AstraZeneca (AZN)

Total return at 5 years: 7.1%/year = 4.1% appreciation + 2.9% dividend. The target price ($194) is ex-dividend; the $25 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $297 · Multiples $178) exceeds the market price ($158).

Today — fairly valued: at $158 trades ~10.9% below its value discounted to today (~$178); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($194) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$113.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($158) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-4.0%/year) than we project (10.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$10.9 bn of owner earnings in year 5 (vs ~$21.6 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on NOPAT (EV/NOPAT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

AstraZeneca files an annual 20-F and publishes its quarters on 6-K with no XBRL: year 0 is the fiscal year ended 31-Dec-2025 (TTM = FY2025), not a tagged quarter. The path starts at 7.0% for year 1, within the company's reconfirmed guidance for FY2026 (guidance of mid to high single digit, per the 6-K of 27-Jul-2026) and decays smoothly (R3) to 5.8% by year 5, which reproduces almost exactly the company's own ambition of USD 80,000 million of revenue by 2030 (58.739 × 1.3636 ≈ 80.1) — an explicit and verifiable anchor from the filing, not an extrapolation of ours. The operating margin expands from 23.4% (FY2025, depressed by the amortization of intangibles from the Alexion and MedImmune acquisitions) to 27.5% by year 5, as the more recent franchises (Enhertu, Truqap, Imfinzi, Ultomiris) scale and the amortization of older intangibles is diluted over a larger revenue base. The net margin follows the same logic (17.4% → 20.5%). Capex grows above depreciation (investment in manufacturing to support the 2030 ambition), with 50% treated as maintenance (Greenwald). The bear case stresses year 1 to 4.5% (below guidance, reflecting the patent expiry risk already materialized in Farxiga in the US and the trial failures of H1 2026 —CARDIO-TTRansform, EMERALD-2—) and the bull case takes it to 8.5% (guidance beaten, plus more positive pipeline readouts among the more than twenty pending within 18 months). Year-0 D&A (5.346) and the change in working capital (1.542) are derived by doubling the real H1 2025 figure from the 6-K itself, given the absence of an explicit annual breakdown in the available section of the filing. An enterprise-level model: the multiple goes on after-tax operating income, which is pre-interest, so the cash (US$5.7 billion) and the debt (US$32.7 billion) enter the bridge and the funding is charged only once.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $194 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $158, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $194 in 5 years plus $25 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $178. Against the current market price ($158), the margin of safety is 10.9% (trades below the maximum → there is margin) and the total return at that price would be 7.1% annually.

