Bristol-Myers Squibb Looks Inexpensive

Bristol-Myers Squibb (BMY) has popped up on my radar screen as a decent value. The company had a lousy third-quarter earnings report, but the one for the fourth-quarter was pretty good. I was also impressed by their forward guidance.
Here’s a look at the stock (in blue, left scale), earnings-per-share (gold, right scale) and dividend (black, right scale). The graph is scaled at a ratio of 16-to-1 so when the blue and gold lines cross, the P/E Ratio is 16; when the blue and black lines cross, the dividend yield is 6.66%.
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After the fourth-quarter earnings report, BMY said it expects EPS for 2010 to come in between $2.15 and $2.25 a share. As the rise in the gold line shows, that’s a pretty bold forecast. The future numbers for the gold line represent analyst estimates.
Even if the stock trades at 14 times earnings by the end of the year, that would represent 26% growth. I’m not predicting that will happen. I’m just showing you how cheap the stock is relative to what the company expects.

Posted by on March 1st, 2010 at 11:17 am


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