The performance of most pharmaceutical stocks has been underwhelming over the past year. The benchmark iShares US Pharmaceuticals ETF (NYSEMKT: IHE) has underperformed the S&P 500 by almost 20% in this time, and some companies in particular look especially cheap. Their share prices have not kept pace with the broader bull market, and that presents a bargain opportunity for investors.
Two big-name pharmaceuticals that have been making news a lot lately, much of that related to the COVID-19 pandemic, are Pfizer (NYSE: PFE) and Gilead (NASDAQ: GILD) (Pfizer with a vaccine in partnership with BioNTech, Gilead with a treatment called remdesivir). But while both have made COVID-related headlines, neither has seen a COVID-related boost — both stocks are at a price-to-earnings ratio of less than 15, which is cheap from a valuation perspective in comparison to many peers. (Johnson & Johnson (NYSE: JNJ) and Eli Lilly (NYSE: LLY) carry P/E ratios of 17.27 and 22.47 respectively.) But if we look to the future and past the pandemic, there is potential for both Pfizer and Gilead to produce great results for investors.