After Falling 13% in the Last Month, Should You Scoop Up Shares of Bristol Myers Squibb?

Global biopharmaceuticals company Bristol Myers Squibb (BMY) specializes in product development, licensing, and sale of biopharmaceutical products. Its product portfolio includes Opdivo for anti-cancer indications, Reblozyl for the treatment of anemia in adult patients with beta-thalassemia, and Revlimid, an oral immunomodulatory drug. BMY is headquartered in New York City.

Closing yesterday’s session at $60.15, the stock is trading 13.8% below the 52-week high of $69.75.

Though the stock’s price has dipped 13.1% over the past month, its impressive growth potential, significant clinical and regulatory milestones, and strategic collaborations with biopharmaceutical companies, including Pfizer, Inc. (PFE), Otsuka Pharmaceutical Co., Ltd., and Bolt Biotherapeutics, Inc., are expected to boost its performance in the coming months. Furthermore, BMY’s robust product portfolio should help it achieve sustained growth.

Click here to checkout our Healthcare Sector Report for 2021

Here’s what could shape BMY’s performance in the near term:

Positive Developments

This month, BMY announced that the U.S. Food and Drug Administration (FDA) accepted for priority review the Biologics License Application (BLA) for the company’s LAG-3-blocking antibody relatlimab and nivolumab fixed-dose combination. In addition, the FDA assigned a Prescription Drug User Fee Act (PDUFA) goal date of March 19, 2022.

Also, last month, the U.S. Food and Drug Administration (FDA) authorized BMY's Opdivo (nivolumab) 240 mg for the adjuvant treatment of patients with urothelial carcinoma (UC) who are at high risk of recurrence following radical resection.

Strategic Collaboration

This month, BOLT, a clinical-stage biotechnology company that is pioneering a new class of immuno-oncology treatments, entered a clinical partnership and supply agreement with BMY to explore BDC-1001 in conjunction with BMY's PD-1 checkpoint inhibitor Opdivo (nivolumab). BDC-1001 is a HER2-targeting Boltbody immune-stimulating antibody conjugate (ISAC) developed to treat patients with HER2-expressing solid tumors. Its unique approach has helped it achieve promising results in preclinical and early clinical studies.

Strong Financials and Profitability

During the second quarter, ended June 30, 2021, BMY's total revenue increased 15.5% year-over-year to $11.70 billion. Its international revenues rose 18% from the prior-year quarter to $4.3 billion. The company reported $1.06 billion in net income for this period, compared to an $85 million net loss in the second quarter of 2020. Its EPS came in at $0.47 versus a $0.04 loss per share in the prior-year period.

BMY’s 79.6% trailing-12-months gross profit margin is 55% higher than the 44.7% industry average. Also, the company’s 18.6% trailing-12-months EBIT margin is 573.9% higher than the 2.8% industry average. Furthermore, its $12.51 billion cash from operations compares with the  negative $14.98 million industry average.

Stable Growth Prospects

Analysts expect BMY’s revenues to rise 9.4% in its fiscal 2021 and 4.4% next year. The consensus EPS estimates indicate a 27.4% year-over-year improvement in the next quarter, a 16% rise in the current year, and an 8.3% increase in 2022.

In addition, BMY’s EPS is expected to rise at a 7.4% CAGR over the next five years. The company has an impressive earnings surprise history; it topped the Street’s EPS estimates in three of the trailing four quarters.

Discounted Valuation

BMY looks undervalued at the current price level, considering its growth potential. In terms of forward P/E, BMY is currently trading at 8.07x, which is 64.1% lower than the 22.51x industry average. In addition, its 1.45 non-GAAP forward PEG ratio is 25.3% lower than the 1.94 industry average.

BMY’s forward EV/EBIT and Price/Book multiples of 8.3x and 3.65x, respectively, are significantly lower than the 59.9x and 4.59x industry averages.

POWR Ratings Reflect Solid Prospects

BMY has an overall A grade, equating to a Strong Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. BMY has an A grade for Value. This is in sync with the company’s lower-than-industry valuation multiples.

The stock also has a B grade for Growth and Quality. BMY’s strong profitability and growth potential are consistent with these grades.

Of the 214 stocks in the Medical – Pharmaceutical industry, BMY is ranked #13.

Beyond what is stated above, we have graded BMY for Sentiment, Stability, and Momentum. Get all BMY ratings here.

Note that BMY is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.

Bottom Line

As one of the leading medical and pharmaceutical companies in the United States, BMY’s continued efforts in the research and development of cancer medicines through strategic collaborations should drive the company’s growth in the coming months. Moreover, the regulatory and clinical milestones achieved by the company should increase investors’ optimism about the stock. Thus, we think it could be a wise bet on it now.

How Does Bristol Myers Squibb Co. Stack Up Against its Peers?

BMY has an overall grade of A in our proprietary rating system. This rating is superior to its peers in the Medical - Pharmaceutical industry, such as Amneal Pharmaceuticals Inc. (AMRX), Dr. Reddy’s Laboratories Ltd. (RDY), Opiant Pharmaceuticals Inc. (OPNT), which have a C (Neutral) rating.

Click here to checkout our Healthcare Sector Report for 2021

BMY shares were trading at $61.17 per share on Thursday morning, up $1.02 (+1.70%). Year-to-date, BMY has gained 0.12%, versus a 19.68% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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