Bristol-Myers Squibb (BMY): Buy, Sell, or Hold Post Q1 Earnings?

Over the past six months, Bristol-Myers Squibb’s shares (currently trading at $46.80) have posted a disappointing 18% loss, well below the S&P 500’s 3.7% gain. This might have investors contemplating their next move.

Is now the time to buy Bristol-Myers Squibb, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Bristol-Myers Squibb Not Exciting?

Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why there are better opportunities than BMY and a stock we'd rather own.

1. Lackluster Revenue Growth

We at StockStory place the most emphasis on long-term growth, but within healthcare, a stretched historical view may miss recent innovations or disruptive industry trends. Bristol-Myers Squibb’s recent performance shows its demand has slowed as its annualized revenue growth of 1.9% over the last two years was below its five-year trend.

2. Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Bristol-Myers Squibb’s revenue to drop by 4.5%, a decrease from its 9% annualized growth for the past five years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Bristol-Myers Squibb’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

Bristol-Myers Squibb isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 7× forward P/E (or $46.80 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. Let us point you toward one of our top software and edge computing picks.

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