Due to rising medical requirements and technical improvements, the pharmaceutical industry’s long-term growth prospects remain promising. Also, the growing global population and rising number of chronic diseases are adding to the industry’s positive outlook. So, I think pharma stocks Roche Holding AG (RHHBY), AstraZeneca PLC (AZN) and Bristol-Myers Squibb Company (BMY) could be worth adding to your portfolio for solid returns.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the pharma industry.
The United States is projected to spend $605-$635 billion on medication in 2025. In 2023, the US pharma market accounts for 43.7% of the global pharma industry. This significant expenditure on medication indicates the huge demand for pharma products in the United States.
According to Statista, worldwide pharmaceutical revenues are expected to grow at a CAGR of 5.8% to reach $1.48 trillion by 2028. Oncology Drugs is the industry’s largest segment, with a forecast market volume of $188.20 billion in 2023.
Moreover, the global AI in drug discovery market is expected to reach $4.9 billion by 2028, expanding at a 40.2% CAGR. The use of Artificial Intelligence (AI) in drug discovery is set to dramatically strengthen the industry landscape.
Considering these conducive trends, let’s take a look at the fundamentals of the three above-mentioned Medical – Pharmaceuticals stocks, starting with the third stock.
Stock #3: Roche Holding AG (RHHBY)
Headquartered in Basel, Switzerland, RHHBY engages in the prescription pharmaceuticals and diagnostics businesses in Switzerland, Germany, and internationally. The company offers pharmaceutical products and in vitro diagnostics solutions for indications.
On October 26, 2023, RHHBY announced a collaboration with Ibex Medical Analytics and Amazon Web Services, allowing pathology laboratories to use Ibex’s AI-powered decision support tools to help doctors diagnose breast and prostate cancer using the Navify® Digital Pathology software platform.
This collaboration aims to enhance the accuracy and efficiency of cancer diagnoses by leveraging Ibex’s advanced AI technology. By integrating with Amazon Web Services, pathology laboratories can seamlessly access and utilize Ibex’s decision support tools through the user-friendly navify® Digital Pathology software platform.
RHHBY’s forward non-GAAP P/E of 12.45x is 29.9% lower than the industry average of 17.76x. Its forward EV/EBIT of 10.71x is 33.5% lower than the industry average of 16.11x.
RHHBY’s trailing-12-month EBITDA margin of 36.43% is 616.8% higher than the 5.08% industry average. Its trailing-12-month gross profit margin of 73.12% is 30.6% higher than the 55.99% industry average.
RHHBY’s pharmaceuticals division sales for the nine-month ended, 2023 came in at CHF 33.62 billion ($37.29 billion), increased marginally year-over-year. Its diagnostics division sales came in at CHF 10.43 billion ($11.57 billion). Moreover, its group sales came in at CHF 44.05 billion ($48.85 billion).
Analysts expect RHHBY’s revenue to increase 4.8% year-over-year to $69.61 billion for the year ending December 2024. Its EPS is expected to grow 9.3% year-over-year to $2.88 for the same year. Shares of RHHBY has lost 6% over the past month to close the last trading session at $32.79.
RHHBY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
RHHBY also has an A grade for Quality and a B for Stability and Value. It is ranked #10 out of 153 stocks in the Medical – Pharmaceuticals industry. Click here for the additional POWR Ratings for Momentum, Sentiment and Growth for RHHBY.
Stock #2: AstraZeneca PLC (AZN)
Headquartered in Cambridge, the United Kingdom, AZN is a renowned biopharmaceutical company focusing on discovering, developing, manufacturing, and commercializing prescription medicines. Its marketed products treat oncology, covid-19, respiratory, cardiovascular, renal, and metabolism diseases, etc.
AZN’s forward non-GAAP P/E of 17.36x is 2.2% lower than the industry average of 17.76x. Its forward non-GAAP PEG of 1.52x is 21% lower than the industry average of 1.92x.
AZN’s trailing-12-month EBITDA margin of 41.57% is 718.2% higher than the 5.08% industry average. Its trailing-12-month asset turnover ratio of 0.47x is 22.9% higher than the 0.38x industry average.
AZN’s total revenues increased 4.6% year-over-year to $11.49 billion for the third quarter (ended September 30, 2023), while its operating profit grew 56.9% from the year-ago value to $1.95 billion. The company’s profit after tax and EPS came in at $1.38 billion and $0.89.
The consensus revenue came in at $45.69 billion for the fiscal year ending December 2023 represents a 3% increase year-over-year. Its EPS is expected to grow 9.3% year-over-year to $3.64 for the same year. It surpassed EPS estimates in three of four trailing quarters. AZN’s shares have lost 7.1% past month to close the last trading session at $63.17.
It’s no surprise that AZN has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and a B for Stability and Quality. It is ranked #7 in the same industry.
Beyond what is stated above, we’ve also rated AZN for Value, Sentiment and Momentum. Get all AZN ratings here.
Stock #1: Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases.
BMY’s trailing-12-month EV/EBITDA of 7.21x is 41.8% lower than the industry average of 12.38x. Its trailing-12-month EV/EBIT of 7.80x is 51.6% lower than the industry average of 16.11x.
BMY’s trailing-12-month EBITDA margin of 40.65% is 700% higher than the 5.08% industry average. Its trailing-12-month gross profit margin of 77.01% is 37.5% higher than the 55.99% industry average.
BMY’s total revenues amounted to $10.97 billion for the third quarter (ended September 30, 2023), while its total expenses declined 2% from the year-ago value to $8.83 billion. The company’s attributable net earnings increased 20% from the prior-year quarter to $1.93 billion, while its non-GAAP EPS came in at $2.00, up marginally year-over-year.
Street expects BMY’s revenue to increase 2.4% year-over-year to $45.87 billion for the year ending December 2024. Its EPS is expected to come in at $7.37 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock has lost 10.3% over the past month to close the last trading session at $50.61.
BMY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #5 in the same industry. It has an A grade for Value and a B for Growth, Stability and Quality. To see additional BMY’s ratings for Sentiment and Momentum, click here.
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RHHBY shares were trading at $33.07 per share on Monday afternoon, up $0.28 (+0.85%). Year-to-date, RHHBY has declined -13.60%, versus a 16.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...
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