Perhaps not surprisingly, the all-time great investor Warren Buffett has one of the best quotes that aptly summarizes the aim of value investing. In his 2008 letter to Berkshire Hathaway's shareholders, he wrote, "Long ago, Ben Graham taught me that - Price is what you pay; value is what you get."

True to the value-investing approach of finding high-quality stocks trading at unjustifiably low prices, I will discuss three reasons why the pharma stock Bristol Myers Squibb (BMY 0.20%) is a strong buy for value and income investors alike.

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Bristol Myers Squibb is on track for another great year

In the third quarter, Bristol Myers Squibb managed to top analysts' revenue and non-GAAP earnings per share (EPS) estimates. This represented the ninth quarter out of the past 10 that the company beat analysts' expectations. Bristol Myers Squibb grew its total revenue by 10.3% year over year (YOY) in the third quarter to $11.6 billion. This helped the company exceed the analyst consensus of $11.5 billion in revenue by 0.9%. How was Bristol Myers Squibb able to pull this off?

The company's top three drugs – cancer drugs Revlimid and Opdivo and an anticoagulant drug, co-owned with Pfizer (PFE -0.41%) known as Eliquis -- accounted for 65.9% of revenue in the third quarter. They made up 70.4% of Bristol Myers Squibb's YOY revenue growth.

Bristol Myers Squibb's top-selling drug Revlimid will face biosimilar competition from Indian company Natco Pharma starting next year on a limited-volume basis. That is, until its key patent expirations in 2025 and 2026 will allow for more fierce competition from generics. Opdivo and Eliquis aren't expected to face competition until around 2028. This should give Bristol Myers Squibb plenty of time to bring to market some of its 50-plus compounds in development, focus on ramping up sales of recently approved drugs like Reblozyl and Zeposia, and make bolt-on acquisitions.

Moving to the bottom line, Bristol Myers Squibb grew its non-GAAP EPS by 22.7% YOY to $2.00 in the third quarter. This was driven by its aforementioned revenue growth, a 330-basis-point expansion in non-GAAP net margins to 38.7%, and a 2.1% reduction in the outstanding share count. These factors led to Bristol Myers Squibb topping the non-GAAP EPS analyst consensus of $1.92 by 4.2%.

As a result of Bristol Myers Squibb's solid performance in the third quarter, the company was confident enough to boost its midpoint non-GAAP EPS forecast to $7.48 for this year. This would represent a robust 16.1% growth rate compared to the $6.44 in non-GAAP EPS reported last year.

A financially healthy business

Bristol Myers Squibb is a growing business. But it's just as important to be sure that the company can remain financially solvent regardless of business conditions. Let's take a look at Bristol Myers Squibb's financial position, using the interest coverage ratio, which measures how well a company can pay its interest expenses from earnings before interest and taxes (EBIT).

Bristol Myers Squibb's interest coverage ratio surged from 4.4 in the nine months ended last year ($4.65 billion in EBIT/$1.07 billion in interest costs) to 7.2 through the first nine months of this year ($7.25 billion in EBIT/$1.01 billion in interest expenses). While Bristol Myers Squibb's interest coverage ratio was merely fair last year, the company has greatly improved the metric by successfully incorporating Celgene into its business in the two years since the deal closed.

Based on its year-to-date interest coverage ratio, Bristol Myers Squibb is at minimal risk of insolvency. That's because either its EBIT would need to tumble more than 80%, its interest costs would need to skyrocket, or a combination of the two would need to occur before the company would face serious financial difficulties.

A rock-bottom price to pay for quality

The company's fundamentals would lead an investor to believe that the company commands a premium valuation. This is shockingly not the case, given its current share price of nearly $60.

It trades at a forward price-to-earnings (P/E) ratio of 7.6, well below the general drug manufacturer industry average of 11.4. Thus, investors who are confident that Bristol Myers Squibb has the pipeline and financial flexibility to overcome its upcoming patent expirations on its top-three drugs should seriously consider buying the stock. In the meantime, income investors will receive a safe, market-beating 3.3% dividend yield as they wait for Bristol Myers Squibb to prove that it can navigate its patent cliff that is looming in the second half of this decade.