Perrigo has faced significant challenges, including a 46% decline in 2025 and a continued drop in Q1. However, we believe the stock's distressed valuation presents an opportunity. The company is undergoing a strategic review of its infant formula business, which could lead to a sale, and management is implementing cost-saving measures. The core OTC/self-care franchise is expected to generate over $2.50 in EPS in a few years, indicating potential for recovery. The current valuation does not reflect the possibility of a turnaround, making it an attractive investment.

Perrigo Company, plc is the leading in-store brand for consumer wellness and self-care products. Our investment in Perrigo was inspired by a new management team that committed to pursuing realistic, steady growth rates within the core business, and the company delivering improved profitability and returns on capital. Although the stock underperformed during the quarter due to sales and margin headwinds in their recovering infant formula business, we continue to hold Perrigo in the portfolio as we believe it has significant room to grow.

Perrigo Co. PLC (PRGO) is an example of heavy lifting on 'self-help' bearing fruit in a company that has an economically-resilient demand profile. The company enjoys a 50% share of store-branded, over-the-counter self-care and wellness products in the U.S., has stabilized its sales, and pruned its line-up of low-margin items. Management plans to reinvest the healthy cash generated by this part of the business into its higher-margin, faster-growing branded lines in the U.S. and Europe. We believe PRGO should trade at 11 times 2025 EBITDA or around 14 times earnings, which would put the stock around $40 per share, up from its current price of around $28 a share.