AstraZeneca’s (LSE: AZN) share price continues to look materially out of step with the strength of the underlying business.
The company is delivering broad‑based revenue growth across oncology, vaccines, and rare diseases. And this is supported by one of the deepest late‑stage pipelines in global pharma.
With strong earnings growth forecast, and multiple blockbuster candidates approaching key regulatory milestones, the long‑term outlook remains exceptionally strong.
So, where ‘should’ the stock be trading right now?
Where’s ‘fair value’ here?
The true worth (‘fair value’) of a share is often different to its price, and sometimes by a long way. This is because price is simply a short-term marker of where the market is prepared to trade at any point. But value reflects the long-term fundamentals of the underlying business.
The difference between the two things is crucial for investors maximising their profits over time. The reason is that history shows that share prices tend to trend toward their fair value over the long run.
The best way I have found to ascertain fair value is discounted cash flow (DCF) analysis. It uses cash flow forecasts for the underlying business and then discounts them back to today.
When those projections are less clear, the discount increases, and different assumptions can lead to varied DCF outcomes among analysts. My DCF modelling — including a 7.4% discount rate — shows AstraZeneca stock is 41% undervalued at its present £133.41 level.
That implies a fair value of £226.12 — much higher than where it is now. So, if historical price-to-value convergence trends continue, and the DCF assumptions hold good, this could be a potentially great buying opportunity.
Is it undervalued to competitors too?
DCF is the acid valuation test for professional investors, but comparisons with peers can provide a useful broader context.
On the key price-to-earnings ratio, AstraZeneca trades at 26.7 — second bottom of its competitor group, which averages 46.7. The firms comprise Novo Nordisk at 10.4, Pfizer at 28.5, Eli Lilly at 39.2, and AbbVie at 108.7.
So, it is very undervalued on this basis.
The same is true of its 4.6 price-to-sales ratio compared to its peer average of 8.
How good are the earnings forecasts?
The key question is whether AstraZeneca’s earnings trajectory is strong enough to pull the share price toward that fair value.
A risk here is any regulatory delays or adverse trial outcomes, which could slow the commercial rollouts of key late‑stage drugs. Another is intensifying competition in key areas such as oncology and immunology which may pressure pricing and squeeze margins.
Nonetheless, analysts project the company’s earnings will increase by a very strong 13.5% a year on average to end-2028 at minimum.
This looks well supported by its robust and diversified product pipeline, boasting over 180 projects in clinical development. This is squarely focused on hitting the company’s $80bn (£45bn) total revenue target by 2030 (from 2025’s $58.7bn).
My investment view
Taken together, these factors underline AstraZeneca’s deep pipeline strength, clear undervaluation, and robust earnings momentum.
Given these factors, I will certainly be adding to my holding in the stock very soon. And my eye has also been drawn to other deeply undervalued shares that offer high dividend yields too.
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Simon Watkins owns shares in AstraZeneca.
