Current Yields Makes Bristol Myers Squibb a Buy

What would you do if the CEO of a company buys 100,000 stocks at the market price. And what if today's stock price is less than what CEO bought them for. That is what is happening at Bristol Myers Squibb Co. (BMY). CEO James Cornelius made this transaction on May 7th. What is he seeing that we are not?One main attraction is the dividend yield at 5.6%, and let us see if there are any more.

Company Profile: Bristol-Myers Squibb Co. engages in sale of pharmaceuticals and other health care related products worldwide. It operates in three segments: Pharmaceuticals, Nutritionals, and ConvaTec. The Pharmaceuticals segment offers cardiovascular products, oncology products, and other psychiatric disorder products. The Nutritionals segment manufactures and sells infant formulas and other nutritional products. The ConvaTec segment manufactures and sells ostomy, and wound and skin care products primarily to hospitals and medical professions.The company was formerly known as Bristol-Myers Company and changed its name to Bristol-Myers Squibb Company in 1989 and is headquartered in New York, New York.

Fundamental Analysis: The following reports are as of March 31th 2008 results.

Financial health:

• Current Ratio = Current Assets/Current Liabilities = 1.25
• Total Liabilities/EBITDA Ratio = 3.45
• Total Liabilities/Operating Cashflow = 1.90
• Total Liability/Share-holder equity = 1.49
• Total Liability/Total Assets = 0.6Looks good and nothing really stands out as a complaint or as a compliment.

Profitability:

• TTM Sales growth: 6.16%
• Last year Sales growth: 12.12%
• Latest Qtr over year ago Quarter sales growth: 20%
• TTM Operating Margin improvement: 20.1%
• TTM Return on Asset: 8.11%
• Last 2 year Gross Margin: 67.3%
• TTM Gross Margin: 67.6%
• Last 2 years Net Margin: 12.5%
• TTM Net Margin: 14.5%

Though Sales growth rate has declined, the operating margins have improved. Since reduced outlook is the current norm in the market, you do not want read too much into this sales decline.

Analysts Rating:

• Strong Buys: 5
• Buys: 2
• Hold: 7
• Sell: 0

No strong direction.

Weakness/Threats: NO big growth driver seen yet.

Technical Analysis: Current weakness in the market can provide opportunity for higher yields.

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My Bottomline: BMY can be a good value play for the next few months enjoying good dividend, but make you get in during dips.

Disclosure: None

Comments

[Steve Alexa...:]

You could duplicate this case for any number of drug stocks, including Pfizer, Merck, GlaxoSmithKline, etc. They are all cheap, and they all pay big dividends (especially Pfizer, with close to 6.5%).

Steve
magicdiligence.com

2008 May 22 03:51 PM

[skwestorange:]

Absent a good review of the strength of the pipeline, i.e., the number phase 3 clinicals and their probabilities of success in terms of substantial revenue in the near to intermediate term, this article fails to add any value. I agree with MD.

2008 May 22 05:01 PM