Bristol-Myers Squibb (BMY -0.68%) is a top healthcare company with a rich history that goes back to the 1800s. But its business, and its stock, have been underperforming recently.

Share prices of Bristol-Myers are down 11% over the past year, while the S&P 500 has been flat. And it's now trading near its 52-week low. Has this become a bargain stock to buy, or is there a valid reason for it to be trading at a discount?

The company's sales growth hasn't been impressive

A key reason investors haven't been too excited about Bristol-Myers' business is that the company's growth rate has typically been modest. And in its most recent quarter, for the first three months of the year, sales of $11.3 billion were down 3% year over year as top-selling drug Revlimid faced competition from generics.

BMY Revenue (Quarterly YoY Growth) Chart

BMY Revenue (Quarterly YoY Growth) data by YCharts

Aside from the big bump in revenue that the company generated in 2020, largely due to acquisitions, including its mammoth $74 billion buy of cancer and immunology company Celgene, Bristol-Myers doesn't normally generate significant year-over-year growth.

To make matters worse, Bristol-Myers is also facing losses of patent protection for other top-selling drugs later this decade, including Eliquis and Opdivo.

Rising interest rates have made the stock riskier

Acquisitions can be great for growth, but not necessarily for the balance sheet. Bristol-Myers took on debt due to the Celgene deal, and its debt-to-equity ratio is up. At a time when interest rates are increasing, that can put investors on edge, as it means costs will rise as well.

BMY Debt to Equity Ratio Chart

BMY Debt to Equity Ratio data by YCharts

The company's debt levels have come down in recent years, but at around $40 billion, it's still a hefty amount for the business to carry, and that could be turning away some investors.

Free cash flow remains strong

A big positive for the business, however, is that Bristol-Myers generates ample free cash flow to cover its dividend, plus leave room for it to pay down debt or invest in its operations. 

BMY Free Cash Flow (Quarterly) Chart

BMY Free Cash Flow (Quarterly) data by YCharts

Bristol-Myers' dividend costs the company about $1.2 billion every quarter, so anything above that in free cash flow is money that the business can afford to spend to pay down debt and to potentially leave aside to fund acquisitions or pursue growth initiatives.

Is Bristol-Myers stock a buy?

Shares of Bristol-Myers are trading at 8 times future profits (based on analyst expectations). That's a steep discount when you consider the average healthcare stock trades at a multiple of 18. 

There's some risk here, but the company's strong financials put Bristol-Myers in a good position and give it time to add and develop assets to bolster its long-term growth potential. And at a cheap valuation, investors can give themselves a margin of safety in case things don't go as planned.

Bristol-Myers may be one of the more underrated healthcare stocks to buy right now, and with a dividend yield of 3.3%, this can be a good investment to buy and hold.