGO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held Perrigo Company plc (NYSE:PRGO) at the end of the fourth quarter which was 28 in the previous quarter. While we acknowledge the potential of Perrigo Company plc (NYSE:PRGO) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we covered Perrigo Company plc (NYSE:PRGO) and shared the list of best weight loss drugs to buy according to analysts. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.