There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

January 9, 2012 - Watson Pharmaceuticals, Inc., (WPI-NYSE) a specialty pharmaceutical company, engages in the development, manufacturing, marketing, sale, and distribution of generic and brand pharmaceutical products focused on urology and women's health in the United States, western Europe, Canada, Australasia, South America, and South Africa.

Global Generics develops, manufactures, and sells generic pharmaceutical products, as well as distributes generic versions of third parties' brand products. This segment offers various dosage forms, such as oral solids, transdermals, injectables, inhalation products, and transmucosals for indications, including pregnancy prevention, pain management, depression, hypertension, and smoking cessation.

Global Brands promotes and co-promotes Rapaflo, Gelnique, Trelstar, Crinone, ella, INFeD, AndroGel, and Femring branded products; and markets through sales professionals. It also sells various non-promoted products.

The Distribution segment distributes generic and certain select brand pharmaceutical products manufactured by third parties, as well as by the company, primarily to independent pharmacies, pharmacy chains, pharmacy buying groups, and physicians' offices. The company sells its generic and brand pharmaceutical products primarily to drug wholesalers, retailers, and distributors, including national retail drug and food store chains, hospitals, clinics, mail order, government agencies, and managed healthcare providers, such as health maintenance organizations and other institutions. Watson Pharmaceuticals, Inc. was founded in 1983 and is headquartered in Parsippany, New Jersey.

Watson has cooled way down from its high of $73.35 reached in September of last year. It's off about 20%. It might be worthwhile to look more closely at this purveyor of generics.

Earnings are doing fine. Last year will most likely finish with $4.61 according to the consensus from 24 analysts. That's well above 2010's $3.42. This year, estimates are for $5.80. Final quarter results for 2011 should impress. Analysts have $1.62 as the consensus compared to 93 cents in the fourth of 2010. They look for $1.50 in the first quarter of this year. Revenues are ramping as well. Last year should finish with $4.53 billion vs $3.57 billion in 2010, up 27.10%. Look for $5.31 billion this year, another 17.2% improvement.

For the last 5 years, earnings grew, on average, 31.92% a year. For the next 5, analysts see growth at 11.28% annually, on average.

There's strong demand globally for generics. And why not. If a drug works as well as the original and costs much less, who wouldn't buy it? The company launched Concerta, a drug for attention deficit disorder and attention deficit hyperactivity in children and adults, last year to solid results. There are many new drug launches in the pipeline for 2012. One of them is the generic form of Nexium, a drug to treat excessive stomach acid known as GERD or gastroesophageal reflux disease. It will be launched in Europe.

- Essential Numbers:
- Trailing P/E: 12.6
- Forward P/E: 10
- Price to sales ratio: 1.92
- Price to book: 2.2
- Operating margin: 11.64%
- Profit margin: 4.62%
- Return on equity: 5.43%
- Return on assets: 4.76%
- Total cash: $172.50 million
- Cash per share: $1.36
- Total debt: $1.15 billion
- Total debt to equity: 33.08%
- Current ratio: 1.81
- Book value per share: $27.42
- 52 week change: 11.41%
- Total shares outstanding: 127.15 million
- Float: 124.96 million
- Held by insiders: 1.27%
- Held by institutions: 89.1%
- There is no dividend.
- Financial Strength: B++

If Watson were still trading in the low $70's, it might be a little too rich. But the current price brings all valuations lower, making it more attractive. With a forward P/E of only 10 and the average annual P/E over the last 10 years between 11 and 31, it seems a Conservative investor would want to spend more time with this stock.

- Company Web site: www.watsonpharm.com

Ted Allrich