The growing desire for personalized treatments coupled with an aging population across numerous countries and rising chronic conditions are generating higher healthcare requirements, consequently leading to an elevated demand for pharmaceutical products and services.
In this context, I have highlighted three fundamentally sound pharma stocks, Pfizer Inc. (PFE), Sanofi (SNY), and GSK plc (GSK), which are trading at a discount relative to their peers and could be valuable watchlist additions.
As diseases manifest in increasingly diverse and individualized ways, there is a growing acknowledgment that a uniform approach may not consistently yield the best outcomes. Thus, there is an emerging tendency among consumers to welcome treatments that are tailored to their distinct medical needs.
A desire for more effective outcomes underscores this inclination toward personalized treatments. The global market for personalized medicine is expected to surge significantly, potentially surpassing $5.70 trillion by 2030, exhibiting an impressive CAGR of 11.6% spanning from 2022 to 2030.
Additionally, generic medicines have bolstered the healthcare system by improving patient access and generating savings for taxpayers, employers, and insurance providers. The U.S. generic drug market is projected to hit $110.70 billion by 2028, with a CAGR of 4.1% from 2022 to 2028.
Furthermore, the expansion in the utilization of Artificial Intelligence (AI) and extensive data analytics within drug discovery and development stands out as a significant catalyst for the growth of the pharma 4.0 market.
The strategic partnerships between pharmaceutical and technology firms have created significant opportunities within the pharma 4.0 market for participants in the industry. The global pharma 4.0 market is poised to escalate to around $46.90 million by 2031, growing at a robust CAGR of 17.7% from 2022 to 2031.
In light of these trends and prospects, investing in PFE, SNY, and GSK could be beneficial. Let us take a look at the fundamentals of these stocks to gain a better perspective:
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas, infectious diseases, COVID-19 prevention and treatment, etc.
On July 28, PFE and OPKO Health Inc. (OPK) jointly announced that they had received approval from the U.S. Food and Drug Administration (FDA) for NGENLA (somatrogon-ghla). This innovative medication is a human growth hormone analog designed to be administered once a week.
It is intended for the treatment of pediatric patients aged three years and above who are experiencing growth failure due to insufficient secretion of endogenous growth hormone. NGENLA is anticipated to be accessible for prescription in the United States starting this month, offering a new avenue for addressing this medical concern.
On June 22, 2023, PFE declared a quarterly dividend of $0.41, payable to its shareholders on September 5, 2023. The company’s annual dividend of $1.64 translates to a yield of 4.68% at the current price level, while its four-year average dividend yield is 3.73%.
Its dividend payouts have grown at CAGRs of 4.7% and 5.1% over the past three and five years, respectively. Also, it has a record of 12 years of consecutive dividend growth.
PFE’s forward EV/EBIT of 10.23x is 39.6% lower than the industry average of 16.92x. Its forward EV/EBITDA multiple of 8.74 is 35.6% lower than the industry average of 13.57. Also, its forward non-GAAP P/E multiple of 10.59x is 47.7% lower than the industry average of 20.25x.
For the second quarter, which ended June 30, 2023, PFE’s total revenues amounted to $12.73 billion. During the same period, the company’s adjusted net income and adjusted EPS came in at $3.84 billion and $0.67, respectively.
Analysts expect PFE’s revenue and EPS for the third quarter (ending September 30, 2023) to be $15.08 billion and $0.63, respectively. Moreover, the company has an excellent earnings surprise history, surpassing the EPS estimates in each of the trailing four quarters.
The stock has gained marginally over the past month to close the last trading session at $35.68.
PFE’s POWR Ratings reflect this promising outlook. It has an A grade for Value. In the 166-stock Medical – Pharmaceuticals industry, it is ranked #45. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Click here to see PFE’s ratings for Growth, Momentum, Stability, Sentiment, and Quality.
Sanofi (SNY)
Headquartered in Paris, France, SNY is engaged in the research, development, manufacture, and marketing of therapeutic solutions globally. The company operates through the three broad segments of Pharmaceuticals; Vaccines; and Consumer Healthcare.
