Unheralded Shares Worth Investing in Immediately
In the world of healthcare stocks, three names stand out as undervalued gems for long-term investors: Merck, Novo Nordisk, and Pfizer. These companies, despite near-term headwinds and patent expirations, boast attractive valuations, strong product pipelines, and strategic responses to upcoming challenges.
Merck: A Bargain in Disguise
Merck, with a forward price-to-earnings ratio of about 9.4, is undervalued compared to the healthcare sector average of 16.5. This discrepancy makes Merck's stock a steal, given its rich history and promising future.
The company faces challenges such as the loss of patent exclusivity for its blockbuster cancer drug Keytruda by 2028 and competition in key cancer indications. However, Merck is actively extending Keytruda’s patent life with a new subcutaneous formulation expected into the 2030s and is developing drug combinations to maintain growth.
Merck's shares are roughly 26% undervalued versus Morningstar’s fair value estimate, reflecting potential upside. The company benefits from a wide economic moat, strong returns on invested capital, and a pipeline offsetting generic competition.
Novo Nordisk: A Growth Opportunity
Novo Nordisk has taken a hit in the market due to slowing momentum of weight management drug Wegovy and lowered guidance. However, its focus on obesity and diabetes therapies still positions it well in large growing markets.
Despite these near-term challenges, an oral version of its promising next-generation treatment, amycretin, is expected to begin phase 3 trials early next year. Street analysts see value many retail investors might overlook.
Novo Nordisk's shares have plummeted by more than 50% in the past year, with its valuation now below $300 billion. This drop presents a significant opportunity for investors looking for growth stocks.
Pfizer: A Pharmaceutical Giant with Potential
Pfizer's stock has faced challenges following the decline in COVID-19-related revenues, leading many investors to shy away. However, Wall Street recognizes its potential.
Pfizer remains a pharmaceutical giant with nearly $64 billion in 2024 revenue attributable to diversified products beyond its COVID portfolio, such as the anticoagulant Eliquis and vaccines like Prevnar. Its shares trade at a low valuation compared to sector peers, creating a buying opportunity for long-term investors betting on recovery and pipeline success.
Pfizer's growth prospects are better than perceived, with strong sales for drugs like Nurtec ODT, Padcev, and Vyndaqel. The company's dividend remains very attractive with a forward yield of 6.79%, and it plans to maintain a growing dividend.
In summary, these three stocks are underrated because their current low valuations do not fully reflect their enduring competitive advantages, pipeline innovation, and strategic moves to overcome patent expirations and market challenges. This disconnect provides a compelling entry point for long-term investors willing to look past short-term concerns.
- Merck's stock, trading with a forward price-to-earnings ratio of 9.4, despite challenges like patent expirations, offers a steal in the finance world, given its rich history and promising future.
- Novo Nordisk, despite facing a drop in its market value due to slowing momentum of Wegovy, is seen as a growth opportunity by street analysts, thanks to an oral version of its promising next-generation treatment, amycretin, expected to begin phase 3 trials soon.
- Pfizer's declining stock value following the decline in COVID-19-related revenues presents a significant opportunity for long-term investors, as the company remains a pharmaceutical giant with strong sales for diversified products and a low valuation compared to sector peers.
