Pharma stocks are once again at the fore, with fresh concerns over the new omicron COVID-19 variant. On November 21, 2021, Dr. Anthony Fauci warned that time was running short to prevent a “dangerous” resurgence of COVID-19 infections during the upcoming holiday season. His statements are deemed to have piqued investor interest in the pharma sector, as evidenced by the iShares U.S. Pharmaceuticals ETF’s (IHE) 2.5% returns over the past month.
In addition, with surging chronic diseases around the globe, the pharmaceuticals sector is expected to grow significantly. According to a Markets and Markets report, the global pharmaceutical drug delivery market is expected to reach $2.21 trillion by 2026, growing at a 5.9% CAGR.
Therefore, we think it could be wise to add fundamentally sound yet undervalued pharmaceutical stocks GlaxoSmithKline plc (GSK), Teva Pharmaceutical Industries Limited (TEVA), and Eagle Pharmaceuticals, Inc. (EGRX) to one’s portfolio now. These stocks have an overall A (Strong Buy) or B (Buy) grade in our POWR Ratings system. They also have an A grade for Value.
GlaxoSmithKline plc (GSK)
Based in Brentford in the U.K., GSK creates, discovers, develops, manufactures, and markets a spectrum of pharmaceutical products globally. It operates through four segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines, and Consumer Healthcare.
GSK and Vir Biotechnology, Inc. (VIR) announced on November 17 that the U.S. government had entered a deal to purchase sotrovimab, an investigational monoclonal antibody for the early treatment of COVID-19. GSK is expected to supply these doses to the U.S. government by December 17, 2021, enabling further expanded nationwide access to sotrovimab for patients.
GSK’s turnover increased 5% year-over-year to £9.08 billion ($12.03 billion) for its fiscal third quarter, ended September 30, 2021. Its gross profit came in at £6.19 billion ($8.27 billion), up 7.4% year-over-year. Furthermore, its operating profit increased 4.3% year-over-year to £1.94 billion ($2.59 billion).
In terms of forward EV/Sales, GSK’s 3.07x is 49% lower than the 6.02x industry average. Also, its 2.23x forward P/S is 69.1% lower than the 7.23x industry average.
Analysts expect GSK’s revenue to be $47.52 billion in its fiscal year 2022, representing a 4.4% year-over-year rise. The company’s EPS is expected to increase 7.7% year-over-year to $3.20 in the next year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past nine months, the shares have gained 22.1% in price to close Friday’s trading session at $41.02.
GSK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
GSK has an A grade for Value, and a B grade for Growth, Stability, Sentiment, and Quality. It is ranked #2 of 199 stocks in the Medical - Pharmaceuticals industry. Click here to see the additional POWR Rating for Momentum for GSK.
Note that GSK is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
Teva Pharmaceutical Industries Limited (TEVA)
Based in Tel Aviv-Yafo, Israel, TEVA is a pharmaceutical company. It develops, manufactures, markets, and distributes generic medicines, specialty medicines, and biopharmaceutical products in North America, Europe, and internationally.
On November 25, Quantum Genomics, a biopharmaceutical company that specializes in developing a new drug class that targets the brain to treat difficult-to-treat/resistant hypertension, announced an exclusive license agreement with TEVA subsidiary, Teva Israel Ltd., to market firibastat in Israel. This could help increase the company’s revenue.
For the third quarter, ended September 30, 2021, TEVA’s Generic products revenue for its European segment came in at $895 million, up 8.6% year-over-year. Its non-GAAP net income came in at $651 million, up 2.2% year-over-year. Moreover, its non-GAAP EPS increased 1.7% year-over-year to $0.59.
In terms of forward EV/S, TEVA’s 2x is 66.8% lower than the 6.02x industry average. Its forward P/S is also 92% lower than the 7.23x industry average of 7.23x.
TEVA’s EPS is expected to increase 4.4% year-over-year to $2.62 in the next year. The stock has gained 3% in price since hitting its 52-week low of $8.24 on July 19, 2021, to close Friday’s trading session at $8.49.
TEVA’s POWR Ratings reflect its promising outlook. It has an overall B rating which represents a Buy in our POWR Rating system.
TEVA has an A grade for Value, and a B grade for Growth. It is ranked #33 in Medical - Pharmaceuticals industry. Click here to see the additional POWR Ratings for TEVA (Stability, Momentum, Sentiment, and Quality).
Eagle Pharmaceuticals, Inc. (EGRX)
Woodcliff Lake, N.J.-based biotechnology pharmaceutical company EGRX focuses on developing and commercializing injectable products, primarily in the critical metabolic care and oncology areas in the United States. Its products include Ryanodex and Belrapzo.
On August 25, 2021, EGRX announced that it had entered a worldwide licensing agreement with Combioxin SA, a clinical-stage biotechnology company based in Epalinges, Switzerland. Scott Tarriff, the CEO of EGRX, said, “This deal, along with the recent Landiolol transaction, broadens our pipeline and provides opportunities for continued leadership in the hospital acute care space.”
EGRX’s total current assets came in at $171.69 million for the period ended September 30, 2021, compared to $166.06 million for the period ended December 31, 2020. Furthermore, its total assets came in at $256.26 million compared to $253.19 million for the same period. Its other long-term liabilities came in at $3.05 million compared to $3.96 million for the same period.
In terms of forward EV/S, EGRX’s 3.05x is 49.3% lower than the 6.02x industry average. Also, its forward P/S is 52.6% lower than the 7.23x industry average.
Analysts expect EGRX’s revenue to increase 74.8% year-over-year to $316.75 million in its fiscal year 2022. Its EPS is expected to increase 136.3% year-over-year to $6.45 in the next year. Over the past nine months, the stock has gained 8.1% in price to close Friday’s trading session at $48.10.
It is no surprise that EGRX has an overall B rating, which represents a Buy. It has an A grade for Value, and a B grade for Quality. It is ranked #31 in the Medical - Pharmaceuticals industry. Click here to see the additional ratings for EGRX (Growth, Momentum, Stability, and Sentiment).
GSK shares were unchanged in after-hours trading Monday. Year-to-date, GSK has gained 18.79%, versus a 25.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.3 Pharma Stocks Too Cheap to Ignore appeared first on StockNews.com