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I have been desperate to buy AstraZeneca (LSE: AZN) shares for centuries. They are a brilliant British company and I want to share their success. One thing has been holding me back. I feel like I'm too far behind the curve.
Chief executive Pascal Soriot's pay package came under fire when it emerged he earned almost £17m last year, one of the most generous packages on the market. FTSE 100. However, he has earned it, given his achievements since his appointment in October 2012.
Soriot has more than doubled AstraZeneca's market capitalization in the last five years, from around £90bn to £191bn. Think about that for a minute: it's an increase of around £100 billion. His compensation, although enormous, is only a fraction of that. However, its success poses a problem for me.
This action is too successful.
I prefer to buy companies when they are struggling and cheap, in the hope that the board of directors can unleash their full potential. Soriot unleashed AstraZeneca years ago. he overcame PfizerFollowing its hostile takeover bid in 2014, it poured money into research and development, revived its drug portfolio and pioneered a big push into cancer therapies and the fast-growing weight loss market. Today, the drugmaker is the largest company in the United Kingdom, slightly ahead of the oil giant. Shell.
As expected, it's not cheap and trades at more than 40 times trailing earnings. The group's forward price-to-earnings (P/E) ratio is 28.3 times. The expected dividend yield is around half the FTSE 100 average at 1.98%, despite a 7% rise this year. That is the price of success.
I'm also thinking, with such a huge market cap, how much room is there for growth from the current bullish starting point?
In full year 2023, total revenue increased 6% to $45.8 billion, which is even more impressive given that Covid drug sales fell by $3.74 billion. Otherwise, the increase would have been 15%.
The outlook is strong, and the board expects total sales and earnings per share to increase in “Low double-digit to low percentage of teenagers” in 2024.
Great prospects, high price
Pioneering new treatments is always risky. Development and approval take years and can end in failure. AstraZeneca has to continue to deliver to justify its valuation. Its Covid vaccine was controversial and caused blood clots in rare cases. However, it is still estimated to have saved 6.3 million lives in 2021 alone.
AstraZeneca's share price is up 117% in five years, but a modest 4.65% in 12 months. That brief slowdown gave me a possible buying opportunity, but I didn't know how to take advantage of it. If you had invested £10,000 three months ago, you would have £12,673 today, and the shares would rise 26.73% in that time.
Should I buy today? Unfortunately, I think I missed my moment. Instead, I've been buying shares in rival companies. GSK, which has had a bad evolution. I hope it is at the bottom of its growth cycle, rather than near the top. Fingers crossed it will work just as well if I give it enough time. I will buy AstraZeneca when it comes down. But I have no idea when that might be. Possibly after Soriot finally leaves?
