Bristol Myers Squibb (BMY -1.15%) underperformed the S&P 500 index in each of the last four years, and it's on the way to extending the streak to five.
Does this lackluster track record mean that investors should look elsewhere? Or is Bristol Myers Squibb a stock to buy right now? To answer this question, we need to look at three key areas for the drugmaker.
If BMS can deliver strong revenue and earnings growth, the big pharma stock could also generate market-beating returns. The good news is that are several reasons to think the company can do all three.
BMS' current product lineup includes eight blockbuster drugs. Sales for three of those drugs jumped by double-digit percentages year over year in the third quarter of 2020 and are likely to keep the momentum going. Another three drugs in the group achieved solid sales growth in the high single digits.
One notable exception, though, was Opdivo. BMS' cancer immunotherapy experienced a 2% year-over-year sales decline in Q3. However, new approved indications for Opdivo could turn things around going forward and boost BMS' overall revenue growth.
The company's portfolio also includes several rising stars. Zeposia especially stands out. The multiple sclerosis drug launched commercially earlier this year and should be a huge winner for BMS.
Even better, BMS' pipeline could turbocharge the pharma company's growth. Cancer cell therapies ide-cel and liso-cel have blockbuster potential. Both candidates currently await FDA approval. The company's recent $13.1 billion acquisition of MyoKardia brought promising cardiovascular drug candidate mavacamten into the fold. BMS plans to file for FDA approval of the drug in treating symptomatic obstructive hypertrophic cardiomyopathy, a chronic heart disease, in the first quarter of 2021.
With this abundance of riches, you might think Wall Street would be bullish about BMS' prospects -- and you'd be right. The average analyst estimate projects average annual earnings growth of more than 21% over the next five years.
Some investors might have worried that Bristol Myers Squibb's big acquisition of Celgene last year could negatively impact the company's dividend. Those concerns quickly evaporated, with BMS increasing its dividend by nearly 10% shortly after the Celgene transaction closed.
BMS' dividend currently yields more than 2.9%. The dividends should keep flowing and growing. BMS' management team has consistently voiced support for the dividend program. The company remains on track to significantly reduce its debt as well, which will give it more financial flexibility for dividend increases in the second half of this decade.
Bristol Myers Squibb is attractively valued no matter how you look at the stock. Its shares trade at only a little over eight times expected earnings -- well below most of its peers.
An easy decision
Let's add up all that Bristol Myers Squibb offers. First and foremost, the company's growth prospects appear strong. BMS has a solid current lineup with established blockbusters and some that could join the $1 billion sales club in the not-too-distant future. Its pipeline should deliver more big winners, the company's dividend looks attractive, and the stock is dirt cheap.
In my view, this is an easy decision. Bristol Myers Squibb definitely appears to be a good stock to buy right now.
I'm in good company with this optimistic perspective, by the way. Warren Buffett, one of the greatest investors of all time, also likes the stock. Buffett's Berkshire Hathaway recently loaded up on big pharma stocks, including Bristol Myers Squibb. I suspect that Buffett and his two investment managers see the same qualities in BMS that I see. There's simply too much to like about the stock to ignore.