If I’d invested £10,000 in AstraZeneca shares one year ago, here’s what I’d have now!

Dr James Fox takes a closer look at the biggest stock, by market cap, on the FTSE 100 and asked whether AstraZeneca shares can continue to outperform.

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AstraZeneca (LSE:AZN) shares are the crown jewel of the FTSE 100, very much in the way that Lloyds and its peers were in the 90s. The pharma and biotech giant is the index’s standout star over the past five years — it’s up an astonishing 120% over the period.

But if I’d invested £10,000 AstraZeneca a year ago, how would my investment be doing today? Well, unsurprisingly — given the five-year performance — very well. The stock is up 17%, meaning my £10,000 a year ago would be worth £11,700 today. I’d have also received around £200 in dividends.

However, I’m not an AstraZeneca shareholder. I was briefly over the past year, but I needed some capital and had to sell my holding. The big question is, what about now? Can AstraZeneca keep its bull run going?

Today, I’m focusing on prospects and valuation.

Prospects

During the latter stages of the pandemic, Covid-related sales supported the company’s outperformance. In Q3 of 2022, for example, topline sales came in 3% ahead of Wall Street consensus estimates. Excluding Covid sales, it was a 2% miss.

But there’s broad optimism about the company moving forward, supported by a huge product pipeline and some positive developments, including Japan’s approval of three drugs for cancer and leukemia in late 2022 — this could be worth $10bn in sales over five to eight years — and recent positive results in lung cancer trials.

Tagrisso, the name given to the lung cancer drug, massively outperformed in phrase three testing. The results were “about twice as good as we expected“, the company noted.

But in 2023, we can expect revenue to be driven forward by Enhertu — a breast cancer drug. Researchers said this week that the HER2 antibody-drug conjugate could be used against other tumour types.

To compliment this, we can observe that AstraZeneca has one of the most exciting pipelines in the industry, with 178 projects in development right now. By comparison, Pfizer only has 101. Its main FTSE 100 counterpart, GSK, has 68.

However, it’s worth highlighting that its pipeline is dominated by label expansion projects for drugs that have already entered the market, as opposed to entirely new opportunities.

Valuation

But all this doesn’t come cheap. The stock trades with a price-to-earnings ratio of 48 and a forward price-to-earnings of 25. Biopharma firms often trade at premiums as it’s a highly developmental and lucrative sector. However, it’s definitely possible to find cheaper biopharma stocks to invest in.

Nonetheless, I’m looking to purchase AstraZeneca once again. It’s still in a dip — possibly after some profit-taking following Q1 results — and this could be a good opportunity to buy in. The company has forecasted total revenue this year to increase by a low double-digit percentage and EPS in high-single to low-double-digits.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has positions in GSK. The Motley Fool UK has recommended GSK. 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.

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