The Motley Fool

AstraZeneca shares: 4 reasons I’d buy them now

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Pen next to sheet of paper
Image source: Getty Images.

Its latest financial update hasn’t sent the AstraZeneca (LSE: AZN) share price soaring, but it has underlined why the share was one of last year’s star stocks. 

AZN share in focus 

AstraZeneca had been a performer at the stock markets even earlier, but last year put it directly under the spotlight. As the market crash occurred last March, panicked investors rushed towards safer stocks, like ones in the healthcare sector. The AstraZeneca share was so much in demand that by August, it touched all-time highs. 

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

It dominated the news because of its Covid-19 vaccine, too. Developed along with the University of Oxford, it has quite literally been a life-saver. As this and other vaccines were successfully developed, investor confidence returned, and the stock market rally began. 

It fell a bit out of favour as investors’ confidence returned in November. However, the AZN share price has only fallen from its new high levels. In 2021 so far it’s only about 6.5% lower on average than it was in all of 2020. 

The stock can rise further 

In fact, I think, going by both the share’s price trajectory over time and the company’s performance, that it can rise again. There are four reasons behind my thinking. 

One, its results, which were released today. It has shown double-digit growth for both the full-year 2020 and the fourth-quarter of the year today. It also expects to continue showing a similar performance next year, although that is not certain, of course. Its core earnings per share (EPS) is up as well.  

Two, speaking of EPS, AstraZeneca also pays a dividend. At present, the AstraZeneca share has a yield of around 3%. For 2021, it will maintain dividends at the current levels. But as a long-term investor, I’m hopeful for future increases in dividend if the EPS keeps rising. A growth stock with increasing dividends sounds good to me. 

Competitive share price for AZN

Three, a relatively subdued share price and an increase in earnings also means that the price-to-earnings ratio (P/E) has also decreased. AZN now trades at 38 times. If I compare this to stocks like the FTSE 100 water and wastewater services provider United Utilities (UU), it looks relatively inexpensive. UU has an earnings ratio of almost 57 times. Similarly, Severn Trent (SVT) has a ratio of 48 times. 

Four brings me to the future share price potential. If we think that the value of UU and SVT is the price associated with safe and financially healthy defensives, then the AZN share price can be expected to rise in the near future. 

Risks and takeaway

There are, of course, always risks to buying any stock. The global economy isn’t out of the woods yet, AZN’s own vaccine isn’t effective against the South African coronavirus variants, and there’s always the possibility of another market crash. But on balance, I’m more in favour of the AZN share than not. In fact, it was my top stock for this month based on expectations of the good results that we saw today. It’s a good stock for me to buy. 

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Manika Premsingh owns shares of AstraZeneca. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.