AbbVie Stock Hits a New 52-Week High. Has It Gotten Too Expensive to Buy?

When a stock hits a new 52-week high, it can be a sign that things are going well for the business and that investors are recognizing some encouraging value. However, it also means that the stock has become more expensive of late. Thus, it isn't always clear whether it's a good buy, since buying a stock at an elevated price can lead to less-than-stellar returns later on.

Healthcare giant AbbVie (NYSE: ABBV) hit a new 52-week high on Monday. And in the past 12 months, it's now up around 40%. Can it go even higher, or has its valuation become too rich to make it a good buy?

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Why a rally for AbbVie may have been overdue

While it may seem like AbbVie has become a hot stock of late, given that it has hit new highs, on a year-to-date basis, it has risen by just around 11%. That's better than the S&P 500's gains of about 8%, but it hasn't been taking off the way some top growth stocks have.

Given the company's level of earnings, the stock should arguably have been trading at a higher price than it has. Even with its rise in value this year, the stock trades at less than 18 times its estimated future earnings (based on analyst expectations). This is still below the S&P 500 average of 21.

Due to concerns about healthcare reform under the current administration, investors may have been a bit hesitant to load up on the stock. But with AbbVie continually reporting strong numbers, it's been demonstrating solid resiliency, reminding investors as to why it's a top blue chip stock to own.

It isn't too late to buy AbbVie stock

AbbVie is a growth beast as it continues to expand its business through acquisitions. Most recently, it announced a $10.9 billion acquisition of Apogee Therapeutics, which will expand its immunology portfolio. While acquisition-related expenses can weigh on its earnings, in the long run, they enable the pharmaceutical giant to diversify and generate some impressive results. along the way.

With an attractive valuation, strong financials, an appetite for more growth, and an above-average dividend that yields 2.7%, AbbVie makes for a terrific all-around stock to buy and hold for the long run. Although its share price may seem inflated, being that it's at a new 52-week high, it's not too late to buy the stock, especially if you're planning to hang on to it for the long haul.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie. The Motley Fool has a disclosure policy.