3 Numbers That Explain Bristol Myers Squibb's Dirt Cheap Valuation
Key Points
Bristol Myers Squibb's stock price is up 42.5% in the past 12 months, yet it still trades at a discounted valuation.
Investors remain uncertain about the company's efforts to replace legacy drug sales with the sale of new drug products.
This uncertainty could work in your favor, as Bristol Myers Squibb shares could re-rate if the turnaround generates further financial improvement.
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Over the past year, Bristol Myers Squibb (NYSE: BMY) shares surged around 42.5%. Yet even after this strong performance, shares remain at the low end of the company's long-term valuation range.
Put simply, investors remain on the fence about the company's ability to overcome major upcoming patent expirations through the launch of new drug products. However, for patient investors, this uncertainty could work in your favor.
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A P/E of 9: Bristol Myers Squibb's super-low multiple
Based on analyst estimates for 2026 earnings, Bristol Myers Squibb currently sells at a price-to-earnings (P/E) ratio of only 9.
There are a few pharmaceutical stocks that trade at a lower multiple, but many of these names are in a similar boat as Bristol Myers Squibb: facing the prospect of declining earnings. Forecasts call for earnings per share (EPS) of $6.95 this year, but $6.56 next year, a 5.6% decline.
2028 marks the company's major patent cliff
Pomalyst just went generic this year. Come 2028, blood thinner Eliquis, its flagship drug product, loses its patent exclusivity. 2028 is also when another key product, Opdivo, loses its U.S. patent exclusivity. Management already expects Eliquis sales to drop by as much as $2 billion next year, with more severe declines in subsequent years.
Last quarter, Bristol Myers Squibb reported $7.6 billion in sales for its "growth portfolio," a 15% increase from the prior year's quarter. This growth outweighed declines for the "legacy portfolio," which fell just 5.2% year over year. Total revenue increased 5.6%, from $12.3 billion to $13 billion, thanks to the company's new drug products, including hematology products such as Reblozyl and Breyanzi, as well as cardiovascular drug Camzyos.
These three numbers from Bristol Myers Squibb's latest results and guidance updates suggest successful execution of its patent cliff mitigation efforts. If results in 2027 and 2028 come in "better than feared," this low-priced pharma stock could experience a re-rating to a mid-teens forward multiple, in line with the median of pharmaceutical stock valuations.
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.
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