The AstraZeneca (LSE: AZN) share price has been behaving like a dream over the past 10 years or so. There aren’t that many FTSE 100 companies with stocks that have risen so steadily for so long. But the pharmaceutical company has delivered the goods. And it’s share price has been travelling broadly north-east on the chart for years now.
However, just lately something’s up. Since August, the share has declined by just over 12%. Is there a problem with the business? I don’t think so. Set against the wider bear market we’ve seen for stocks, AstraZeneca has actually held up quite well. Indeed, the recent weakness looks like a buying opportunity for me. But sadly, I have no spare cash to take advantage of it!
Robust operational performance
Scoping back, the one-year performance of the stock remains encouraging. With the share price near 9,952p, it’s just over 14% higher than it was a year ago. And I reckon the progress has been driven by a robust operational performance in the underlying business.
AstraZeneca is a remarkable business considering its size. And in recent years it’s been pumping out impressive growth numbers for earnings. Indeed, the £152bn market-cap company can put many smaller growth outfits to shame.
Right now, City analysts following the behemoth expect earnings this year to knock the ball out of the park with an almost 200% increase. And they’ve pencilled in a further uplift of just over 14% for 2023.
It’s all being driven by a resurgent new products pipeline propelled by a huge research and development (R&D) effort over many years. The days of so-called patent cliffs and falling sales are now firmly behind the company. And that’s all worked out exactly as prescient investors were predicting when they loaded up with the stock in the doldrums a decade ago. Sadly, not buying the stock then was another investing misstep I made. I was aware of the company’s potential, but failed to act on that knowledge at the time.
A virtuous circle
AstraZeneca delivered its half-year report at the end of July. The company said: “Strong revenue performance and R&D success enables further investment in the pipeline and new launches.” And that neatly sums up the case for me investing in the business now. Success can lead to enhanced potential for more success in a kind of virtuous circle.
I think it’s wise for me to examine the way companies invest in R&D for my future growth investments. Studying AstraZeneca’s record of investing in R&D could have given me the conviction to buy some of its shares a decade ago. It’s not a guarantee of making a successful investment in shares. But it is another factor to add to the overall research picture.
Meanwhile, today’s share price level throws up a forward-looking earnings multiple of about 15 for 2023. I’d describe that valuation as up with events and fair. However, I reckon the long-term potential for the business to grow remains intact.
There can be no certainty the R&D pipeline will keep on delivering big-selling medicines in the years ahead. And I could lose money on the shares if progress declines. But, right now, the business is performing well. And I see the stock as attractive.
