KV.A – KV Pharmaceutical Class A

KV markets more than 130 generic drugs including cardiovascular and anti-inflammatory treatments.

With the Democrats in control and wanting to negotiate lower drug prices for the Medicare insurance program for the elderly and therefore cover more medicines with U.S. government subsidies could be a positive for KV Pharma. On the other hand there is still the pending lawsuit from last November over alleged improper stock options backdating. With a proper stop-loss in place, I believe the reward outweighs the risk.

According to analyst estimates, KV is expected to grow earnings at 48% next year to 1.48. That leaves it with a forward P/E of 17. Needles to say that when expected growth is nearly 3 times that of the P/E there is little question that valuation is attractive.

Technically, The stock has been trading below $25 for nearly 2 years. In the past 5 months the attacks of breaking above this level have become more frequent. The shares trade both above its 50 and 200 SMA.

I'm planning to start a position once the stock moves above $25, therefore putting in a stop-buy order.