• Entry multiple. The market price implies a multiple within the pharmaceutical archetype band (14x-22x over adjusted earnings); see the detail in the exit-multiple tooltip.
• Estimated total return. +7% annually over five years, combining appreciation and a growing dividend, against Fairly valued.
• Margin of safety. It trades close to intrinsic value, far from the required margin of safety. against the intrinsic value today, discounted at the risk-free rate with a floor.
• Growth anchored to the valuation. The revenue path converges with the company's own public ambition (USD 80 billion by 2030), reducing dependence on a growth assumption invented by the analyst.
• Forward multiple compression. As adjusted earnings grow toward year 5, the effective entry multiple compresses relative to today's, even without material share buybacks.
• Sensitivity to the adverse scenario. The adverse scenario, with year 1 stressed below guidance, still produces a positive per-share value — the thesis does not depend on an extreme assumption to avoid a capital loss.
• Dividend as part of the return. The dividend yield, growing at 5.4% annually, contributes a material and relatively predictable portion of the estimated total return over five years.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (128%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on invested capital. 15.0%, above the 10% bar, calculated on equity plus debt minus cash from the FY2025 balance sheet.
• Operating margin. 23.4% in FY2025, depressed by non-economic amortization of intangibles from the Alexion and MedImmune acquisitions; expansion is expected as that charge dilutes.
• Cash generation. Operating cash flow of US$14,575M in FY2025 (+22.9% year over year), comfortably covers growth capex and the dividend.
• Rising capital intensity. Capex nearly tripled from FY2022 (US$1,091M) to FY2025 (US$2,810M) to sustain the 2030 manufacturing ambition — a legitimate use of cash, but one that reduces near-term free cash flow.
• Earnings quality. Reported earnings under IFRS deduct amortization of acquired intangibles, a non-cash charge that owner earnings restore via the D&A add-back.
• Effective tax rate. 17.5% effective in FY2025, within the company's own Core tax rate guidance range (18%-22%).
• Product diversification. No individual product exceeds 15% of consolidated revenue, which reduces the idiosyncratic risk of any single patent expiration.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The available drivers combine the level of consolidated revenue and operating profit (the only ones with a multi-year series in the XBRL) with the dividend-per-share trajectory, which is the highest-visibility driver for a consistent semi-annual payer. The revenue breakdown by therapy area is only available with one full year (FY2025) plus the H1 2026 half-year in the most recent 6-K —there is no multi-year historical segment series in the available filing sections—, so it is shown separately in growthBreakdown rather than as a long-series driver. Volume-times-price growth is not disaggregated product by product in the extracted sections; the most reliable operating proxy is consolidated revenue by therapy area.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-dic-2025): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Recent consolidated growth. Revenue +8.6% in FY2025 and +6% CER in H1 2026, with reconfirmed guidance of mid-to-high single digits for FY2026.
• Stated long-term ambition. USD 80 billion in revenue by 2030 is a public target from the company itself, not an external extrapolation, and it is consistent with the model's base path.
• Oncology engine. +16% CER in FY2025 and +18% CER in H1 2026, the largest and fastest-growing franchise, with Enhertu and Truqap accelerating strongly.
• CVRM slowdown. Just +2% CER in FY2025 and already contracting -8% CER in H1 2026 on Farxiga's U.S. patent expiration.
• Rare Disease. +5% CER in FY2025 and +13% CER in H1 2026, with a more protected pricing and reimbursement profile than the rest of the portfolio.
• Medium-term pipeline. More than twenty high-value readouts expected over the next 18 months, though two of the most recent (CARDIO-TTRansform, EMERALD-2) failed their primary endpoint.
• Vaccines and Immune Therapies. The only franchise in contraction (-20% CER in FY2025), though it represents just 1.4% of consolidated revenue.

• Diversification by therapy area. Four growth areas plus Rare Disease; no individual product exceeds 15% of revenue, which cushions the impact of an isolated patent expiration.
• Predictability of revenue under patent. Patent protection gives multi-year cash flow visibility on active franchises, with extensions reaching through 2041 on some products.
• Binary risk of clinical development. Two Phase III failures in H1 2026 (CARDIO-TTRansform, EMERALD-2) show that even with a broad pipeline, each individual program retains binary success-or-failure risk.
• Exposure to patent expiration. Farxiga has already lost exclusivity in the U.S. and is pressuring CVRM growth; other products (Crestor, Nexium, Pulmicort, Seloken, Synagis, Zoladex) have already lost it in core markets.
• Regulatory and manufacturing scale. Active presence in more than 80 countries under global GMP/GDP standards, a real operating barrier for smaller competitors.
• Strategic collaborations. Daiichi Sankyo (Enhertu/Datroway), Amgen (Tezspire) and Sanofi (Beyfortus) extend the portfolio without bearing the full R&D cost of each asset.
• Geographic concentration of demand. The U.S., China and Europe account for most of revenue; regulatory pricing pressure in those markets (IRA, joint health technology assessment) weighs on the entire sector.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✓Interest coverage (EBIT / interest)10.8x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 128% of ROIC
• !Value creation (ROIC − 10% bar)+5pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.5x — no over-investment
• !Float / working capitalConsumes cash $1.1 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 1.2% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Equity. US$48,667M attributable to the parent at the FY2025 close, in steady expansion (US$48,719M total including the non-controlling interest).
• Financial debt. US$29,622M at the FY2025 close, of which US$3,104M matures within the year; invested capital (equity + debt − cash) is US$72,548M.
• Cash and equivalents. US$5,741M (cash plus short-term investments) at the FY2025 close, moderate relative to the scale of the balance sheet.
• Recent rise in net debt. Net debt rose to US$26,912M at the H1 2026 close (+US$3,538M in the half), partly from debt issuance to fund the licensing agreement with CSPC Pharmaceuticals.
• Cash flow coverage. FY2025 operating cash flow (US$14,575M) comfortably covers capex (US$2,810M) and dividends paid (US$4,971M).
• Litigation and contingencies. The company faces recurring patent litigation (Enhertu, Forxiga/Farxiga, Tagrisso) in multiple jurisdictions, typical of the industry but with the potential to generate unexpected charges.

