Bausch Health (TSX:BHC) has been quietly putting together a string of solid quarters, and the market may be underestimating what’s possible from here. The health stock climbed over 25% in the past year, rebounding from lows of $5.91 to trade near $10. It’s still far off its multi-year highs, but the latest results suggest the turnaround story is gaining traction.

What happened

The second quarter of 2025 marked the health stock’s ninth consecutive quarter of year-over-year revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) growth. Total revenue came in at $2.5 billion, up 5% on a reported basis and 4% on an organic basis. Adjusted EBITDA rose 6% to $842 million, showing the business can expand profitability while growing sales. Furthermore, earnings per share improved thanks to higher operating income in several segments.

Segment performance tells an even more compelling story. The Salix unit, anchored by gastrointestinal drug Xifaxan, grew revenue 12% year over year, powered by strong demand and double-digit growth for the flagship therapy. Solta Medical posted an impressive 25% increase, with South Korea driving much of the momentum in aesthetic device sales.

Even the Bausch + Lomb vision care division delivered 5% growth, helped by new product launches and steady international demand. The one weak spot was the Diversified segment, where revenue dropped 13%, but it’s a smaller part of the overall business and less critical to the long-term thesis.

What to watch

Debt has long been the sticking point for Bausch Health, and it’s still high at $21.7 billion. But the health stock made progress here, too. After quarter-end, it announced plans to repay about $900 million using cash on hand, a notable move in reducing leverage and interest expenses. With $1.7 billion in cash and strong operating cash flow of $1.5 billion over the past year, management appears committed to gradually easing the balance sheet risk.

Strategically, the pending acquisition of DURECT Corporation could add another growth lever. DURECT’s lead therapy for alcohol-induced hepatitis would fit neatly into Bausch’s hepatology expertise, potentially expanding its therapeutic reach. While the deal is still pending regulatory and closing conditions, it highlights management’s willingness to target niche opportunities where Bausch can leverage existing infrastructure.

What makes Bausch interesting now is that it’s executing in multiple growth areas while trading at a valuation that suggests the market still has doubts. The forward price/earnings (P/E) ratio is under 2, reflecting investor caution. But the consistent growth streak, coupled with targeted acquisitions and debt payments, could start to shift sentiment if results keep coming in strong.

Bottom line

Risks remain, of course. The health stock still faces heavy debt service obligations, and any stumble in key segments like Salix could pressure both revenue and profitability. Competitive pressures in eye care and aesthetics are also real, and pricing power is not guaranteed. Regulatory or litigation surprises could also weigh on the health stock.

Still, after years of restructuring and repositioning, Bausch Health looks more stable than it has in a long time. The operational momentum, diverse revenue streams, and steps toward deleveraging suggest there’s more upside potential than the current share price implies. For investors willing to accept some volatility and watch the debt metrics closely, this could be one TSX health stock that quietly delivers a much stronger future than its recent past.