3 Reasons ANIP is Risky and 1 Stock to Buy Instead

What a brutal six months it’s been for ANI Pharmaceuticals. The stock has dropped 22.2% and now trades at $73.90, rattling many shareholders. This may have investors wondering how to approach the situation.

Is now the time to buy ANI Pharmaceuticals, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is ANI Pharmaceuticals Not Exciting?

Even though the stock has become cheaper, we're cautious about ANI Pharmaceuticals. Here are three reasons we avoid ANIP and a stock we'd rather own.

1. Fewer Distribution Channels Limit its Ceiling

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $883.4 million in revenue over the past 12 months, ANI Pharmaceuticals is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

2. Shrinking Adjusted Operating Margin

Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.

Analyzing the trend in its profitability, ANI Pharmaceuticals’s adjusted operating margin decreased by 1.6 percentage points over the last two years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its adjusted operating margin for the trailing 12 months was 26%.

3. Previous Growth Initiatives Have Lost Money

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

ANI Pharmaceuticals’s five-year average ROIC was negative 3.1%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.

Final Judgment

ANI Pharmaceuticals isn’t a terrible business, but it isn’t one of our picks. Following the recent decline, the stock trades at 8.3× forward P/E (or $73.90 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. Let us point you toward a top digital advertising platform riding the creator economy.

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