• Leadership continuity. Pascal Soriot as CEO since 2012, with a long track record of consistent execution of the transformation strategy toward oncology and biologics.
• Capital allocation discipline. Reinvestment in R&D/manufacturing and a growing dividend over share buybacks, with selective, complementary M&A (CSPC Pharmaceuticals) rather than transformational deals.
• Transparency about setbacks. The company disclosed the CARDIO-TTRansform and EMERALD-2 failures directly in its own H1 2026 earnings release, rather than downplaying them.
• Internal ownership detail. Not available in the extracted 20-F sections (no DEF 14A, a form specific to U.S. domestic issuers); the gap is declared rather than estimated.
• Dividend policy. Semi-annual dividend with 5.4% recent annual growth and an already-announced intended increase for FY2026 (to US$3.30/share from US$3.13).

• Two Phase III trial failures in H1 2026 (CARDIO-TTRansform in Wainua and EMERALD-2 in Imfinzi for adjuvant hepatocellular carcinoma) triggered a one-off negative reaction on a company with more than a hundred programs in development.
• Farxiga's U.S. patent expiration already pressures CVRM growth (-8% CER in H1 2026), and the market extrapolates that dynamic without weighting the segment's declining share of the mix (21.7% of FY2025 and falling).
• General regulatory pressure on the pharmaceutical sector (Medicare price negotiation under the IRA, joint health technology assessment in the EU) that weighs on the entire sector, not on AstraZeneca specifically.

The two H1 2026 trial failures are identifiable, verifiable catalysts from the company's own 6-K, not unexplained noise: they are the kind of one-off event that a pipeline of more than a hundred programs structurally absorbs, with more than twenty high-value readouts still pending over the next 18 months.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -4%/year (-20% total): the margin of safety protects the downside. The bull (+12%/year, +75% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Patent expiration and generic competition. Farxiga has already lost exclusivity in the U.S. and is pressuring CVRM; the pattern will repeat with other franchises as their patents expire over the coming decade.
• Binary risk of clinical development. CARDIO-TTRansform and EMERALD-2 failed their primary endpoint in H1 2026; the remaining pipeline retains the same risk, with more than twenty readouts pending over 18 months.
• Regulatory pricing pressure. Medicare price negotiation under the IRA in the U.S. and the EU's joint health technology assessment structurally pressure pricing in the most profitable markets.
• Dependence on third parties for supply. The manufacturing chain depends on third parties for critical inputs that are difficult to substitute quickly; a disruption can lead to lost sales and adverse regulatory findings.
• Intellectual property litigation. Growing pressure from governments and payers to limit patent protection and speed generic approval, with active litigation in multiple jurisdictions over key products.
• Litigation and government investigations. Subject to a broad range of global laws; civil litigation, particularly in the U.S., is inherently unpredictable and can lead to unexpected damages.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 15% above the 10% bar, but the margin is limited (+11%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower growing 10% at a multiple/growth of 2.4 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 6% (EBIT/EV) + ROIC 15% → brushes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -4% vs our 10%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -8%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, switching costs, cost advantage → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -4%, within what we project (10%) — the story squares with the numbers.