Generic pharmaceutical giant Teva (TEVA:NYSE) is set to report earnings in the coming sessions, leading to an uptick in volume and volatility for the company’s shares as management discusses results and issues forward-looking guidance. Even though performance has been weak since the outset of 2016, with share prices falling -16.73% year-to-date, Teva exhibits many attractive qualities especially at a time when the pharmaceutical industry is under intense political scrutiny following revelations about pricing practices that are overwhelmingly destructive. Thanks to a strong management team and an ongoing strategy of growth through acquisition that has served the company well over the years, Teva shares could see substantial upside, especially if the upcoming earnings performance is strong.

Solid Fundamentals Oppose Lackluster Share Performance

While many Teva bears will point to stagnant revenues as a reason for weakness in share prices, on the whole, careful management of the product portfolio has enabled Teva to maintain profits over time despite weak or shrinking revenue growth. Even though 52-week performance has been negative, coming in a at -14.33% return, Teva remains an attractive potential holding for income investors with alonger-term view thanks to a dividend yield of 2.49%.  Teva has a strong history as a blue chip stock, issuing dividends since 1990, providing steady growth and value to loyal holders of the shares. Even though medium-term performance has been weaker as evidenced by falling share prices and the proximity to entering a bear market, Teva should by no means be underestimated.Management’s ability to find efficiencies at a time when sales are falling is just further evidence of the future potential for shares.

Looking at the company’s balance sheet, Teva’s cash flow improved in 2015 versus the prior year, with free cash flow at $18.53 billion for the year and also rising thanks to modestly contracting capital expenditures. Cash levels are also still on the rise, reaching $27.27 billion by the end of 2015 and adding to funds to be leveraged in potential acquisition activities. The growing emphasis on generic drugs is also going to really benefit Teva down the road, especially if the company can execute its plans to expand more into emerging markets. With most of the revenues coming from North America and Europe, Teva has substantial room to expand globally. If the company is able to close the transaction for Allergan’s Actavis generic division, the company will be able to not only increase efficiency, but also open up new markets for its products.