A strong performer from today's afternoon trading session is Gilead Sciences, whose shares rose 3.2% to $70.67 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Gilead Sciences's Valuation Is in Line With Its Sector Averages:
Gilead Sciences, Inc., a biopharmaceutical company, discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 27.53 and an average price to book (P/B) ratio of 3.61. In contrast, Gilead Sciences has a trailing 12 month P/E ratio of 196.3 and a P/B ratio of 5.02.
Gilead Sciences's PEG ratio is 3.39, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
A Positive EPS Growth Rate and Significant Leverage Levels:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $22,127 | $22,449 | $24,689 | $27,305 | $27,281 | $27,116 |
| Operating Margins | 37% | 19% | 16% | 36% | 27% | 28% |
| Net Margins | 25% | 24% | 0% | 23% | 17% | 21% |
| Net Income (M) | $5,455 | $5,386 | $123 | $6,225 | $4,592 | $5,665 |
| Net Interest Expense (M) | $1,077 | $995 | $984 | $1,001 | $935 | $944 |
| Depreciation & Amort. (M) | $226 | $255 | $288 | $329 | $323 | $354 |
| Diluted Shares (M) | 1,308 | 1,277 | 1,263 | 1,262 | 1,262 | 1,258 |
| Earnings Per Share | $4.17 | $4.22 | $0.1 | $4.93 | $3.64 | $4.5 |
| EPS Growth | n/a | 1.2% | -97.63% | 4830.0% | -26.17% | 23.63% |
| Avg. Price | $60.3 | $55.56 | $60.46 | $62.06 | $59.6 | $70.67 |
| P/E Ratio | 14.36 | 13.1 | 604.6 | 12.51 | 16.28 | 15.57 |
| Free Cash Flow (M) | $7,476 | $8,319 | $7,518 | $10,805 | $8,344 | $7,421 |
| CAPEX (M) | $924 | $825 | $650 | $579 | $728 | $585 |
| EV / EBITDA | 10.81 | 18.46 | 23.99 | 9.84 | 12.65 | 13.67 |
| Total Debt (M) | $30,064 | $24,593 | $34,159 | $28,211 | $27,502 | $26,785 |
| Net Debt / EBITDA | 1.44 | 2.85 | 6.46 | 2.23 | 2.89 | 2.6 |
| Current Ratio | 3.38 | 3.1 | 1.4 | 1.27 | 1.29 | 1.43 |
Gilead Sciences has growing revenues and decreasing reinvestment in the business, positive cash flows, and just enough current assets to cover current liabilities, as shown by its current ratio of 1.43. In addition, we note significant leverage levels. We also note that the company benefits from strong operating margins with a stable trend and positive EPS growth. Furthermore, Gilead Sciences's financial statements do not display any obvious red flags.
