Are Terry shares worth buying?

Terry Rae Inc. (NYSE: PFE)It's not a hot stock right now. Since Terry's pandemic surge on the back of its coronavirus vaccine, new growth hasn't been as profitable.

But it will still be a good choice for investors once some of the higher expectations for its future are safely contained. Let's hear the bears' point of view on why this stock isn't worth buying, and then look at the other side of the argument.

It's been a rough couple of years.

Under normal circumstances, one might expect a large pharmaceutical company with a large portfolio of essential drug formulations and recent best-sellers, such as the Cominati coronavirus vaccine, to thrive. In this case, the investment rationale is obvious - buy the stock because the company has successfully developed the right name for the right market, and thus has the know-how to keep the stock rising over the long term.

But that's not where Terry is today. Far from being a defending champion, it now looks more like a former competitor that has been eliminated. Over the past three years, the aggregate return on Terrific's stock price has declined by 191 TP3T, while the total return on Terrific's stock price has declined by 2.5 TP3T.Standard & Poor's 500For the same period, the company's 12-month revenues rose only 61 TP3T to $58.5B, while net income fell 831 TP3T to $2.1B.

In addition, the company has $75.3 billion in debt and capital lease obligations. It should be able to pay down that debt in due course, but interest payments will continue to be a drag on earnings growth for a long time. And Terry's wasn't a fast-expanding company before it reaped huge profits from its coronavirus drugs.

It is unlikely that Terry will ever receive such a windfall again. The sharp decline in its revenue and earnings is mainly due to the sharp drop in global demand for coronavirus vaccines and antiviral drugs. So, in a bear market, the financials and macro environment speak for themselves.

Terrific will not regain its top line, bottom line, or stock price peak anytime soon. As it stands now, the home run of Terry's coronavirus drugs has not solidified to fund future growth opportunities, and there is little left to validate the market after the initial gold rush subsides.

The future looks bright.

The bearish argument against buying Terry's is correct, as a backward-looking study of financial indicators reveals that Terry's current performance is overshadowed by its performance from 2020 to mid-2022. It will take a long time for this situation to change. But by then, the bears will have completely missed a great buying opportunity. Here's why.

Currently, Terry has 31 projects in Phase 3 clinical trials and 34 projects in Phase 2 clinical trials. Management believes that in the next six years, Terry has at least eight drugs that could become best-sellers in the recently enhanced oncology pipeline alone. That means each drug could generate more than $1 billion in annual revenue.

The company has been pushing hard into R&D for anti-cancer drugs, which is a big reason for its current debt. The company acquired Seagen, a major tumor biotech company, for $43 billion, which it financed with debt. Once some of this debt is paid off over the next few years and new revenue streams begin to open up, management plans to allocate the funds more evenly to reinvesting in internal R&D and to returning the funds to shareholders in the form of dividends and share buybacks.

Currently, Terry's dividend yield is high at 6.31 TP3T, and while it could rise further if the stock price continues to fall, sooner or later the market will recognize that Terry's business is actually more valuable than it is today. In other words, the company's strategic plan to expand into cancer treatment will eventually make undeniable progress, and those who wait to invest until then won't get the biggest bang for their buck.

If you can be patient and wait a few years for the new revenue streams to mature, then this is a very good time to buy this stock. Terrific will be around for a long time, and it has a proven track record of commercializing successful medicines in a wide variety of economic environments. In the long run, Terrific will live up to its name, and those who buy Terrific at a time of great uncertainty will maximize their returns.

Should you invest $1,000 in Terry now?

Consider the following before buying Terry's stock:

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Alex Calcidi does not hold any of the aforementioned stocks.The Motley Fool has a position in Terry Rae, Inc. and recommends Terry Rae, Inc.The Motley Fool has a disclosure policy.

Is Terry's Stock Worth Buying? This post was originally published by The Motley Fool.