In a sense, every investor is a growth investor. If you focus on valuation, you want to find bargain stocks that will grow more in the future than in the past. If you're looking for income, you'll still like for your dividends to grow. And, of course, the textbook example of a growth investor loves growth.
Three Fool.com contributors have picked what they think are magnificent growth stocks to buy right now in the healthcare sector. Here's why they chose AbbVie (ABBV +0.68%), Eli Lilly (LLY +2.31%), and Vertex Pharmaceuticals (VRTX +1.14%).
AbbVie: A top growth stock that keeps finding ways to grow
David Jagielski (AbbVie): AbbVie is an undervalued growth stock that I think could be a fantastic long-term buy right now. The stock might get overlooked by some investors due to its seemingly underwhelming results and its hefty price-to-earnings ratio of 63. However, recent expenses related to acquisitions have weighed on the company's earnings numbers and make those numbers look worse than they otherwise would be.
NYSE: ABBV
Key Data Points
Under the hood, there's a lot to like about the healthcare stock. For one, AbbVie has a diverse business, with aesthetics, immunology, oncology, neuroscience, and eye care all providing the company with many different avenues to grow its business in the long run.
AbbVie's most recent results look a little disappointing. For the last three months of 2023, revenue fell 5% year over year to $14.3 billion. The biggest reason for the decline was Humira sales, which were down 41% as it battles growing competition now that it has lost exclusivity.
The positive is that AbbVie recently upgraded the guidance of its two newer immunology drugs, Skyrizi and Rinvoq, which it is leaning on to make up for Humira's lost sales in the future. Combined, the company expects the two drugs will generate $27 billion in sales by 2027. Previously, AbbVie was forecasting their combined sales to top just $21 billion.
AbbVie has also been relying on acquisitions to open up even more growth opportunities. This month, it acquired oncology company ImmunoGen for $10.1 billion. The company makes antibody-drug conjugates (ADCs), which are promising medicines in the fight against cancer. In December, AbbVie announced it was buying neuroscience company Cerevel Therapeutics for $8.7 billion in a move that it says will advance its pipeline within that segment.
Based on analysts' future earnings estimates, AbbVie's stock is only trading at a multiple of 15 times its expected profits, which is well below the S&P 500 average of 22. On top of all this growth potential, the stock also offers investors a dividend that yields 3.6%.
Eli Lilly: Impressive growth with more on the way
Keith Speights (Eli Lilly): Shares of Eli Lilly have skyrocketed nearly 120% over the last 12 months. Along the way, Lilly has claimed the mantle as the biggest drugmaker in the world based on market cap. I think more impressive growth should be on the way.
NYSE: LLY
Key Data Points
Lilly's new weight-loss drug Zepbound raked in close to $176 million in the fourth quarter of 2023 with less than one month on the market. I won't be surprised if Zepbound becomes one of the top-selling drugs of all time within the next few years.
Zepbound's sibling, Mounjaro, is already a huge winner. Both drugs use the same active ingredient (tirzepatide). But while Zepbound targets weight loss, Mounjaro is approved for treating type 2 diabetes. It generated sales of nearly $5.2 billion last year, with $2.2 billion of that total coming in Q4.
These two sibling products aren't Lilly's only big growth drivers. The company's lineup includes six other drugs with double-digit percentage sales growth in 2023. Two of them are blockbusters -- cancer drug Verzenio and diabetes drug Jardiance.
Lilly's pipeline also seems likely to soon contribute additional growth. The company awaits U.S. regulatory approvals for experimental Alzheimer's disease drug donanemab and atopic dermatitis candidate lebrikizumab.
The main negative for Lilly right now is its valuation. The big pharma stock trades at a whopping 60 times expected earnings. However, this metric doesn't factor in Lilly's tremendous growth prospects over the next decade. I think the stock should have plenty of room to run.
Vertex: A top growth stock that's entering a new phase
Prosper Junior Bakiny (Vertex Pharmaceuticals): There aren't too many biotech giants that have performed better than Vertex Pharmaceuticals in the past decade. The drugmaker's laser focus on its cystic fibrosis (CF) franchise through this period has proved highly lucrative. Revenue and earnings have grown rapidly, and Vertex has continued to deliver significant clinical and regulatory progress within its central field of expertise.
NASDAQ: VRTX
Key Data Points
But things are changing with the biotech. To be clear, the details are changing, but the company's future, in terms of overall performance, should look much like its past. Vertex is now expanding beyond CF.
Last year, it earned approval for Casgevy, a therapy for sickle cell disease and beta-thalassemia. It recently reported positive results from a late-stage study for VX-548, a potential treatment for acute and neuropathic pain. Vertex hopes that VX-548 will replace opioid-based pain treatments that come with severe side effects.
Casgevy and VX-548 should significantly contribute to Vertex's top-line growth in the midterm. The biotech has several more exciting programs in the pipeline that could yield important regulatory wins within the next five years as well.
The lesson for investors is clear: Though no one can go back in time and invest in Vertex stock a decade ago, the company has all the tools it needs to produce similarly impressive returns in the next 10 years, and likely beyond. That's why it is worth investing in this fantastic growth stock right now and holding onto its shares for a long time.
