Should You Buy Bristol Myers Squibb While It Trades Below 10 Times Forward Earnings?

Bristol Myers Squibb's stock is trading at approximately 9.7 times forward earnings, slightly higher than its five-year average. In comparison, Eli Lilly, a pharmaceutical competitor, has a forward earnings ratio of 35.6 times, making Bristol Myers Squibb seem more affordable. While Wall Street worries about potential patent losses, investors are drawn to Eli Lilly's success in the GLP-1 weight-loss space.

Bristol Myers Squibb's lower forward P/E ratio is due to the impending loss of patent protection on its blockbuster drugs, Opdivo and Eliquis. This is a common occurrence in the pharmaceutical industry, as Eli Lilly will also eventually lose patent protection on its successful GLP-1 drugs. Despite this, Bristol Myers Squibb has a rich history of navigating patent expirations and surviving.

The real challenge lies in the timing of new drug development relative to patent expirations, which Wall Street tends to focus on in the short term. However, Bristol Myers Squibb has new drugs in the pipeline, including in cardiology and oncology. The company offers a dividend yield of over 4%, with a payout ratio of around 55%, well-covered by earnings.

Its track record of dividend growth suggests that a cut is unlikely, even during tough times. Therefore, for long-term investors, Bristol Myers Squibb could be an attractive investment, even if others are fearful.