Here’s why Bristol Myers Squibb Stock is a better choice on this pharmaceutical barometer


OI think Stock Bristol Myers Squibb (NYSE: BMY) is currently a better choice compared to its industry counterpart Johnson & Johnson Stocks (NYSE: JNJ), given its better growth prospects and comparatively lower valuation of 3.2x trailing earnings, versus 4.5x for J&J. This valuation gap can be attributed to J&J’s ability to generate better profits and lower financial risk. However, going forward, BMS appears to have better growth prospects than J&J, as discussed in the sections below. We compare a host of factors such as historical revenue growth, returns and valuation multiple in an interactive dashboard analysis Bristol Myers Squibb v Johnson & Johnson: Which stock is a better bet? Parts of the analysis are summarized below.

1. Bristol Myers Squibb revenue growth is better

  • Both companies have managed to see sales growth in recent quarters, but BMS has seen slightly faster revenue growth in recent quarters. Over a longer period, BMS sales have grown from $20.8 billion in 2017 to $46.4 billion in 2021, while J&J’s revenue has grown from $76.5 billion to $93.8 billion. billions of dollars over the same period.
  • Note that BMS’s revenue growth was helped by its acquisition of Celgene in 2019.
  • The recent increase in revenue for both companies was driven by a rebound in demand for pandemic-induced lockdowns.
  • BMS’ anticoagulant – Eliquis – continues to gain market share and support the company’s overall revenue growth.
  • While J&J’s medical device business has faced headwinds in 2020 due to the impact of the pandemic, it has seen a rebound in recent quarters. The company’s pharmaceuticals business is experiencing strong growth driven by market share gains for its cancer drugs, Imbruvica and Darzalex, and immunology drugs, Stelara and Tremfya.
  • Our Bristol Myers Squibb turnover and Johnson & Johnson revenue dashboards provide more detail on business segments.
  • Now, BMS’s 9% revenue growth over the last twelve months is less than J&J’s 14% growth. However, if we were to look at revenue growth over the past three years, BMS has outperformed J&J with its CAGR of 29%, compared to J&J’s 5%. Still, as we mentioned above, the Celgene acquisition has bolstered BMS numbers. .
  • Going forward, BMS’ top-selling drug – Revlimid – will lose market exclusivity this year, and it’s likely to weigh on its sales growth in the coming years.
  • That said, BMS’s revenue is expected to grow at a faster rate than J&J’s. The table below summarizes our revenue forecast for BMS and J&J over the next three years and indicates a CAGR of 8.2% for BMS, compared to a CAGR of 4.2% for J&J.
  • Note that we have different methodologies for companies negatively impacted by Covid and for companies not impacted or positively impacted by Covid when forecasting future revenues. For businesses negatively impacted by Covid, we consider the quarterly revenue recovery trajectory to forecast recovery at the pre-Covid revenue run rate. Beyond the recovery point, we apply the average annual growth observed for the three years preceding the Covid to simulate the return to normal conditions. For companies with positive revenue growth during Covid, we consider pre-Covid average annual growth with some growth weight during Covid and past twelve months.

2. J&J is more profitable and offers less risk

  • BMS’ operating margin of 11% over the last twelve months is less than 25% for J&J. Further, J&J’s average operating margin of approximately 24% over the previous three years is well above BMS’s approximately 6%.
  • When it comes to recent margin growth, BMS is better, with a 5% margin change in the last twelve months compared to the previous three years, compared to 1% for J&J.
  • When it comes to financial risk, J&J trumps BMS. Its 8% debt as a percentage of equity is well below BMS’s 30%. Similarly, J&J’s 17% cash as a percentage of assets is slightly higher than BMS’s 16%, implying that J&J has better debt and a better cash position.

3. Filet of Everything

  • We see that revenue growth has been better for BMS in recent years. It is also available at a lower valuation than J&J. However, J&J is more profitable and offers less financial risk.
  • As for the outlook, using the P/S as a basis, due to the large swings in both the P/E and the P/EBIT, we believe that BMS is currently the better choice of the two.
  • The table below summarizes our revenue and return forecasts for BMS and J&J over the next three years and indicates an expected return of 40% for BMY shares over this period versus 12% expected returns for JNJ shares. , implying that investors are better off buying BMS on J&J, based on our dashboard – Bristol Myers Squibb v Johnson & Johnson – which also provides more detail on how we arrive at these numbers.

While BMY stock may outperform JNJ, the Covid-19 crisis has created many price discontinuities which may provide interesting trading opportunities. For example, you’ll be surprised how counter-intuitive stock valuation is to Xylem versus Merck.

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Return February 2022
MTD [1]
YTD [1]
Total [2]
Back BMY 5% 9% 16%
Back JNJ -6% -6% 40%
S&P 500 return -6% -11% 89%
Performance of the Trefis MS portfolio -5% -14% 239%

[1] Cumulative monthly and cumulative annual as of 02/24/2022
[2] Cumulative total returns since the end of 2016

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Price estimates

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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