Bristol Myers Squibb: Bargain Buy or Value Trap?
Key Points
Bristol Myers' top drugs have lost patent protection and their sales have been declining.
The company, however, has a portfolio of growing drugs that have been doing fairly well of late.
The stock trades at a low value and offers a very high yield.
- Motley Fool Issues Rare "Total Conviction" Buy Alert ›
Bristol Myers Squibb (NYSE:BMY) is a top name in healthcare, with a market cap of around $125 billion today. But over the past five years, the stock has generated returns totaling just 6% and has been a fairly lackluster investment. By comparison, the S&P 500 has generated returns totaling nearly 70% over that same time frame.
The market has been fairly bearish on Bristol Myers due to question marks about its future growth prospects, which has resulted in the stock trading at an incredibly low valuation today, and its yield being fairly high.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Is it a bargain buy, or is this just a value trap that investors are better off steering clear of?
Image source: Getty Images.
Its growth portfolio has been doing well
The concerns about Bristol Myers' growth are significant enough that management has broken out its products into a legacy portfolio and a growth portfolio to help show investors that the business isn't really in that bad a shape. Through the first six months of the year, the company's legacy portfolio experienced a 6% decline in revenue, when excluding the impact of foreign exchange. By comparison, the growth portfolio experienced 12% organic growth.
The good news is that with $13.8 billion in revenue, the growth portfolio has also become larger than the legacy portfolio, which generated $10.7 billion in sales over the past two quarters.
Overall, however, Bristol Myers grew its top line by just 3% organically during that stretch. But the solid numbers in the growth portfolio appear to have inspired investors, as the healthcare stock has risen by nearly 14% this year, slightly outperforming the S&P 500, which is up around 12%.
Could Bristol Myers stock be an underrated buy right now?
Although Bristol Myers stock has been beating the market this year, its valuation remains incredibly low, as it's trading at just nine times its estimated future earnings. By comparison, the S&P 500 averages a multiple of 19.
Bristol Myers' business is by no means broken. It has been dealing with patent expirations as many drugmakers inevitably do. But with an encouraging portfolio of growth products, the business has been doing reasonably well given the circumstances.
The stock's low valuation gives investors an excellent margin of safety. Plus, with a high-yielding dividend that pays 4.1% and that is sustainable with a payout ratio of around 55%, that sweetens the deal even further. Bristol Myers is a stock I'd definitely call a bargain, and it's a great option for long-term investors to consider loading up on right now.
Should you buy stock in Bristol Myers Squibb right now?
Before you buy stock in Bristol Myers Squibb, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bristol Myers Squibb wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $355,124!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,296,254!*
Now, it’s worth noting Stock Advisor’s total average return is 901% — a market-crushing outperformance compared to 210% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of October 26, 2026.
David Jagielski, CPA 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.
Recommended Articles
