1 Reason To Avoid AstraZeneca
Over the last couple months, I’ve shown you stocks to avoid…
Stocks to consider buying…
- Is Walmart A Buy As It Preps Its “Amazon Prime Killer?”
- Should You Buy Coca Cola?
- Should You Buy Apple?
- Should You Buy McDonald’s?
And some of the best stocks related to the coming Internet of Things… Which you can find linked further below.
All these recommendations are to help you either avoid pain and terrible stocks. Or to help you find potentially great stocks to invest in during this pandemic.
Doing both of things together will help you earn higher than average investment returns and build your wealth.
There are few safe places to invest your capital today. And this number is growing smaller every day this crisis lasts.
The key to continue compounding your capital is to keep investing well over time… Combine this with dividends and you’re well on your way to building a retirement account you can live off.
And this is huge part of things.
But another huge part of this is also losing as little capital as possible.
The fewer investment losses you have the more capital you keep. And the more capital you keep the faster you can invest well to grow your wealth.
Both things are necessary to build wealth. But most only think of investing well.
Today, I want to show you 1 Reason To Avoid AstraZeneca
1 Reason To Avoid AstraZeneca
It’s Enormously Overvalued
Normally in these articles I talk about other things like profitability, cash flow, the affects coronavirus is having on a company’s financials, and other things.
But frankly none of those matter with AstraZeneca (AZN) due to its huge valuation.
As of this writing AstraZeneca is one of the largest pharmaceutical companies in the world with a market cap of $146.4 billion.
But just how overvalued is AstraZeneca?
Its current P/E is 69.2
Its current P/CF is 33.7.
And its current forward P/E is 28.5.
I look to buy companies with valuations below 20 on all these metrics to consider the company undervalued or at worst fairly valued…
AstraZeneca crushes this threshold.
Why below 20?
Because that means the company is at worst fairly valued… And if its significantly under 20 that means the company is undervalued.
When a stock is fairly valued or undervalued it gives you more margin of safety in investing terms.
This also means you have a much higher probability of earning higher returns owning its stock over time. And these combined make the stock a less risky investment.
With AstraZeneca stock being so overvalued it means there is no margin of safety… That you have a far lower likelihood of making money owning its stock over time. And these make the stock riskier.
But why is it so overvalued?
Because it’s one of the companies in the pharmaceutical world working to create a Covid 19 vaccine.
And as of this writing its proposed vaccine looks like one of the best candidates.
Because of this people are buying its shares a lot on the hopes of this vaccine. And this is taking its share price far above where it should be based on its current profits.
I hope the vaccine it creates works well, is safe, and protects all of us from this virus.
But I require as much of a margin of safety and room for error as possible when investing in stocks because bad stuff always happens at some point.
If you’re buying AstraZeneca stock today there’s zero room for error due to its huge valuation.
And this makes it a risky investment today even though it’s likely to continue performing well, producing profits, and helping patients.
For this reason of its huge valuation I recommend you stay far away from investing in AstraZeneca.
Use the following links to some of our recent articles to learn other ways to protect yourself and your investments in these uncertain times.
- The Best Internet of Things Stock
- The Best Telehealth Stock
- One Thing That Will Increase Your Investment Returns More Than Anything
- This Top Robotics Stock Isn’t One You’d Think Of
- The Best Internet Security Stock
- Should You Buy Oracle?
- 5 Reasons To Buy Emerson Electric
- 1 More Reason To Buy CVS
- More Reasons To Consider Buying EA Stock
- 1 More Reason To Buy Xilinx Stock
- 3 Reasons To Buy Qualcomm – And 1 Not To
Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.