The late comedian Rodney Dangerfield was famous for his catchphrase, “I don’t get no respect.” Does Dangerfield’s line apply to some stocks today? Absolutely.
Three Motley Fool contributors think they’ve found surprisingly underrated pharmaceutical stocks to buy right now. Here’s why they picked AstraZeneca (NASDAQ: AZN), Pfizer (NYSE: PFE), and Viatris (NASDAQ: VTRS).
A healthcare behemoth that’s trading at a discount
David Jagielski (AstraZeneca): You wouldn’t expect that one of the largest healthcare stocks in the world would be an underrated buy, but AstraZeneca definitely falls into that category.
Despite its mammoth $250 billion market cap, the stock trades at a fairly light valuation. Based on analyst estimates, it’s trading at just 19 times its estimated future profits. By comparison, the average healthcare stock in the Health Care Select Sector SPDR Fund trades at a multiple of 21.
AstraZeneca is no average healthcare stock, however. It’s a growth machine with some impressive prospects. This year, it acquired multiple healthcare businesses, including rare-disease company Amolyt Pharma and cancer company Fusion Pharma, which develops radioconjugates (more-targeted cancer treatments than chemotherapy).
Through its acquisitions and in-house development, AstraZeneca expects to generate as much as $80 billion in annual revenue by the end of the decade. That is massive growth when you consider that last year, its top line came in at just under $46 billion.
And if the company can maintain its current 13% profit margin, its earnings could top more than $10 billion by then — up from $6 billion in 2023.
AstraZeneca looks like a cheap buy today, and with a lot of earnings growth coming in the next five years or so, buying shares of the business right now could look like a downright steal in the future.
More to the story with this big drugmaker
Keith Speights (Pfizer): I fully understand why many investors don’t have a favorable opinion of Pfizer. The stock has been a dud in recent years and is still around 50% below its peak set in late 2021.
Its COVID revenue has sunk…
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