Paladin results beat consensus

RBC Capital Markets has revised upwards its financial model for Paladin Labs (TSX:PLB) after the company posted third quarter results on Wednesday that were slightly higher than consensus.

Analyst Doug Miehm writes that Paladin’s results support “our positive investment thesis.  What we continue to find compelling about the story is the company’s unique strategy, with a particular focus on free cash flow generation and growth in a conservative but opportunistic manner.”

He also notes that the stock trades at multiples of consensus 2010 and 2011 results that are below comparable companies.  As a result, he maintained an “outperform, above average risk” rating on the stock and $23 target price.  Paladin finished trading at $19.25 on Wednesday.

On a conference call, Mr. Miehm said that Paladin management cautioned that the Street should not expect a transaction the size of last year’s Dexedrine deal with GlaxoSmithKline in the near future as many of the larger companies that Paladin works with have been largely sidelined with ongoing M&A activities.

“While the company is obviously reviewing a number of opportunities, we expect that they are more in-licensing in nature and any material acquisitions should not be anticipated until 2010,” Mr. Miehm suggested.