Bristol Myers Squibb growth portfolio outpaces legacy sales

Bristol Myers Squibb (BMY) reported that its growth portfolio generated 12% organic revenue growth in the first half of the year, a performance that contrasts with a 6% organic decline in its legacy portfolio. The company’s management separated these segments to demonstrate that the business is not in as poor a shape as market sentiment suggests. Despite the mixed results, the stock has risen by nearly 14% this year, slightly outperforming the S&P 500, which is up around 12%.

The growth portfolio now represents the larger portion of the company’s revenue. With $13.8 billion in sales over the past two quarters, it has surpassed the legacy portfolio, which generated $10.7 billion during the same period. Overall, Bristol Myers Squibb grew its top line by just 3% organically during that stretch. The market has remained bearish on the stock due to questions about future growth prospects, leading to a low valuation and a high yield.

Investors have reacted to the solid numbers in the growth segment, driving the recent price increase. However, the stock’s valuation remains low compared to broader market indices. Bristol Myers Squibb is trading at nine times its estimated future earnings, while the S&P 500 averages a multiple of 19. The company has been dealing with patent expirations, a common challenge for drugmakers, but the portfolio of growth products has supported reasonable performance given the circumstances.

The low valuation provides a margin of safety for investors according to The Motley Fool. The stock also offers a high-yielding dividend that pays 4.1%. This payout is considered sustainable with a payout ratio of around 55%. Over the past five years, the stock has generated returns totaling just 6%, whereas the S&P 500 generated returns totaling nearly 70% over that same time frame. The Motley Fool identifies Bristol Myers Squibb as a bargain and a good option for long-term investors.