Despite new highs, Cramer spots a bargain stock

The S&P 500 and Dow Jones industrial average might be making new all-time highs, but that doesn't mean there isn't bargain to be had.

"What's a bargain right here? I think Perrigo is a great example," Jim Cramer said.

How does Cramer identify a bargain? First, he scours the market looking for high quality companies that have fallen well below their 52-week highs.

Perrigo shares are well below their 2014 peak of about $167 in March.

"It got slammed due to some manufacturing issues and a disappointing quarter where the company missed the earnings estimates and also cut its full-year guidance," Cramer explained.

Then, once Cramer finds a potential stock, he seeks catalysts that could counterbalance the negatives, and in turn, drive a rebound.

Again, looking at Perrigo, Cramer has identified a slew of positives.

First, as a maker of generic and private label drugs, Cramer believes Perrigo is well positioned to capitalize on a long-term trend he calls the new frugality. That is, during the last recession, Cramer says middle-class shoppers were forced to trade down to lower priced generic and store brands. However, they quickly learned those products weren't terribly different from their name brand counterparts, so they've stuck with them.

"But the private label story has another leg to it that's in addition to the value proposition it presents for consumers," Cramer explained. "Perrigo's products also carry much higher margins than nationally branded stuff. Therefore, as stores look to boost their bottom lines, there's rising demand from the stores themselves."

That alone would probably be a strong enough catalyst for Cramer to consider owning the stock, however, in this case, there's more—much more.

"They also have a nutritional products business," Cramer said, which should drive sales as more and more people look to improve their health. Plus, Perrigo has exposure to some patent protected prescription drugs, including a piece of the multiple sclerosis drug, Tysabri. That, too, should be accretive.

Terry J Alcorn | E+ | Getty Images

However, on top of all that, "Last year, Perrigo acquired Elan, an Irish drug company," Cramer said. "The acquisition was a classic tax inversion, allowing the company to change its business address from the United States to the tax haven that is Ireland. In 2013, its last year as a U.S. based company, Perrigo's cash tax rate was 28 percent, but for their 2015 fiscal year, which has already started, the company's cash tax rate should come in at just 17 percent."

In other words, Perrigo will keep more of the money it makes, another bullish catalyst. And, if it were to acquire another US-based company, the target's profits could be taxed at the lower rate, too.

"In fact, I can even see Perrigo itself as an attractive takeover target for any larger firm that may want to do the same thing Perrigo did, buy a company that lets them change their business address to Dublin, and therefore lower their tax rate," Cramer added.

--------------------------------------------------------------
Read more from Mad Money with Jim Cramer
5 stocks give Cramer indigestion
CEO: Stock decline buying opportunity
Pharma firm with room to run
--------------------------------------------------------------

Given the catalysts outlined above, Cramer thinks that the recent decline in Perrigo is nothing to fear. Instead, he believes it presents an attractive point of entry. And he thinks recent gains are a sign that other investors share his bullish outlook.

"All told, to me, this smells like an opportunity," Cramer said. "Perrigo appears to have a lot going for it. I think its stock could rally back to its old highs and then some."

(Click for video of this Mad Money segment)

Call Cramer: 1-800-743-CNBC

Questions for Cramer? [e-mail]

Questions, comments, suggestions for the "Mad Money" website? [e-mail]