Should investors buy the AstraZeneca share price dip?

At AstraZeneca (LSE: AZN) share price near 10,744p is about 9% down from its January peak. But is the dip big enough for investors to consider buying shares in science-led biopharmaceutical companies?

I think so. After all, business is one of the most dynamic growth stories FTSE 100. And the financial indicators do not show a terrible value because of the growth potential that the company continues to show.

A productive R&D pipeline

To put the recent share price action in context, the stock is about 25% higher than a year ago. But the big prize for investors is the long-term business potential. For example, over the past 10 years, the stock has risen about 252%. And shareholders have also enjoyed the flow of dividends along the way.

Can AstraZeneca deliver similar performance for shareholders over the coming decades? Perhaps. After all, the research and development (R&D) pipeline has been on fire for the past few years. And it has been releasing new commercial grade drugs and treatments at a rapid pace. Indeed, these conditions enable the company to rebuild and increase its income in a meaningful way.

The compound annual growth rate for normal earnings is running around 23%. And I think this is a figure that could put many small growth companies to shame. But there are no signs of the business slowing down. City analysts expect revenue to rise more than 83% this year and nearly 20% in 2024.

However, it’s worth remembering that AstraZeneca’s stock fell out of favor 10 years ago. The issue of patent expiration has affected businesses and the sector. And the R&D pipeline has yet to kick in.

From zero to hero

Most investors at the time saw the company as a declining business. And those who are tempted to buy the stock are considered to be the best dividend payers. That said, some prescient investors are talking about the potential in the R&D pipeline.

So the rise in AstraZeneca stock has been driven by two things. The first is the way stocks have been tracked and anticipated growth in earnings. And the second is the way the valuation has been re-rated higher to reflect a better growth picture.

Therefore, the guess is that the potential for uprating more than the value may be limited in the next decade. But there’s still a chance that growth in earnings could push the stock higher.

However, nothing is certain or guaranteed. And that’s happening even though immediate forecasts for earnings look strong today. Of course the R&D pipeline can dry up. Or maybe there were some research failures that could not be translated into a commercial product.

However, the company’s news feed continues to be vibrant with positive announcements. And I see the business is also worth the investor’s time to research more deeply. To me, these stocks look good in a diversified long-term portfolio looking for income and growth.