Bristol Myers Squibb Co. (BMY), AstraZeneca plc (ADR) (AZN): Expanding P/E Saved This Pharma Investment

Investors are willing to pay more for less because they have expectations that next year — and the year after — will be better. Whether you look at forward P/E based on analysts’ estimates, or earnings from the trailing 12 months, Bristol Myers Squibb Co. (NYSE:BMY)’ P/E ratio has increased substantially.

BMY P/E Ratio data by YCharts

I think an expanding P/E was reasonable — expectations were awfully low a few years ago — but investors have to be careful at this point. There’s little room for further expansion of the P/E. If Bristol Myers Squibb Co. (NYSE:BMY) shares are going to go higher, the company is going to have to do it the old fashion way: improving earnings.

The article Expanding P/E Saved This Pharma Investment originally appeared on Fool.com.

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying calls on Johnson & Johnson. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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