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Bristol Myers Stock: Attractive Income Stock, Fairly Priced

I am bullish on Bristol Myers Squibb (BMY) because its valuation multiples indicate that it trades at a discount to its fair value based on past history.

Furthermore, its dividend yield makes it an attractive income stock, the balance sheet is strong, and the business model is competitively advantaged due to the company’s vast intellectual property library.

Bristol Myers Squibb is a multinational pharmaceutical company that engages in discovering, manufacturing, and marketing innovative medicine and prescription drugs. (See Analysts’ Top Stocks on TipRanks)

Strength

Bristol Myers Squibb is one of the biggest pharmaceutical companies in the world and regularly ranks on the Fortune 500 list.

It has a workforce of over 44,000 employees across the world, and a large intellectual property library that includes many patents, giving it a strong global footprint in the pharmaceutical industry.

It delivers new medicine regularly, and provides free treatments to qualifying underprivileged patients in the United States. Given its vaunted drug development pipeline, it will likely continue churning out highly profitable new products for years to come.

Recent Results

Bristol Myers Squibb’s second-quarter report showed robust product sales, continued advancement of innovation, and strong operational performance across the corporation.

The company reported $11.7 billion in revenues compared to $10.1 billion in revenues in the same quarter of 2020, beating consensus estimates by 4.1%. This includes U.S. revenues, which increased 14% to $4.7 billion, and international revenues, which increased to 18% to $4.3 billion in the quarter.

Sales in the quarter, however, saw a decrease of $350 million due to COVID-19 related inventory write-downs. The company also came out of the quarter with earnings per share of $1.93, beating analysts’ estimates of $1.88, and showing an increase of 15.5% year-over-year. The figures were adjusted for non-recurring items.

Valuation Metrics

Bristol-Meyers Squibb’s stock looks attractively valued right now, as its EV/EBITDA ratio and P/E ratios both indicate the stock is trading below its historical average.

The EV/EBITDA ratio is currently 5.9x, compared to its five-year average of 10.8x and the P/E ratio is currently 7.2x, compared to its five-year average of 13.5x.

Wall Street’s Take

From Wall Street analysts, Bristol Myers Squibb earns a Strong Buy analyst consensus based on six Buy ratings, two Hold ratings, and zero Sell ratings in the past three months. Additionally, the average Bristol Myers price target of $74.86 puts the upside potential at 31.1%.

Summary and Conclusions

Bristol Myers Squibb is a world class pharmaceutical company with a well-diversified drug portfolio, a strong balance sheet, an attractive dividend yield, and a compellingly cheap valuation.

Furthermore, Wall Street analysts are overwhelmingly bullish on the stock and put a price target on it that implies significant upside could be in store for its future.

Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.

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