Thursday, March 5, 2015

Analysis of Gilead Sciences

Gilead Sciences, an American bio-pharmaceutical company

Company: Gilead Sciences

ISIN US3755581036 | WKN 885823

Business: An American bio-pharmaceutical company. They are involved in six different fields: HIV/AIDS, Liver Diseases, Oncology/Inflammation, Cardiovascular, Respiratory and finally Other. They go all the way from discovery, development and finally commercialisation of the new pharmaceuticals.

Active: They are present on every continent but mainly/strongest in the US and in Europe.

P/E: 14.0

This company was analysed due to a request on Twitter by Rafy - Long Investor. Thanks for the suggestion!

contrarian values of P/E, P/B, ROE as well as dividend for Gilead Sciences

The P/E is a little bit high for me but still ok with 14.0 but the P/B is far too high with 11.0 this then also gives a very clear no go from Graham. The earnings to sales is at 49% which is excellent and the ROE is insane high with almost 80%! The book to debt ratio is also ok with 0.8.
In the last five years they have had a yearly revenue growth of over 25% which is spectacular and this then gives us, being cautious that is, a motivated P/E of 40 to 45 which means that Gilead Sciences is highly undervalued on the market.
The spend 23% of their earnings on research which I find to be a very healthy amount.
They pay no dividends which I do not like at all.
As a final comment they seem to have hit the jackpot in 2014 and their revenue and earnings went up like crazy in comparison to the very nice linear growth that they previously had.

Conclusion: Graham says no to this company but I do not. This looks like an excellent growth company that hit jackpot last year. They also seem to connect to their patients by spending symbolic money on several HIV/AIDS foundations and activities. The P/E is good, the ROE is excellent and the only downside is P/B and no dividends. With that revenue and earnings growth I can live without dividends. Gilead Sciences will directly be added to the Stocks of Interest list.

If this analysis is outdated then you can request a new one.


Edmund Shing said...

Hi there, actually Gilead has recently announced a maiden dividend, so they should yield something like 2%+ going forwards. Also they will buy back shares I believe, which helps the overall shareholder yield. Edmund

Fredrik von Oberhausen said...

Thanks for letting me know Edmund!

I just got this message also on Twitter:

Rafy - Long Investor @InvestorLong @vonOberhausen thank you very much! I read that they made a decision to pay dividend from now on !

It was a slow growing company with reasonable profitability that last year went ballistic in growth and profitability.