Comments on $GRF (-2,35 %)
Related to My F&F Portfolio
I recently added $GRF (-2,35 %) to the portfolio as I believe it is a strong play in the pharmaceutical sector. Its valuation appeared (and still remains) attractive, especially when considering its future EPS projections and its significant position in a growing market. I also noted that their debt was their biggest weakness, although I believed it to be manageable.
Since then, recent news has positively impacted the stock. But what exactly happened, and why did investors view it favorably for $GRF (-2,35 %) ? The company announced a bond issuance aimed at addressing the debt maturing between 2025 and 2027, which had been putting considerable pressure on their cash flow.
The Good News
With this bond issuance, their their debt position is still tight, but short-term debt is no longer a pressing concern. Investors also perceived this move as a demonstration of $GRF (-2,35 %) 's ability to access debt markets, which speaks to their financial stability. Additionally, by shifting short-term debt into long-term obligations, $GRF (-2,35 %) improved its credit rating, which further boosts investor confidence. Given their strong EPS forecasts, this new debt shouldn't pose a repayment issue, although the risk if forecasts are wrong is still there.
The Bad News
However, the new debt comes at a higher cost. The bonds carry an interest rate of approximately 7.2%, significantly higher than their previous debts, which ranged from 2.5% to 5%. This increase in interest expense will weigh on their financial results and could impact profitability in the near term.
Conclusions
Despite the higher costs, I view this move as a step in the right direction. It addresses immediate financial pressures and positions $GRF (-2,35 %) more favorably for the future, reinforcing my confidence in the decision to invest in this company.
**Disclaimer - This is not a stock recommendation. Do your own research before investing**