Forest Laboratories (NYSE: FRX) develops branded and generic drug products, as well as non-prescription pharmaceuticals. Offerings include Lexapro, for the treatment of depression, Namenda for Alzheimer's disease, Benicar for hypertension, and Campral for the maintenance of alcohol abstinence. Other products include treatments for diaper rash, colic, cystic fibrosis, hypertension, eczema and psoriasis. The company is working in collaboration with other firms to develop treatments for asthma, schizophrenia, chronic pain and anxiety. Eli Lilly (NYSE: LLY) and Pfizer (NYSE: PFE) are major competitors.

Forest Labs pleased investors last week when it reported Q3 EPS of 96 cents and revenues of $998.2 million. Analysts had been looking for 75 cents and $946.6 million. Management also guided FY08 EPS to $3.35-$3.45, above prior guidance of $3.10-$3.20 and Street consensus of $3.06. The CEO noted that the company expects to report clinical trial results for several late-stage products during the remainder of the calendar year. Lehman Brothers, Roth Capital and AmTech Research subsequently reiterated "buy" ratings on the stock. Raymond James initiated the shares with a "strong buy." The shares popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Altogether, brokers now recommend the issue with eleven "strong buys," ten "buys," twelve "holds" and one "sell." The stock's Price Book ratio (3.90), EPS Growth rate (23.35%), Operating Margin (22.46%) and Net Profit Margin (14.94%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $34.89 and $57.97. A stop-loss of $33.95 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.