Prognosis: Potentially Outstanding Value Shares to Rule the Market until 2030
Buying undervalued stocks in unpopular sectors can be quite profitable. One such sector right now is healthcare, especially after Robert F. Kennedy Jr.'s appointment as U.S. Secretary of Health and Human Services. His criticism of the pharmaceutical industry has sent investor sentiment spiraling, leaving many leading pharmaceutical stocks trading at record lows.
Two such companies I believe have potential to outperform in the next five years are Pfizer and Novo Nordisk.
Pfizer: From Pandemic Winner to Oncology Giant
Pfizer was a major beneficiary of the COVID-19 pandemic, but as the temporary sales from vaccines and treatments dried up, the company saw its revenue and earnings dip. However, Pfizer has since pivoted towards growth in the oncology sector. In 2024, the company's oncology revenue increased by 25%, and it expects to double its patient base and launch at least three new blockbuster drugs by 2030.
Analysts expect Pfizer's earnings to grow by nearly 14% annually over the next three to five years. Yet, investors seem to have missed this potential, with the stock trading near its lowest price in over a decade and offering a generous 6.7% dividend yield. The company's current price-to-earnings ratio is a mere 0.6, far below the typical 2 to 2.5. If Pfizer delivers on its projections, the stock could easily double or even triple in value over the next five years.
Novo Nordisk: Weight Loss Wonders
Founded decades ago, Novo Nordisk has built a dominant position in the insulin and diabetes markets. Recently, GLP-1 agonists, drugs that suppress appetite and slow digestion, have taken off. Novo Nordisk's Ozempic, primarily used to treat diabetes, has become synonymous with the drug class. The company controls approximately 63% of the GLP-1 agonist market, with main competitor Eli Lilly holding about 34%.
Grand View Research estimates that GLP-1 agonist sales in North America could triple to $126 billion by 2030, growing at an average annual rate of 18%. Novo Nordisk is also developing a pill-form GLP-1 agonist, Amycretin, which could further expand its market share. Analysts predict that these growth drivers will help Novo Nordisk increase earnings by an average of 24% annually over the next three to five years.
But despite this strong earnings growth outlook and a ridiculously low PEG ratio of 0.8, the stock is down almost 50% from its high. The decline can be attributed to the overall pessimism in the healthcare sector, as well as supply chain constraints and competition from generic versions of Novo Nordisk's products. However, these challenges seem to be short-term issues that should resolve themselves as Novo Nordisk addresses its production capacity and the market recovers.
Both Pfizer and Novo Nordisk offer compelling investment opportunities, with strong growth prospects, undervalued stock prices, and generous dividend yields. While the healthcare sector may be unpopular due to regulatory challenges and negative sentiment, the long-term outlook for these two companies is bright.
Investing in Pfizer and Novo Nordisk, two companies with promising growth prospects in the healthcare sector, could yield significant returns over the next five years. Pfizer's focus on oncology and expected earnings growth of nearly 14% annually make its stock an attractive option, despite trading near its lowest price in over a decade and offering a high dividend yield. On the other hand, Novo Nordisk's dominance in the GLP-1 agonist market and potential for increased earnings due to new drug developments and market expansion, despite facing temporary challenges, also make it a potential investment opportunity. Despite the sector's current unpopularity, the long-term outlook for both companies is astoundingly bright, given their strong growth prospects and undervalued stock prices.
