Does AstraZeneca’s share price fall make it a bargain FTSE 100 stock?

first_img1.5 Image source: Getty Images. 19 2015 G A Chester | Tuesday, 10th March, 2020 | More on: AZN 0.5 6.4 My core operating profit (£bn) Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. 2018 6.8 2019 2.1 5.9 22  Year 6.7 1.3 “This Stock Could Be Like Buying Amazon in 1997” 5.7 1.8 3.7 Enter Your Email Address I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. 2017 G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. 14 4.1 5.4 AZN core operating profit (£bn) 2016 5.2 I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.center_img 0.0 1.9 Statutory operating profit (£bn) 0.4 2014 3.8 6.9 2.3 33 The AstraZeneca (LSE: AZN) share price is a long way from being the hardest hit in this market crash. It ended yesterday at just over 7,000p. This is down 9% from its pre-crash level on 21 February, and 11% below its all-time high of 7,878p printed in January.However, because big FTSE 100 pharma firms have defensive qualities, and healthcare is an industry with long-term structural growth drivers, we shouldn’t expect a company like AZN to suffer as badly as stocks in more cyclical or structurally-challenged sectors. Therefore, we should ask whether AZN’s current discount share price is a bargain for a stock of its quality.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Debased coinageFund manager Mark Slater — son of the late Jim Slater (author of best-selling investment book The Zulu Principle) — recently savaged companies’ “adjusted earnings per share” numbers as “a debased coinage.”Most companies headline such numbers in their results, and most analysts and investors use them to value the business. Almost invariably, these numbers portray a more flattering picture of the company’s performance than statutory EPS.I’ve previously suggested AstraZeneca’s adjusted EPS — it calls it ‘core’ EPS — is one of the most egregious around. Don’t get me wrong, I think AZN is a quality business with a sound strategy, but, for a good while, I’ve felt the shares have been over-valued on a true view of underlying EPS.However, after the recent fall in the share price, do I think the valuation is now attractive?Smoke and mirrors revisitedI last wrote about AZN after its Q3 results last year. In that article, I showed how the company books one-time gains on disposals of non-core drugs as ‘core’ operating profit. I pointed out that such disposals had increased from £0 in 2014 to £1.9bn in 2018, with the latter representing a whopping 33% of AZN’s ‘core’ operating profit for the year.On a positive note, I suggested it looked like certain disposals for 2019 would be lower, and that what I consider true core earnings would increase for the first time in five years. We now have AZN’s 2019 results, and the table below brings the position up to date. 5.3 Gains on disposals (£bn) Our 6 ‘Best Buys Now’ Shares Gains on disposals as % of AZN core operating profit 1.0 6.9 0 4.9 6.9 4.8 1.2 Adjustments (before gains on disposals) (£bn) 2.9 As you can see, gains on disposals in 2019 were indeed lower, both in absolute terms (£1.2bn), and as a percentage of AZN’s core operating profit (19%). This is a move in the right direction, so how is the company’s price-to-earnings (P/E) valuation looking today?Getting thereAZN’s EPS for 2019 came in at $3.50 (267.2p at current exchange rates) on the company’s own core measure. It worked out at $2.75 (209.9p) on my core measure, and at $1.03 (78.6p) on a statutory basis.At the current share price of 7,003p, this produces P/Es of 26.2 (AZN core), 33.4 (my core) and 89.1 (statutory). I believe my core number is a truer reflection of the underlying business performance than AZN’s core (and the statutory measure).I’d want to see a P/E in the 20s on my measure before considering the stock a potential buy. This would require a lower share price or a further improvement in core EPS. For the moment, I continue to see AZN as a stock to avoid on valuation grounds. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Does AstraZeneca’s share price fall make it a bargain FTSE 100 stock? 3.4 Simply click below to discover how you can take advantage of this. 1.7 19 See all posts by G A Chesterlast_img read more