3 Dirt-Cheap Stocks to Buy Right Now

Key Points

• Merck's growth potential is underrated.

• Novo Nordisk's sell-off has gone too far.

• Pfizer's story is better than meets the eye.

• 10 stocks we like better than Merck ›

The major market indexes are bumping against all-time highs. It's not surprising, therefore, that many stocks are trading at steep valuations. There are, however, some exceptions that are still bargains.

Three Motley Fool contributors believe they've found dirt cheap value stocks to buy right now. Here's why they picked Merck (NYSE: MRK), Novo Nordisk (NYSE: NVO), and Pfizer (NYSE: PFE).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

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Merck has underrated growth potential

David Jagielski (Merck): One incredibly cheap stock to buy right now is Merck's. The pharmaceutical company has a market cap of over $200 billion, but investors have been a bit concerned with what lies ahead for the business as it loses patent protection for its top-selling cancer drug, Keytruda. It will begin losing patent protection in 2028, and it accounts for around half of the company's top line.

Merck, however, has been working on ways to offset those headwinds, including the launch of a new injectable form of the drug later this year. Plus, it has been expanding its pipeline via both in-house development and acquisitions.

Winrevair is a recently approved treatment for pulmonary arterial hypertension, and it could be a blockbuster drug that generates billions in revenue. The company is also acquiring Verona Pharma for $10 billion, which will add Ohtuvayre -- a potential blockbuster treatment option for people with chronic obstructive pulmonary disease -- to its portfolio.

There's loads of growth potential on the horizon for Merck, and investors who simply focus on potential lost revenue due to Keytruda losing patent protection may be missing the bigger picture: Merck still has plenty of room to get bigger in the future.

The healthcare stock is down more than 15% this year and looks like it could be a bargain buy. Based on analyst estimates, it's trading at a forward price-to-earnings multiple of less than 9. By comparison, the average stock on the S&P 500 trades at more than 21 times its estimated future earnings. For long-term investors, Merck appears to be a steal of a deal.

The sell-off has gone too far

Prosper Junior Bakiny (Novo Nordisk): Over the past 18 months, Novo Nordisk has encountered significant headwinds. The company's financial results haven't met market standards, and several clinical setbacks have sunk its stock price. The sell-off might have been justified, but it has arguably gone a bit too far. Novo Nordisk is currently trading at 13.6 times forward earnings. The average for the healthcare sector is 16.4.

That would be warranted if it weren't for the fact that Novo Nordisk typically grows its revenue and earnings faster than similarly sized peers. At current levels, the stock looks cheap, and that's before we factor in other things. Despite some recent clinical setbacks, Novo Nordisk has also made progress. It earned approval for its famous medicine, Wegovy, for the treatment of metabolic dysfunction-associated steatohepatitis (MASH), becoming only the second therapy to earn that regulatory nod and the first in the GLP-1 category.

There is a significant need in MASH, with millions of potential patients in the U.S. alone. This indication could add over $1 billion in annual sales to Wegovy's sales, according to some projections. Further, Novo Nordisk recently announced that its oral GLP-1 medicine, Rybelsus, earned approval in Europe to reduce the risk of certain cardiovascular events.

And the company is also awaiting a green light in the U.S. for oral semaglutide (the active ingredient in Wegovy) for weight loss. With several new indications and exciting late-stage candidates, such as Amycretin in weight loss (among others), the stock should deliver excellent financial results over the next five years, along with solid clinical and regulatory progress. After the beating Novo Nordisk has taken since early 2024, now is a great time to buy the stock.

A better story than meets the eye

Keith Speights (Pfizer): Pfizer's COVID-19 product sales are only a fraction of the levels from a few years ago. The company faces the loss of patent exclusivity for Inlyta, Xeljanz, Eliquis, Xtandi, Vyndaqel/Vyndamax/Vynmac, and Mektovi over the next three years. All except Inlyta and Mektovi generated sales of at least $1 billion last year. And Inlyta missed the threshold by only $22 million.

With this in mind, Pfizer may seem like a value trap, given its shares are trading at only 7.7 times forward earnings. However, there's a better story behind this big drugmaker than meets the eye.

Pfizer's sales for the products losing exclusivity won't dry up overnight. More importantly, the company has multiple products that should generate strong growth, including bladder cancer drug Padcev, multiple myeloma drug Elrexfio, and RSV vaccine Abrysvo.

We can't forget Pfizer's pipeline, either. It features 108 candidates, 28 of which are in phase 3 testing. Another four await regulatory approvals.

Last but not least, Pfizer's dividend yield of 7.12% helps boost the stock's total return significantly. Investors shouldn't have to worry about the dividend being cut. Pfizer's management team remains committed to maintaining and growing the dividend over the long run.

Should you invest $1,000 in Merck right now?

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David Jagielski has positions in Novo Nordisk. Keith Speights has positions in Pfizer. Prosper Junior Bakiny has positions in Novo Nordisk. The Motley Fool has positions in and recommends Merck and Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.