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Similar to a number of other giant pharmaceutical companies, Bristol-Myers Squibb Company (BMY) went through a transformation in 2011. The drug industry is very unique in the sense that the field is highly competitive and the companies are under high pressure to keep innovating as their patents keep expiring. Bristol-Myers Squibb is no exception to this rule and the company has to come up with new products continuously, expand to new markets, create new business opportunities, and develop new approaches to things such as customer service. I have mixed feelings for BMY's potential in the near future after looking at the company's past performances.

Last year, the company achieved a revenue growth rate well above 10% in multiple markets and a rate of 9% overall. This growth rate is impressive when we consider that the world economy witnessed a lot of slowdown in the same year. Some of the company's brands, particularly Baraclude, Sprycel, Orencia and Ongylza, saw strong growth. In addition, Yervoy had a good first year in 2011. This drug is developed to treat metastatic melanoma and it's the first drug that has the potential to treat this disease effectively and increase the survival rates of the patients suffering from it.

The company is financially in good health. It holds $11.6 billion in cash and short-term investments. BMY plans to use this money in acquisitions, business partnerships, development of new products and return some of the money to the shareholders in the form of dividends and stock repurchases. The company values the different skill sets and knowledge that come from acquiring smaller companies.

For example, one significant acquisition of BMY in 2011 was Inhibitex. This company was known for the Hepatitis C treatment it had been developing, and BMY wanted to get more involved in the market of this disease. The global market for Hepatitis C is expected to cross $15 billion by 2015. Inhibitex has also been busy developing treatments for viral and bacterial infections. Now the company's former employees all work for BMY.

The company's current pipeline is strong. There is solid diversification, and many projects in the pipeline are in their later stages. This is very promising for the company at a time where many companies are having so much trouble pushing their projects to the final stages.

The company hasn't delivered much capital appreciation to investors in the medium to long term. In the last 3 years, the capital appreciation was a handsome 60%, however in the last 5 years capital appreciation rate is only 16%. If we look at the last decade, BMY's stock price has appreciated by less than 13%. The company has impressive dividend history.

Currently BMY's dividend yield is 4.07%. The company increased its dividend rate for more than 25 years in a row. In the last 2 years, the dividend growth rate was 22%. When compared with BMY's peers, the dividend growth rate is decent, but nothing to write home about when compared to companies like Coca Cola (KO) and Pepsi (PEP).

In the last decade, the company's revenue per share grew by 39%, its EPS grew by 22%, and its assets grew by 33%. During the same period, the company's P/E ratio increased by 3% and it currently sits at 15. The company's peers have an average P/E ratio of 11, which means BMY's P/E ratio has room to improve.

Conclusion

I have mixed feelings about Bristol-Myers Squibb Company. The company is solid, well-run and has a lot of potential. On the other hand, in the last 10 years, the company didn't deliver the best results, and this concerns me as future behavior usually reflects past behavior. The company could be attractive for dividend investors and those looking for a defensive play in their portfolio. Last year, the company outperformed the market, but in the last five and 10 years, it failed to do the same.

I think the company's performance in the next few years will be well in-line with the market, as I don't expect it to either outperform or under-perform the market. This is not necessarily bad, but not necessarily good either. I rate the company as "market-perform" at the moment.

Source: Bristol-Myers Squibb Is A 'Market-Perform' For Now