Despite what appears to be an unhealthy market for drug stocks, weighed by political pressures on pricing, Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) still could be compelling trade. With TEVA stock down some 36% over the past year, investors looking for potential bounce-back candidate, and willing to apply patience, can make some money on these shares.

While Teva, which specializes in branded and generic drug development, does face some challenges, the beaten-down pharma name — currently trading at around $32 — has bounced strongly, gaining more than 18% since reaching its 52-week low of $27.60 at the end of May. Even with TEVA stock rising 12.5% over the past month, it’s priced at just seven times fiscal 2018 estimates of $4.70 per share, suggesting that Wall Street is baking in little-to-no growth for the next 12 months.

Meanwhile, TEVA stock continues to trade some 17% below its average analyst price target of $38. Adding in the company’s 34-cent quarterly dividend that yields 4.39% annually, Teva Pharmaceutical shares, which can deliver almost 22% returns in the next 12 to 18 months, reaching $40 per share, present a strong combination of value and below-average risk.

Reasons To Like TEVA Stock

TEVA closed Friday at $33.22, up 1.2%. And if you’re keeping score at home, the shares have risen more than 15% since I last recommended the Israel-based company on May 24. But I’m not here to boast. I only care about making you more money. TEVA stock is still down more than 8% year to date, versus the more than 8% gain in the S&P 500 Index and has grossly underperformed the almost-13% rise in the Market Vectors Pharmaceutical ETF (NYSEARCA:PPH) and the near-15% increase in the Health Care SPDR (ETF) (NYSEARCA:XLV).

The company has fallen out of favor with Wall Street largely in part to the rash of controversies surrounding Valeant Pharmaceuticals Intl Inc (NYSE:VRX). As with Valeant, TEVA needs to grow both its cash balance and revenue to boost long-term profitability, particularly following its acquisition spree that included generic drugmaker Actavis. But that’s exactly what’s about to happen.

The Actavis deal, in particular, turned Teva into the world’s largest generic drug producer — status that gives it pricing power with insurers. What’s more, even after having trimmed its headcount by about 5,000 people following the closing of the Actavis deal in August, TEVA still expects to cut about $1.5 billion in capital expenses this fiscal year. There’s still almost $2 billion worth of business synergies that Teva can realize with Actavis once the company cuts out redundant operations, which should boost long-term profit margins.

Plus, as for the much-needed cash infusion, TEVA also has potential for asset sales announcements, including its Women’s Health, European oncology, and pain operations businesses, which combine should fetch $2.5 billion to $3.2 billion. When considering its ability to generate some $5 billion in free cash flow annually, TEVA has many levers it can pull to do more than just sustain the business, but also grow it well into the future.

Bottom Line for TEVA Stock

TEVA — the company — continues to operate far better than TEVA shares. The most-recent example is that first-quarter revenue grew 17% year over year to $5.6 billion, led by a 24% surge in generics revenue. As such, while uncertainties still remain with top leadership, stemming from the departures of both the CEO and CFO, there is now less downside risk to TEVA over the 12 to 18 months. With some patience, the market will realize that. For those investors who like to “buy low, sell high”, waiting for the market to give you confirmation could be too late.

As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.