Proprietary Data Insights
Financial Pros Top Drug Manufacturer Stock Searches In The Last Month
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This Pharma Stock Yields Almost 6%
The world is getting unhealthier, and pollution and climate change is damaging the air we breathe.
Six in ten Americans live with at least one chronic disease in America, according to the CDC.
As the population ages, that figure could worsen. While this is terrible news for most people, it means more money for pharmaceutical companies.
One of the largest vaccine makers in the world is GlaxoSmithKline (GSK).
The British drugmaker garners nearly twice as many searches as Abbvie (ABBV) by financial pros looking at drug manufacturers.
That makes sense considering business is booming.
Yet, shares performed horrendously this year.
Is now the time to get in?
GlaxoSmithKline (GSK) is a global pharma company with a portfolio of vaccines (20+) that delivers 20 million doses daily.
The company operates 12 vaccine manufacturing sites globally, which produced 767 million doses in 2021. Its vaccines protect people from meningitis, malaria, shingles, flu, polio, measles, COVID-19, and many more.
Additionally, GlaxoSmithKline delivered 1.7 billion doses of medicine last year.
The company is divided into the following segments: Specialty Medicines, Vaccines, and General Medicines.
On Jul 18, GSK completed the demerger of its Consumer Healthcare (CHC) segment into a standalone company. The independent Consumer Healthcare company has been named Haleon. GSK shareholders own 54.5% stake in Haleon, while 6% is held by GSK.
Shares have struggled in 2022 as key products, including Advair, which accounts for 14% of total sales, faced competition from generic versions. While this is a normal part of pharma business cycles, the exiting pipeline is rather underwhelming and plagued by multiple setbacks.
GlaxoSmithKline showed modest growth from 2017 to 2021, moving from $30 billion in revenue in 2017 to $34 billion in 2021.
However, its 12-month trailing revenues currently stand at $37 billion.
During the Q2 2022 earnings release, management updated their sales growth for FY2022 to 6-8% and adjusted operating profit to increase by 13-15%.
GlaxoSmithKline credits this to its growth in Specialty Medicines, including HIV, and a record quarter for its shingles vaccine Shingrix.
The firm did get a boost from its COVID-19 therapy Xevudy, but expects those numbers to decline in the second half of the year. Moreover, its Specialty Medicines group grew +44% YoY.
Despite its strong quarterly numbers, GlaxoSmithKline shares are down by nearly 30% YTD.
GlaxoSmithKline has a current ratio of 1.4x, which implies it has plenty of liquidity to cover its short-term liabilities.
GlaxoSmithKline trades at P/E GAAP of 11.3x, which is notably lower than its 5-year average of 19.3x. Moreover, it’s trading at a lower multiple than Merck (MRK) at 13x, and Eli Lily (LLY) at 48x but higher than Pfizer (PFE) at 8.8x.
At 1.38x, the price-to-sales ratio is quite attractive and lower than its 5-year average of 1.93x. Compared to its rivals, its price-to-sales is lower than PFE at 2.53x, LLY at 9.37x, and MRK at 3.81x.
Furthermore, GlaxoSmithKline trades at a price-to-cash flow of 4.9x, lower than its 5-year average of 7.96x, and notably better than its competitors, PFE at 8.15x, MRK at 11.52x, and LLY at 40.2x.
GlaxoSmithKline pays a handsome annual dividend of $1.85, which currently yields 5.89%.
GlaxoSmithKline operates at a gross profit margin of 65%, which is better than PFE at 62.7%, but not as strong as MRK at 70.7%, and LLY at 75.4%.
At an EBITDA margin of 29.8%, GlaxoSmithKline trails competitors MRK at 41%, LLY at 35.8%, and PFE at 42.9%.
GlaxoSmithKline has a return on equity of 24.7%, which is significantly smaller than its competitors MRK at 43.4%, PFE at 37.4%, and LLY at 74.2%.
The good news is GlaxoSmithKline generates plenty of cash, as its cash from operations exceeds $12.7 billion.
Revenues (YoY) grew at a whopping 31.2%, better than MRK at 30.2%, and LLY at 8.7%, but not as good as PFE at 83.7%, who benefited from Covid vaccines and treatments.
Our Opinion 6/10
Shares of GlaxoSmithKline fell pretty hard in 2022, despite the company raising its guidance.
While the growth outlook doesn’t look spectacular, , the company offers an attractive dividend yield and trades at a discount relative to its 5-year average. Plus it generates huge amounts of cash.
This is why we believe it’s worth taking a shot at these levels.
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