Why I’m Going All In on This Undervalued Healthcare Stock (RPRX)

As a growth investor, I don’t mind taking calculated risks—especially when I see a stock that’s undervalued, financially solid, and rewarding shareholders. That’s exactly why I’ve decided to start building a position in Royalty Pharma (RPRX) as of February 2025.

It’s not the kind of biotech stock that’s going to explode overnight, but I see a solid growth and income play here. The company dominates its niche, has a steady cash flow model, and is actively expanding through smart deals. Sure, there are some risks, but for me, the upside outweighs them.

If you’re into growth stocks, you might also want to check out my take on MercadoLibre, one of the best growth stocks of 2025, where I break down its long-term potential.

Is RPRX Undervalued Right Now?

One of the first things I check before investing is whether a stock’s price actually makes sense for its growth potential. And in the case of RPRX, I think it’s undervalued relative to its earnings power.

Right now, it’s trading with a P/E ratio of 22.3, which is slightly above the industry average of 19.6. Normally, I’d be a little cautious here, but the PEG ratio tells a different story—it’s sitting at 0.67. That’s well below 1, which usually signals a stock that’s cheap for how fast it’s growing.

The Price-to-Sales (P/S) ratio is 8.47, which is a bit high, but for a royalty-based business like this, it’s not a dealbreaker. Plus, the Price-to-Book (P/B) ratio is 2.09, meaning the stock is reasonably valued based on its assets.

So, valuation-wise? RPRX is looking like an attractive buy right now.

If you’re curious about how to analyze valuations in more depth, I recently wrote about what the P/E ratio really means with examples, which might help you understand why I like RPRX at its current price.

If you're serious about tracking valuations and stock charts, I highly recommend using TradingView—it's my go-to platform for technical and fundamental analysis.

What’s Driving RPRX’s Growth?

One of the biggest reasons I’m getting into RPRX is its business model. This isn’t some small biotech company hoping to strike gold with a new drug. Instead, Royalty Pharma makes money by collecting royalties from existing blockbuster drugs. That means it doesn’t bear the risk of clinical trial failures but still gets paid if those drugs succeed.

And they’re not just sitting still. They’re expanding strategically, and the latest partnership with Biogen is a big deal. RPRX is funding up to $250 million for Biogen’s lupus treatment, which is in Phase 3 trials. If it gets approved, Royalty Pharma could lock in a steady stream of future royalties—exactly what I want to see.

This approach reminds me a bit of Nu Holdings' growth strategy, where the company is rapidly expanding in emerging markets, much like how RPRX is locking in long-term revenue sources.

How Is RPRX Rewarding Investors?

I like to see companies put their money where their mouth is, and RPRX is doing just that.

They just announced a massive $3 billion share repurchase program, with $2 billion planned for 2025 alone. That’s a strong sign that management believes the stock is undervalued, and buybacks help increase the value of my shares over time.

On top of that, they just raised their dividend by 5% to $0.22 per share, which isn’t huge but adds a layer of passive income. Between buybacks and dividends, this is a shareholder-friendly stock, which gives me confidence as an investor.

For dividend investors, I also took a deep dive into EOG Resources, a hidden gem in the energy sector, which could be another strong passive income play.

If you're looking for a low-cost brokerage to start investing, M1 Finance is a great choice for automated investing and fractional shares.

What Are the Risks?

Every investment has risks, and I’d be lying if I said RPRX is perfect. The biggest concern for me is their recent decline in portfolio receipts and cash flow.

• Portfolio receipts fell 8% in 2024—not a great sign.
• Net cash flow dropped by 7%, meaning they’re bringing in less cash than before.
• Adjusted EBITDA declined by 9%, showing some pressure on profitability.

I don’t love seeing these numbers, and it’s something I’ll keep an eye on. But the company is still profitable, still growing earnings, and still making moves to expand its revenue streams. As long as these declines don’t become a long-term trend, I’m not too worried.

How High Can RPRX Go?

I always check analyst targets before making a move, and MarketBeat.com has the following price targets for RPRX:

• High target: $51.00
• Average target: $41.67
• Low target: $28.00

At its current price of $32.30, RPRX is trading below its average price target, meaning analysts see potential for 29%+ upside. If the Biogen partnership plays out well and revenue picks up, I could see this stock moving toward the $40-$45 range in the next year.

If you like stocks with explosive potential, I also covered CrowdStrike’s 2025 growth forecast, which could be another high-upside pick.

What’s My Plan With RPRX?

I’m not going all-in on RPRX just yet, but I am opening a position and will look to add on dips. The combination of undervaluation, growth potential, and strong shareholder returns makes this a solid midterm investment for me.

That said, I’ll be watching a few key things closely:

✅ Portfolio receipts & cash flow trends—If they keep declining, I’ll reconsider my position.
✅ Biogen partnership progress—If their lupus drug gets FDA approval, RPRX’s future royalties could surge.
✅ Overall sector momentum—If biotech and pharma stocks struggle, RPRX could face headwinds.

For now, I see more upside than downside, and I’m comfortable taking the risk. I like where RPRX is positioned, and I think this is a smart buy for my portfolio. 🚀

If you’re planning your investment strategy for 2025, I also put together a full investing playbook covering stocks, crypto, and key risks, which might help you decide where to put your money this year.

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