AstraZeneca (LSE:AZN) shares are up 23% over six months. I think this has gone under the radar somewhat. That means £20,000 invested six months ago is now worth £24,600.
It’s a big move for a UK-listed stock, adding somewhere in the region of £35bn to its market-cap. In fact, it’s now very close to pushing through the £200bn market-cap barrier.
Of course, most stocks are up versus where they were six months ago. After all, President Donald Trump had just unveiled his tariff plans, sending stock markets plummeting.
But it’s worth noting that AstraZeneca shares were somewhat beaten-down before then. Investors were worried about the outcome of an investigation into operations in China and the new administration’s position on vaccines and pharmaceuticals.
Big news
AstraZeneca appears to have eased US tariff pressure with a swiftly-negotiated deal backed by the Trump administration.
Following months of talks, CEO Pascal Soriot agreed to expand the firm’s American footprint through a new $4.5bn manufacturing facility in Virginia, a move that helped avert potential 100% tariffs threatened against foreign drugmakers.
The agreement follows AstraZeneca’s $50bn US investment plan.
While the company conceded modest price cuts for Medicaid and pledged to boost local production, analysts see the deal as a win that strengthens its relationship with Washington. AstraZeneca now expects half its projected $80bn in 2030 revenue to come from the US market.
What’s next?
The most obvious concerns now appear to have passed. As such, it’s really time to focus on the hard data. AstraZeneca’s currently trading around 18 times forward earnings. That actually puts it at a modest discount to the pharma sector average.
However, it’s worth noting that some of the big pharma players are actually a little cheaper on this metric.
The difference is AstraZeneca’s expected earnings growth rate. After all, we’re investing for the future not the past.
Looking at the medium term, the company is expected to grow earnings by around 14.8% a year. That’s really strong, and it gives us a price-to-earnings-to-growth (PEG) ratio of 1.2. This represents a 33% discount to the sector average.
It’s also an ‘ok’ dividend payer — around 1.9% on a forward basis — and has manageable debt on the balance sheet. What’s more, its operational focus on oncology and its vast pipeline will likely contribute to an increasingly positive outlook among investors.
Remember, perception’s often the key in investing. It’s great when a company’s actually making progress, but perception’s really important.
The bottom line
There are always risks. And let’s be honest, we can’t guarantee there won’t be any more speed bumps regarding the US administration. And while AstraZeneca has a huge pipeline of new drugs and vaccines, it’s worth remembering that this is an industry where companies spend billions often to find they don’t deliver statistically significant improvements on existing treatments.
Nonetheless, I still think UK investors should consider this juggernaut of the pharma and biotech sector.
