Three Drug Manufacturers Offering The Best Value Today
Cagdas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There are various industries which have provided very safe returns throughout history, and drug manufacturing is certainly one of them. It is one of the rare industries providing sleep-at-night investments. There will never be a peak for producing new drugs because illnesses will be on the face of the earth as long as human kind exists. New drugs with the least side effects and higher efficacy are always favored, so drug companies wil remain popular investments. Most of the renowned drug manufacturers offer high and safe returns.
I looked for the top three drug manufacturers operating in the United States and offering the best value today. All of the following stocks have a maximum P/E ratio of 23.9 and offer dividends to shareholders. Moreover, they are estimated to report a positive EPS growth in the next five years. I have examined these stocks in this article, and added my opinion along with my analysis. Here is a fundamental analysis of these four drug manufacturers offering the best value.
What’s more attractive in the investment world than spin-offs ? They usually lead to great bargains and high profit in the short term. Abbott (NYSE: ABT) has recently spun off part of its business into a new name “AbbVie” (ABBV), which offers a breathtaking dividend yield (4.50%) for its size.
It is always the same in the history of investment. A successful company goes for a spin-off and this leads to one or –usually- two “buy low, sell high” opportunities. Abbott has declined in price since the spin-off, which is quite possibly a temporary condition. Besides, this creates a marvelous bargain to buy at low levels. The stock has an attractive balance sheet. Almost all of the key stats are showing green flags. Its price to earnings ratio is 8.0, less than half the industry average of 16.8. Revenue and cash flow are looking good. The beta value for its stock is 0.34, second only to Biostar Pharma (BSPM) which is 0.04. Abbott has always been a profitable choice for investors. These low levels are suitable for entry.
Johnson & Johnson
In the healthcare world, companies simply don’t grow any larger than this legendary giant. Johnson & Johnson (NYSE: JNJ) has just received an expanded EU approval for its cancer treatment Zytiga. There’s been a steady rise in JNJ's share price since Christmas.
The company has surpassed analyst expectations in the last four quarters straight. Revenue and assets are rising steadily. Beta is 0.54, while analysts estimate a 4% increase in the mid-term. One might think that this stock is done for some time, but I can tell this stock will be a bargain going forward. A stock with an expanded EU patent for cancer treatment will surely be benefitting from this success. Besides, Johnson & Johnson is a very profitable company in the long term, and looking at its massive research pipeline it is a must for long-term portfolios. I think this new approval is a sign for even better times ahead. I see no harm in stocking some JNJ shares.
Merck & Co.
Merck (NYSE: MRK) is another bargain of the day. Its share price hit 52-week highs recently, but it eventually went lower with the help of a dividend tax increase. Merck always excelled in its research & development program, and was rewarded with considerable growth as a result.
I can say that it is in a much better condition than it was in October. MKM Partners has upgraded its call on Merck from Neutral to Buy when it fell to today’s level in November. Institutions own 75.13% of total shares, which is a strong sign of profitability. Merck has been raising the dividend slowly yet steadily, and there is no reason to halt that trend. The payout ratio is over 71%, which is quite a wide ratio. Merck offers a considerable bargain nowadays. I don’t recommend you miss that.
BargainReporter owns shares of Abbott Laboratories and Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!