Moderna (MRNA 0.17%) isn't exactly what most investors would think of as a cheap stock. Its shares are trading near all-time highs. The company's market cap of well over $70 billion might seem too high to many.

However, last week Moderna announced a supply agreement with Israel for its COVID-19 vaccine that could be a predictive indicator for investors to take note of. It's even possible that this latest supply deal could mean that the stock is a pretty big bargain right now. Here's why.

Vial with a dollar sign in it next to a syringe with needle and a COVID-19 vaccine label

Image source: Getty Images.

First firm order for 2022

The key to why the Israel supply deal is so important for Moderna can be found just below the headline in the biotech's press release announcing the news. Moderna stated that this deal is the "first firm order" that it has received for 2022. 

While Moderna didn't announce any specifics of the deal, the Israeli news organization Ynet did. It reported last week that Israel plans to purchase 7.2 million doses of Moderna's COVID-19 vaccine for around 500 million shekels. Based on current exchange rates, that amounts to a little over $150 million.

Assuming Ynet's numbers are accurate, this appears to be a really good sign for Moderna. The company has already inked agreements with Israel to supply 10 million doses of its COVID-19 vaccine this year. It now appears to have an order in hand that's relatively close to that level.

This is important because it could indicate that other governments (particularly the U.S.) will also move forward soon with supply deals for 2022 that are in the same ballpark as their 2021 orders. Pfizer and BioNTech are close to finalizing a two-year supply agreement with the European Union for up to 1.8 billion doses. The U.S. is more likely to go with multiple vaccine sources, which should be promising for Moderna.

A biotech bargain?

Now, here's why this latest deal could mean that Moderna is a bargain at its current price. Its shares currently trade at 8.8 times expected earnings. That's a valuation that would typically be viewed as really low by investors, especially for a biotech stock

But it's probably fair to say that few investors have thought of Moderna as a bargain. Why? Uncertainty about the future for the company's COVID-19 vaccine sales.

Everyone knows that Moderna stands to rake in billions of dollars in sales from its COVID-19 vaccine this year. Much of that revenue will flow right down to its bottom line. As a result, the biotech's forward earnings multiple is quite attractive.

The problem, though, has been that there were a lot of questions about how much of this revenue would be recurring. Based on Moderna's supply deal with Israel, it's looking increasingly likely that the company could generate a large percentage of its 2021 sales in 2022 as well. The Pfizer/BioNTech agreement with the EU bolsters this case.

Assuming that Moderna will be able to make upward of 70% of its projected revenue for this year in 2022 (and presumably beyond then), investors don't have to worry that the current low forward earnings multiple is a mirage. The stock really could be as much of a bargain (or at least close to it) as the valuation metric indicates.

Looking to the future

It's important to also remember that Moderna's prospects aren't solely based on its COVID-19 vaccine. The company expects to advance its cytomegalovirus (CMV) vaccine candidate into late-stage testing this year. It thinks this vaccine could rake in sales of up to $5 billion annually if approved.

The biotech also currently has 12 other messenger RNA (mRNA) programs in clinical testing. CEO Stephane Bancel has stated publicly that he wants to greatly expand Moderna's pipeline to include up to 50 clinical programs. 

Moderna's current share price just might look like an absolute steal in retrospect within the next few years. The supply deal with Israel could be the signal investors needed that the questions about the company's fortunes after 2021 aren't all that difficult to answer.