The late comedian Rodney Dangerfield was famous for his catchphrase: “I get no respect.” Does Dangerfield’s phrase apply to any actions today? Absolutely.
Three Motley Fool contributors think they found surprisingly underrated pharmaceutical actions to buy now. Here’s why they chose AstraZeneca (NASDAQ:AZN), Pfizer (NYSE: PFE)And Viatris (NASDAQ:VTRS).
A healthcare giant trading at a discount
David Jagielski (AstraZeneca): You wouldn’t expect one of the world’s largest healthcare stocks to be an underrated buy, but AstraZeneca definitely falls into that category.
Despite its colossal $250 billion market cap, the stock trades at a fairly low valuation. According to analyst estimates, it trades at just 19 times its estimated forward earnings. By comparison, the average U.S. healthcare stock SPDR Selective Healthcare Sector Fund is trading at a multiple of 21.
AstraZeneca is not your average healthcare stock. It is a growth machine with impressive prospects. This year, it has acquired several healthcare companies, including rare-disease company Amolyt Pharma and cancer company Fusion Pharma, which is developing radioconjugates (more targeted cancer treatments than chemotherapy).
Through acquisitions and internal expansion, AstraZeneca hopes to generate up to $80 billion in annual revenue by the end of the decade. That’s a significant increase considering that last year, its sales were just under $46 billion.
And if the company can maintain its current 13% profit margin, its profits could exceed $10 billion by then, up from $6 billion in 2023.
AstraZeneca looks like a cheap buy today, and with strong earnings growth coming in the next five years or so, buying shares of the company now could look like a real bargain in the future.
More information about this major drug manufacturer
Keith Speights (Pfizer):I completely understand why many investors don’t have a favorable view of Pfizer. The stock has been a failure in recent years and is still about 50% below its peak reached in late 2021.
COVID-19 revenues have dropped like a brick. The company will also have to deal with the loss of patent protection for several blockbuster drugs in the coming years.
But I think the story of this big pharmaceutical company is more complex and could well end well.
First, we’ve probably seen the worst of Pfizer’s COVID franchise. I think most people who got vaccinated last year will do so again. Better yet, the company shouldn’t be too far away from launching a combination COVID-flu vaccine that could serve as a catalyst.
Second, Pfizer has implemented what I consider to be a solid strategy to address the patent cliff threat. The company has invested heavily in research and development and now has a promising group of new products. It has also made several smart acquisitions that have strengthened its portfolio and pipeline. I expect this strategy to help the company offset the impact of its bankruptcy.
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