Over the last year, Bristol-Myers Squibb Company (NYSE:BMY) has done better than the overall market, with its shares increasing by nearly 40% as a result of new medicines contributing to revenue growth and management having raised its earnings forecast. Nevertheless, the pharmaceutical company is currently trading at just 9.36 times forward earnings, indicating that investors are worried about the falling sales of its older drugs and the expense of coming up with new treatments. The main issue now is whether the growth in its newer product line will be able to counter these challenges and merit a higher valuation.
The company itself raised its 2026 non-GAAP EPS guidance in July to $6.75-$7.00, from $6.05-$6.35 previously. BMY is just one of the stocks in the healthcare sector that have outperformed. For more insight into the sector, there are ten healthcare stocks other than BMY in our ranking of the best healthcare stocks to buy according to hedge funds. Check out the complete list here.
The Newer Portfolio Is Growing Quickly
The biggest reason the valuation deserves attention is the performance of BMY’s newer medicines. In the second quarter, the company’s Growth Portfolio generated $7.6 billion of revenue, up 15% year over year, while total revenue increased 6% to $13.0 billion. Bristol Myers Squibb said that the growth portfolio revenue was primarily driven by Opdivo Qvantig, Reblozyl, Camzyos, Breyanzi, and Opdualag.
Several of these products are already producing substantial growth. Reblozyl revenue increased 29% to $735 million Ex-FX in the second quarter, Breyanzi rose 41% to $484 million, and Camzyos jumped 59% to $416 million. Opdivo Qvantig, which Bristol Myers Squibb is positioning as an important addition to its oncology franchise, generated $261 million, more than 200% of the prior-year period.
That growth is important because BMY is attempting to build a portfolio that can become less dependent on mature medicines, and management also stated that the Growth Portfolio represents an expanding share of the company’s overall business. But before we dive further into BMY’s investment story, take a look at our recently published article on AbbVie (ABBV) vs Bristol Myers (BMY): Which is a Better Stock to Buy? for better comparative insight.
Eliquis Is Helping, But Legacy Products Remain a Risk
There is another unusual element to the current earnings picture, which revolves around Eliquis, which is still growing despite being classified within the company’s Legacy Portfolio. Worldwide Eliquis revenue increased 22% to $4.48 billion in the second quarter, and Bristol Myers Squibb raised its 2026 forecast for worldwide Eliquis revenue growth to 20%-25%, from its previous 10%-15% range.
However, Eliquis is not enough to make the entire legacy portfolio a growth business. Legacy Portfolio revenue fell 4% in the second quarter, while Revlimid revenue declined 49% Ex-FX, Pomalyst/Imnovid fell 71%, and Sprycel declined 26%, reflecting continuing generic competition.
This marks a significant issue behind Bristol Myers Squibb’s low valuation. Investors are not simply getting a growing pharmaceutical company at less than 10 times earnings, but rather they are getting a company where rapidly growing newer products must increasingly compensate for declining mature products. We meticulously crafted a list of the 7 Best Pharma Stocks to Invest In Now. Access the complete list here.
The Pipeline Could Determine Whether the Discount Persists
Bristol-Myers Squibb Company (NYSE:BMY) is investing heavily to extend that growth. The company expects full-year 2026 operating expenses of approximately $16.5 billion, up from its previous $16.3 billion forecast, largely because of increased investment behind key pipeline programs and new product launches.
The pipeline has also produced several recent developments. The FDA accepted Bristol Myers Squibb’s supplemental Biologics License application for Reblozyl in myelofibrosis-associated anemia with a PDUFA date of March 11, 2027, while the company reported positive Phase 3 results for mezigdomide and received an FDA acceptance for the drug’s new drug application in relapsed or refractory multiple myeloma.
While these programs do not guarantee future revenue, they do provide potential avenues for replacing products facing competition.
Does a Sub-10x Multiple Make Sense?
Bristol Myers Squibb’s valuation is difficult to dismiss. Yahoo Finance’s 9.36x forward P/E is low even after the stock’s 34.5% price gain, while management is simultaneously reporting double-digit growth across its newer portfolio.
The discount, however, has a rational basis. Bristol Myers Squibb remains exposed to declines across mature products, while its pipeline requires substantial spending and successful clinical and regulatory execution.
Still, the balance has been moving in the right direction. If the Growth Portfolio can continue expanding at a double-digit rate while Eliquis remains stronger than expected, Bristol-Myers Squibb Company (NYSE:BMY) may not need a dramatic earnings acceleration for its current valuation to look reasonable. At less than 10 times forward earnings, the market appears to be demanding relatively little from that transition, but the stock’s future returns will depend on whether the newer portfolio can keep delivering as the legacy business contracts.
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This article is originally published at Insider Monkey.
