AbbVie (ABBV 0.36%), a pharmaceutical leader, has faced some challenges over the past three years. The company is managing some patent cliffs and clinical setbacks that worried investors and dinged its stock price. Despite all that, the stock still performed well over this period. Yet, there is an argument to be made that AbbVie remains attractively valued and will grow into its valuation over the next five years or so, delivering market-beating returns in the process.
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Looking at some key metrics
Let's consider two metrics that help make a case for AbbVie's shares being undervalued at current levels. First, the stock trades at 16.8 times forward earnings. That's slightly lower than the 18.3 average for the healthcare sector, and the 22.6 average for the S&P 500. AbbVie's price/earnings-to-growth (PEG ratio) of 0.43 also puts the stock well within the undervalued range. Of course, numbers can't tell us everything. But these two, which are well-respected valuation metrics, at least suggest that AbbVie is too cheap to ignore.
NYSE: ABBV
Key Data Points
The growth drivers and the dividend
Now, let's turn to the company's operations. AbbVie has a lineup of products across multiple therapeutic areas: Neuroscience, oncology, and, of course, immunology, which is its most important market. The drugmaker has several growth drivers. Two of them, Skyrizi and Rinvoq -- both immunosuppressants -- will be the main ones for the foreseeable future. Combined, they are approved across several indications in immunology, including plaque psoriasis, rheumatoid arthritis, Crohn's disease, and ulcerative colitis.
Here's the best part: Neither will lose patent exclusivity anytime soon. So, for the next five years at least, they should help AbbVie's revenue and earnings move consistently in the right direction. What's more, AbbVie won't face any major patent cliff through the end of the 2020s at all, even beyond its two core growth drivers.
Meanwhile, we can expect the pharmaceutical leader to expand its lineup through new approvals, given its extensive pipeline, which features several dozen products. Even a handful of approvals or label expansions can have a meaningful effect.
Lastly, AbbVie is a fantastic income stock. The company is part of the group of Dividend Kings, corporations that have increased their payouts for at least 50 consecutive years (it inherited this designation from when it was still part of Abbott Laboratories back in 2013). AbbVie's "streak" is currently at 54 years.
When considering the company's valuation, growth prospects through 2030 (at least), and its excellent dividend program, AbbVie appears to be a no-brainer for income seekers at current prices.
