At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." Today, we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.

Bristol-Myers' mojo
On a rather "red" day for the market, at least one group of investors was left smiling yesterday: shareholders in drugmaker Bristol-Myers Squibb (NYSE: BMY). As you've probably heard by now, the company recently announced positive results for the new blood-thinner drug Eliquis that it's been developing with Pfizer (NYSE: PFE). Fellow Fool and pharma phan Brian Orelli explained yesterday how the new drug "could be worth billions" to Bristol-Myers -- and it seems Wall Street agrees.

Yesterday, Morgan Stanley bought a ticket on the Bristol-Myers train, too. Praising the company's solid pipeline of drug candidates and calling Bristol-Myers "one of the few companies with a clear path to growth among Major Pharma," Morgan Stanley raised its price target on the stock to $34 and upped its rating to overweight.

An unpopular view
Not everyone's so hot on Bristol-Myers' prospects, mind you. In fact, the consensus up on Wall Street is that far from growing, the company's earnings are likely to shrink about 1.6% every year for the next five years. That's as compared to single-digit growth at Pfizer, Merck (NYSE: MRK), and blood-thinner rival Johnson & Johnson (NYSE: JNJ) -- and big pharma standout GlaxoSmithKline (NYSE: GSK), which is expected to grow 11% annually for the next half-decade.

But if everyone else is so down on Bristol-Myers' prospects, what is it that has Morgan Stanley feeling so optimistic? Basically, it's this new blood thinner, which the analyst expects to have a truly transformative effect on the business. According to Morgan Stanley, Eliquis alone could contribute as much as $2.4 billion to annual sales by 2015 and help the company earn as much as $2.34 per share in four years' time.

Building off the $1.93 that Bristol-Myers has earned over the past 12 months, that would work out to about 4.9% annual earnings growth -- or fully 650 basis points more than the rest of Wall Street expects.

But is even that enough?

It depends
From a pure value investing perspective, it's hard to find real value in any company growing at single-digit growth rates, while selling at double-digit P/Es. And Bristol-Myers is no exception. Its 15 P/E ratio means that even an annual 5% growth rate results in a PEG ratio of 3.0 -- exorbitantly expensive by most value investing standards. Even the company's near-5% dividend rate will be hard-pressed to make up the difference.

On the other hand, if you look at Bristol-Myers from a free cash flow perspective, the math gets a little better. Based on the $4.1 billion in free cash flow that the company generated over the past 12 months, I see Bristol-Myers selling for about 12.2 times its annual free cash flow. Now grow these profits at 5% or so a year, and toss in the 4.5% dividend yield to sweeten the deal, and the valuation no longer looks quite so stretched.

Foolish takeaway
Times have become very tough for value investors with a big-pharma bent. Lately, even yesteryear's hypergrowth stories like Cephalon and Teva (Nasdaq: TEVA) are getting pegged for single-digit, roughly 7% growth rates. If you're looking for "growth at a reasonable price," the almost total lack of growth predictions in this industry makes obvious value candidates hard to come by. Personally, I had to travel overseas to find AstraZeneca (NYSE: AZN) for my portfolio, and even there, had to rationalize myself into buying a sub-seven price-to-free cash flow ratio based on the company's 5.3% dividend yield.

That said, Morgan Stanley's reversal on Bristol-Myers Squibb shows you how quickly things can change. If a single drug candidate can transform a 1.6% annual "shrinker" into a 4.9% "grower" in the blink of an eye, maybe there are more bargains in this industry than we think.

Which hidden value drug candidates are on your radar today? Tell us on Motley Fool CAPS.

Fool contributor Rich Smith owns shares of AstraZeneca. The Motley Fool owns shares of GlaxoSmithKline, Teva, and Johnson & Johnson. Also, Motley Fool newsletter services have recommended buying shares of Johnson & Johnson, GlaxoSmithKline, Pfizer, and Teva, and recommended creating a diagonal call position in Johnson & Johnson.

You can find Rich on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 441 out of more than 170,000 members. The Motley Fool has a disclosure policy.

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