On July 28, SNY announced its definitive agreement to acquire Qunol®, a prominent brand in the health and wellness sector based in the United States. Through this acquisition, SNY aims to bolster its Consumer Healthcare (CHC) Vitamin, Mineral, and Supplements (VMS) category.
This category is one of the most expansive and rapidly evolving U.S. consumer health segments, with a specific emphasis on the active 'healthy aging' segment. This acquisition underscores SNY’s commitment to pursuing growth prospects and generating value for its consumer healthcare division.
SNY’s forward non-GAAP P/E of 11.56x is 42.9% lower than the 20.25x industry average. Its forward EV/EBITDA multiple of 9.43 is 30.5% lower than the industry average of 13.57x. Also, its forward EV/EBIT ratio of 10.22 is 39.6% lower than the industry average of 16.92x.
During the fiscal second quarter that ended June 30, 2023, SNY’s net sales amounted to €9.97 billion ($10.96 billion). Its operating income increased 29.8% year-over-year to €1.86 billion ($2.04 billion). The company’s net income and EPS grew 18% and 22.3% from its prior-year quarter to €1.45 billion ($1.59 billion) and €1.15 per share, respectively.
The consensus revenue estimate of $13.14 billion for the third quarter (ending September 30, 2023) represents a 5.7% increase year-over-year. The consensus EPS estimate of $1.47 for the same quarter reflects a 2% improvement year-over-year. Moreover, the company topped the EPS estimates in each of its trailing four quarters, which is promising.
SNY’s shares have gained 19.8% over the past nine months to close the last trading session at $52.04.
SNY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and a B for Value and Sentiment. Within the same industry, it is ranked #11. Click here to see SNY’s ratings for Growth, Momentum, and Quality.
GSK plc (GSK)
Based in Brentford, the United Kingdom, GSK engages in the research, development, and manufacture of vaccines and specialty medicines to prevent and treat disease. It operates through four segments: Pharmaceuticals; Pharmaceuticals R&D, Vaccines; and Consumer Healthcare.
On June 28, GSK acquired BELLUS Health Inc. (BLU), a biopharmaceutical firm dedicated to improving the well-being of patients with Refractory Chronic Cough (RCC).
Commenting on this, Luke Miels, Chief Commercial Officer of GSK, said, “The acquisition of BELLUS is highly synergistic with GSK’s expertise in respiratory medicines and is further supported by GSK’s leading R&D, manufacturing, and commercialisation capabilities.”
In the same month, GSK announced that FDA granted Fast Track designation to its investigational vaccine Neisseria gonorrhoeae (NgG). Currently undergoing Phase II testing, the vaccine candidate aims to establish proof of concept by evaluating its efficacy in healthy adults aged 18 to 50 deemed at risk of gonorrhea.
In terms of forward non-GAAP P/E, GSK is trading at 9.02x, 55.5% lower than the industry average of 20.25x. Its forward EV/EBITDA multiple of 6.81 is 49.8% lower than the industry average of 13.57x. Also, its forward EV/EBIT ratio of 8.09 is 52.2% lower than the industry average of 16.92.
For the six-month period, which ended on June 30, 2023, GSK’s turnover increased marginally year-over-year to £14.13 billion ($18.02 billion). Its operating profit rose 25% from the year-ago value to £4.22 billion ($5.38 billion).
The company’s profit after taxation for the period amounted to £3.38 billion ($4.31 billion), up 7.4% year-over-year. While its EPS improved by 40.3% from the year-ago value to 76.20p.
Street expects GSK’s revenue and EPS for the third quarter (ending September 30, 2023) to increase 7.8% and 3.8% year-over-year to $9.62 billion and $1.12, respectively. Additionally, the company topped the revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past nine months, the stock has gained 8.4% to close the last trading session at $34.64.
It’s no surprise that GSK has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Value and a B for Stability, Sentiment, and Quality. Out of 166 stocks in the same industry, it is ranked #13.
In addition to the POWR Ratings we stated above, we also have GSK’s ratings for Growth and Momentum. Get all GSK ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
PFE shares were trading at $35.43 per share on Tuesday afternoon, down $0.25 (-0.70%). Year-to-date, PFE has declined -28.68%, versus a 17.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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