Is AstraZeneca a Bargain After Share Price Jumps on Oncology Partnership News?

• Ever wondered if AstraZeneca is truly a bargain right now? Let’s break down whether the current price makes sense for investors looking for value or growth.
• AstraZeneca’s shares have seen strong momentum this year, rising 4.1% over the past week and increasing 33.1% year-to-date. This movement signals growing interest and shifting risk perceptions among investors.
• Recent headlines show AstraZeneca’s partnership expansions and regulatory approvals continue to draw attention. Notably, its progress in oncology treatments and a major collaboration in rare diseases have contributed to optimism behind the recent share price jump.
• On valuation, AstraZeneca scores a 3 out of 6 on our key checks, meaning it is considered undervalued in half of the most important metrics. Up next, we will look at how these approaches compare, but stay tuned for a more comprehensive way to judge AstraZeneca’s value at the end of the article.

AstraZeneca delivered 37.2% returns over the last year. See how this stacks up to the rest of the Pharmaceuticals industry.

Approach 1: AstraZeneca Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a tool that projects a company's future cash flows and then discounts them back to today's value. This approach helps estimate what the business is truly worth at present. For AstraZeneca, the most recent reported Free Cash Flow (FCF) stands at $10.24 billion. Analysts expect FCF to continue growing, with projections reaching $18.30 billion by the end of 2029. While analyst estimates are only provided for up to five years, future FCF figures beyond that point are extrapolated using internal modeling from Simply Wall St.

Looking over the next decade, the DCF model estimates the fair value of AstraZeneca's shares at $223.14. Compared to today's market price, this assessment shows AstraZeneca is currently trading at a 36.6% discount, indicating the shares are considered substantially undervalued by this approach.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests AstraZeneca is undervalued by 36.6%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for AstraZeneca.

Approach 2: AstraZeneca Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like AstraZeneca because it directly compares the market price of a stock to its earnings. This makes it especially useful for investors to gauge whether the company’s growth and profitability prospects are already reflected in the current share price.

What constitutes a normal or fair PE ratio depends on a company's earnings growth expectations and its risk profile. Higher growth companies often command higher PE ratios, while companies with more uncertainty or risk typically trade at lower PEs.

AstraZeneca’s current PE ratio stands at 30.87x. This is notably higher than the Pharmaceuticals industry average of 22.93x and above the average of its closest peers at 13.15x. However, context matters because these simple comparisons do not factor in AstraZeneca’s robust earnings outlook and unique characteristics.

To provide a more tailored benchmark, Simply Wall St calculates a proprietary “Fair Ratio” for AstraZeneca, which considers not just growth, but also factors like profit margin, the company’s size, industry trends, and associated risks. This Fair Ratio, at 31.56x, indicates what would be a reasonable PE multiple for AstraZeneca given its profile. Unlike basic industry or peer comparisons, the Fair Ratio delivers a more meaningful perspective because it accounts for AstraZeneca’s specific potential and risk factors rather than broad averages.

Comparing AstraZeneca's current PE ratio of 30.87x to its Fair Ratio of 31.56x reveals a close alignment. This suggests the stock is valued appropriately based on all the relevant factors.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your AstraZeneca Narrative

Earlier we mentioned there's an even better way to understand valuation, so let's introduce you to Narratives. Unlike traditional valuation models that focus only on numbers, a Narrative is a story you create about a company based on your own assumptions and perspective. This approach links AstraZeneca’s business context, such as its drug pipeline, market challenges, and earnings forecasts, directly to a financial projection and a fair value estimate.

This approach makes investing more personal and insightful, as you combine your outlook on AstraZeneca’s future with concrete numbers around revenue, margins, and risks, resulting in a tailored view of what the company is really worth. Narratives are easy to use and widely accessible on the Simply Wall St Community page, where millions of investors actively share and update their own Narratives, helping you see different points of view in real time.

By comparing your Narrative’s fair value to the current share price, you can quickly decide when to buy, sell, or hold. Narratives update dynamically whenever new developments, like regulatory news or earnings results, emerge. For example, some investors might be highly optimistic about AstraZeneca’s oncology expansion and forecast a fair value of £180.93, while others, more cautious about patent expirations and market pressures, land closer to £108.24.

Do you think there's more to the story for AstraZeneca? Head over to our Community to see what others are saying!

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.

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