Growth: It's what every investor would like to have from the stocks they buy. That's true even for individuals who are primarily seeking income.
Three Fool.com contributors believe they've identified truly magnificent growth stocks to buy right now. Here's why they chose AstraZeneca (AZN 0.19%), Eli Lilly (LLY 1.19%), and Vertex Pharmaceuticals (VRTX -0.06%).
This overlooked growth stock has a plethora of potential
David Jagielski (AstraZeneca): What makes AstraZeneca a magnificent long-term investment is how broad the business is and the potential it has to generate long-term gains. Its oncology business brings in close to 40% of the company's total revenue. That's an important pillar, as cancer treatments are necessities for patients.
Getting a cancer treatment across the finish line is no easy task -- just 3% of oncology drugs make it through clinical trials and obtain approval from the U.S. Food and Drug Administration(FDA).
What's encouraging for growth investors is that oncology is only one growth avenue for the business. AstraZeneca also develops drugs in many other therapeutic areas, including rare disease, respiratory and immunology, cardiovascular, and others. Through the first half of the year, the company already has six drugs that have generated more than $1 billion in revenue and have been growing at impressive double-digit growth rates:
| Product | Therapy Area | Revenue (in Millions) | Year-Over-Year Growth Rate |
|---|---|---|---|
| Tagrisso | Oncology | $2,915 | 12% |
| Farxiga | CVRM | $2,804 | 39% |
| Imfinzi | Oncology | $1,976 | 57% |
| Lynparza | Oncology | $1,368 | 10% |
| Ultomiris | Rare disease | $1,364 | 64% |
| Calquence | Oncology | $1,185 | 33% |
Data source: Company filings. CVRM = Cardiovascular, Renal & Metabolism.
AstraZeneca is nothing short of a growth machine, as it also has an incredible 172 programs in its pipeline. With so many different assets to build and grow its business around, this makes for an underrated growth stock for long-term investors to load up on right now.
Down 2% this year, investors have looked past the company's strong financials and promising growth opportunities. At a forward price-to-earnings multiple of 16, the stock looks like a bargain, as the average healthcare stock trades at more than 18 times its estimated future profits.
AstraZeneca makes for a magnificent stock to buy and hold, as it provides good value, has strong growth prospects, and even pays a dividend that yields 2.1%. It ticks off a lot of check marks, making it suitable for many types of investors.
Firing on all cylinders
Prosper Junior Bakiny (Eli Lilly): Try as you might, you won't find much wrong with Eli Lilly's business right now. Over the past year, the biotech giant has crushed the broader market thanks to its solid financial results and clinical progress.
Lilly's financial results continue to deliver, minus its fluctuating coronavirus-related sales. That won't stop anytime soon. Analysts expect Lilly's top line to grow at an average of about 24% annually for the next five years.
On the clinical front, Eli Lilly posted solid results from a phase 3 clinical trial for donanemab, a potential Alzheimer's disease therapy that is now being considered for approval in the U.S. The biotech's diabetes medicine, Mounjaro, also delivered with flying colors in late-stage studies for weight loss; it is now under review for this particular label expansion.
Speaking of Mounjaro, this medicine should be one of Eli Lilly's biggest growth drivers in the coming years. Some analysts foresee peak annual sales of $25 billion for the medicine -- an impressive number.
It's not like the rest of Eli Lilly's existing lineup is slacking off either, as products such as cancer drug Verzenio and plaque psoriasis treatment Taltz still posting solid results. What's more, the biopharmaceutical giant still has a rich pipeline beyond those products that have made a lot of noise recently.
Eli Lilly's overall prospects look solid, which is why the drugmaker's performance over the past 12 months should surprise no one. But it's not too late to get in on this magnificent growth stock. Eli Lilly's future could be just as bright.
Growth prospects to get excited about
Keith Speights (Vertex Pharmaceuticals): If you only look at Vertex's immediate future, you might not be enthusiastic about the stock. The big biotech expects to deliver year-over-year sales growth of a little over 9% this year. That's not bad, but it's not going to light a fire beneath many investors. However, peeking just a little farther into the future reveals growth prospects to really get excited about.
Vertex and its partner, CRISPR Therapeutics, expect to win FDA approvals for exa-cel in treating rare blood disorders sickle cell disease and transfusion-dependent beta-thalassemia within the next several months. Exa-cel could be a slam-dunk blockbuster if approved (which seems likely).
The company could have its most profitable cystic fibrosis (CF) therapy ever on the way to market soon. Vertex plans to announce late-stage results for a triple-drug combo featuring vanzacaftor by early 2024. Its royalties on the combo are significantly lower than its current hugely successful CF drugs.
There's also another potential near-term launch in Vertex's future with VX-548. The nonopioid drug is currently being evaluated in a late-stage study as a treatment for acute pain. This study should wrap up by the end of 2023.
Vertex has a pivotal clinical trial underway for inaxaplin as well. The drug targets APOL1-mediated kidney disease, which affects more patients worldwide than CF does. In addition to these promising candidates, Vertex's pipeline also features three programs in early-stage testing that just might cure type 1 diabetes.
Despite all this potential, Vertex's shares remain attractively valued. The stock's price-to-earnings-to-growth (PEG) ratio is a super-low 0.5. In my view, Vertex is without question a magnificent growth stock to buy right now.
