AstraZeneca (LSE:AZN) Valuation in Focus as Shares Gain Nearly 20% in 2024

AstraZeneca (LSE:AZN) shares are quietly gaining attention among investors as the company continues to post steady returns across different timeframes. With a year-to-date rise of nearly 20%, the stock's momentum stands out compared to the broader sector.

See our latest analysis for AstraZeneca.

Momentum has been building for AstraZeneca, with investors rewarding the company’s recent achievements and solid results. While short-term share price returns have been modest, the drugmaker’s one-year total shareholder return of 10% and 68% over five years point to healthy long-term value creation.

If the sector’s growth prospects appeal to you, it’s the perfect time to see which other healthcare leaders are gaining traction. See the full list for free.

With AstraZeneca’s impressive track record fresh in mind, the key question now is whether the stock remains undervalued or if the market has already priced in all of the company’s future growth. Could there still be a buying opportunity here?

Most Popular Narrative: 7.9% Undervalued

AstraZeneca’s current market price sits well below the fair value calculated in the most widely followed narrative. This has fueled the debate over potential upside if forecasted growth is delivered.

The company's robust and diversified late-stage pipeline, particularly in oncology, rare diseases, and cardiovascular/metabolic therapies, is set to deliver multiple blockbuster launches over the next several years. Management estimates these new medicines could generate $10+ billion in peak risk-adjusted revenue, directly supporting both long-term high-margin revenue growth and future earnings expansion.

Read the complete narrative.

Curious what drives such a bold premium over today's price? This narrative hinges on extraordinary growth in new therapeutics, world-beating margins, and future profit multiples far beyond industry averages. Want to see the ambitious financial targets behind this value? You have to read the full narrative.

Result: Fair Value of $138.16 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, AstraZeneca's reliance on key blockbuster drugs and heightened regulatory risks could disrupt growth expectations and challenge its margin resilience in the years ahead.

Find out about the key risks to this AstraZeneca narrative.

Another View: Market Ratios Paint a Different Picture

While analyst consensus suggests AstraZeneca may be undervalued, a look at the current price-to-earnings ratio tells a more cautious story. At 32.1x, AstraZeneca trades well above both its industry average of 21.4x and its peer average of 14.7x. This potentially signals a valuation premium and less room for upside. With the fair ratio estimated at 33.3x, is this premium justified or does it hint at heightened valuation risk?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own AstraZeneca Narrative

If you have your own perspective or want to dig deeper into the numbers, you can easily craft your own version in just a few minutes. Do it your way

A great starting point for your AstraZeneca research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Don’t let an opportunity slip by. Find your next big winner with tailored investment ideas that go beyond AstraZeneca and set your portfolio apart.

• Spot hidden potential with these 894 undervalued stocks based on cash flows and position yourself for gains that the market hasn’t yet priced in.
• Unlock future growth by checking out these 25 AI penny stocks, where rising innovators are reshaping industries with artificial intelligence breakthroughs.
• Boost your passive income with these 19 dividend stocks with yields > 3%, which offers reliable yields above 3% and steady payouts from proven performers.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com