Is Bayer Stock A Buy?

Though it is one of the largest pharmaceutical and life sciences organizations in the world, Bayer is the sort of company that flies under the radar. Its name doesn’t come up often when market analysts discuss industry news because its stock doesn’t have dramatic highs and stunning lows. Instead, Bayer quietly achieves its mission quarter after quarter and year after year – just as it has since it was founded in Germany on August 1, 1863. 

A Brief History of Bayer

Founder Friedrich Bayer was a dye salesman, and his partner Johann Friedrich Weskott was highly skilled in the art and science of creating and applying dyes. Together, they launched a chemical empire.

In its earliest days, Bayer developed and manufactured synthetic dyes. Its biggest customers were in the textile industry, which had long struggled with the difficulty of securing adequate supplies of natural dyes. 

However, it soon became clear that there were more profitable opportunities. The company turned its attention to other in-demand chemicals – specifically, pharmaceuticals. Its first big seller was Bayer aspirin, which remains the best-known brand of aspirin today. 

Bayer was the first to trademark and market heroin as a cough suppressant and pain reliever. It was also responsible for the development and distribution of the antibiotic Prontosil, which marked a turning point in modern medicine. The Bayer chemist that discovered Prontosil was awarded the 1939 Nobel Prize in Medicine for his work. 

Does Bayer Product Pipeline Is A Mile Deep

Today, Bayer is out of the business of producing and selling heroin, but it remains deeply involved in developing innovative therapies for some of the toughest medical issues facing mankind. In addition to its work in medicine for humans, it has divisions focused on veterinary medicine and plant health. 

The company’s pharmaceutical portfolio includes a variety of prescription drugs, primarily in the area of women’s healthcare and cardiology. Examples include Adalat, Adempas, Mirena, Ventavis, and Yasmin. There are also therapeutics focused on hematology, oncology, and ophthalmology, and Bayer manufactures the equipment and contrast agents used in various radiology applications. 

Bayer’s work in consumer health is not limited to prescription and specialty medications. The company produces a range of popular over-the-counter remedies for minor pain relief, digestive issues, and allergies. Examples include Aleve, Alka Seltzer, Claritin, and MiraLAX.

On the agricultural side, Bayer’s portfolio includes a long list of disease prevention and pest control products. One of the more controversial brands is Roundup herbicide, but the company also owns the Gaucho crop protection line and Harness branded herbicides.

Bayer Stock Has High Expected Outcome If…

Bayer isn’t relying on its existing products to generate revenues indefinitely. The company has a culture of innovation, and researchers are hard at work on identifying and developing more effective treatments for debilitating diseases like Parkinson’s and certain cancers. 

Research and development take priority, as evidenced by the heavy investment of resources. In 2020, Bayer spent a total of €4.884 billion on R&D, which represents approximately 17 percent of total sales. As a result of its commitment to developing new solutions to protect human and plant health, the company has a robust pipeline. 

One of Bayer’s most exciting announcements came in June 2021. The company reported the start of clinical trials for a cell therapy and a gene therapy – both first-in-class drugs – that may offer new, more effective treatment options for the 10 million patients living with Parkinson’s disease.

If successful, the drugs could stop and perhaps reverse the neurodegenerative symptoms that dramatically affect patients’ quality of life. 

All of that potential has most market analysts feeling optimistic about Bayer’s future. The median estimate for Bayer stock over the next 12 months is an increase of more than 28 percent. Even the less enthusiastic of the group don’t believe share prices will drop. In a worst-case scenario, the naysayers predict that Bayer stock will remain steady at its current price. 

Those predictions – and the possibility that Bayer will win the war against Parkinson’s disease – make Bayer stock a smart buy. 

Bayer Revenues and Earnings Forecasts

Overall, Bayer reported a successful start to 2021. In its first-quarter earnings report, management announced total sales of €12.3 billion and EBITDA of €4.1 billion. The EBITDA figure does represent a decrease of 6.2 percent.

However, this is explained as an issue with currency rather than a true drop in earnings. For the quarter, net income grew to a total of €2.1 billion, and earnings per share came in at €2.59. 

Bayer leadership is aware that investors want more, and the company intends to deliver. Over the next three years, it expects to grow earnings per share to between €7 and €7.50 by 2024, assuming exchange rates remain relatively stable.

That’s a promising target, as the company’s earnings per share came in at €6.39 for 2020.  

Ag Product Risk to Human Health A Major Risk

As with any company, Bayer has its issues, and that means there are risks to buying Bayer stock. The first is standard across any pharmaceutical company: promising products may fail during clinical trials. 

Lots of hope is attached to the Parkinson’s disease drug trials, as patients are desperate for a cure. Unfortunately, it is common for problems to come up during various trial phases, causing products to be scrapped entirely. Sometimes, the drug simply doesn’t work as expected. Other times, the side effects outweigh the benefits. Either may occur during the current drug trials, which will have a negative effect on share prices. 

The second risk is more specific to Bayer: concerns about the impact of certain agricultural products on human health. The company has been the target of legal claims from people who developed life-threatening illnesses after exposure to Roundup. A massive class-action lawsuit is in the process of being settled, and the company has a plan to manage any future claims. 

Cash has been set aside to meet the costs associated with these legal issues. However, litigation of this kind can be a serious concern for investors considering the stock as part of their long-term strategy. 

Is Bayer Stock A Buy? The Bottom Line

Overall, Bayer is a reliable company with a long history of slow but steady growth. It is committed to improving the health of people and plants – and the purpose of protecting plants is to secure the world’s food supply. 

Bayer continues to pursue innovative solutions to the toughest medical issues, and it invests heavily to ensure that research progresses as quickly as possible. That’s why industry experts and market analysts agree that Bayers stock is a buy. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.