We recently published a list of The 10 best undervalued UK stocks to buy now. In this article, we take a look at AstraZeneca PLC (NASDAQ:AZN)’s position compared to other undervalued UK stocks.

The economy of the United Kingdom

According to a report by KPMG, the UK economy is experiencing a combination of consumption tailwinds and falling inflation, which should support modest positive growth in the country for the rest of 2024 and 2025. The UK economy is expected to achieve GDP growth of 0.5% in 2024 and 0.9% in 2025, while inflation is expected to remain stable at 2.6% in both 2024 and 2025. The unemployment rate is expected to be 4.5% in 2024 and 4.9% in 2025. Interest rates are expected to fall to 3% by the end of 2025, and the election is likely to remove political uncertainty, which would boost the economy. However, geopolitical uncertainty, conflict and trade tensions could lead to spikes in inflation and sharp changes in monetary policy. Despite the uncertainty, KPMG analysts remain optimistic about the future. Yael Selfin, Vice Chairman and Chief Economist at KPMG UK, said:

Investors find the UK market particularly attractive due to its current valuations, which are similar to emerging markets when measured based on forward price-to-earnings ratios. The UK stock index is notable for its heavy exposure to the energy sector, which could benefit significantly if the global economy exceeds expectations. In addition, the energy sector could also generate gains during times of escalating geopolitical tensions due to rising prices. The composition of the UK stock market is well-structured, especially in terms of dividend yield and volatility. Compared to European stocks, UK stocks are less volatile and offer higher dividend yields, making them an attractive option for investors at present. Goldman Sachs also expects modest growth in UK economic growth in 2025 and 2026, and forecasts the FTSE 100 Index to rise to 7,900 by the end of 2024. Goldman Sachs said:

The story continues

According to Emma Wall, head of investment analysis at Hargreaves Lansdown, the UK offers one of the best value opportunities among developed markets, particularly for those looking for undervalued investments. Despite its strong performance in the FTSE 100, it highlights that it is trading at a 45% discount compared to the US market. Emma Wall sees the best value opportunity in the UK, citing the significant discount, international revenue, lack of leverage and expectations of high dividend payouts as the main reasons for this analysis.

The UK market offers investors a unique and attractive opportunity as the global economy shows signs of improvement and inflation stabilises. The UK will benefit from economic growth despite some uncertainties. With this in mind, let’s take a look at the 10 most undervalued UK stocks to buy now.

Our methodology

For this article, we used the Finviz screener to search for UK-based companies trading at a P/E ratio below 20 as of August 9. We ranked the stocks according to their hedge fund sentiment, which was taken from our database of 920 elite hedge funds as of Q1 2024.

Why do we care what hedge funds do? The reason is simple: Our research shows that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (read more details here).

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AstraZeneca PLC (NASDAQ:AZN)

Number of hedge fund investors: 46

Expected P/E ratio as of August 10: 19.60

AstraZeneca PLC (NASDAQ:AZN) is one of the top 10 pharmaceutical companies in the world and had a market capitalization of $251.73 billion as of August 10. AstraZeneca PLC (NASDAQ:AZN) has significant financial resources, research capabilities and market presence. The company employs more than 80,000 people in over 100 countries and its products are sold in more than 125 countries. AstraZeneca PLC (NASDAQ:AZN) is a leader in oncology, cardiovascular, renal and metabolic diseases, respiratory diseases and immunology, as well as other general diseases. The company is also emerging as a market leader in cancer therapy. In the first quarter, the stock was held by 46 hedge funds, representing nearly $2.17 billion. Fisher Asset Management is the company’s largest investor, holding $654 million worth of shares as of March 31.

AstraZeneca PLC (NASDAQ:AZN) stock price has risen nearly 15% over the past 12 months to $81 as of August 10, driven by positive developments in its oncology (cancer treatment) franchise, particularly successful clinical trials called LAURA, ADRIATIC, and DESTINY-Breast06. In addition, AstraZeneca provided long-term revenue guidance for the first time, projecting revenue of $80 billion by 2030, a 75% increase from 2023 revenue of $45.8 billion. This forecast suggests a seven-year annual growth rate of 8%, which is higher than the growth targets of its peers such as GSK, Johnson & Johnson, and Novartis. Baron Health Care Fund stated in its Q2 2024 investor letter on AstraZeneca PLC (NASDAQ:AZN):

On June 17, AstraZeneca PLC (NASDAQ:AZN) announced that the FDA approved a combination of Imfinzi and two oncology chemotherapy drugs, carboplatin and paclitaxel, for the treatment of primary advanced/recurrent endometrial cancer, which the American Cancer Society estimates may affect over 67,000 women in 2024. Imfinzi revenue in the first quarter of 2024 was $1.11 billion, up 23.7% year-over-year, due to high demand in the U.S. and Europe to treat patients with bile duct cancer and small cell lung cancer. Enhertu, a highly effective drug for treating breast cancer patients, also saw year-over-year revenue growth of 79.4%, generating revenue of $461 million in the first three months of 2024. The reason for this is the high demand from patients and physicians in the USA for the treatment of metastatic HER2-positive breast cancer and non-small cell lung cancer.

AstraZeneca PLC (NASDAQ:AZN) has set an ambitious goal of generating total revenue of $80 billion by 2030. The stock has a P/E ratio of 19.60, which is almost 4% below the industry average. The company still looks attractive, with earnings expected to grow 11% this year to $4.03 per share.

Total AZN 2nd place on our list of the best undervalued UK stocks to buy. You can visit The 10 best undervalued UK stocks to buy now to see the other undervalued UK stocks that are on hedge funds’ radar. While we recognise AZN’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter timeframe. If you’re looking for an AI stock that is more promising than AZN but trades at less than 5x earnings, read our report on the cheapest AI stock.

Read more: Analyst sees a new $25 billion “opportunity” for NVIDIA And Jim Cramer recommends these 10 stocks in June.

Disclosure: None. This article was originally published on Insider Monkey.