uploads///Chart  Rev EPS

Changes in GlaxoSmithKline’s Valuation

By

Oct. 5 2017, Updated 9:38 a.m. ET

GlaxoSmithKline’s valuation

GlaxoSmithKline (GSK) reported growth across all segments in 2Q17, with revenues of 7.3 billion pounds.

The above chart shows revenues and EPS (earnings per share) over the last few quarters and estimates for 3Q17. Wall Street analysts are estimating EPS for 3Q17 at 31.8 pence on revenues of 7.9 billion pounds.

Article continues below advertisement

Forward PE

As of September 29, 2017, GlaxoSmithKline is trading at a forward PE (price-to-earnings) multiple of 14.2x, which is lower than the industry average of 15.7x. Competitors Merck & Co. (MRK), Novartis (NVS), and Eli Lilly (LLY) are trading at forward PE multiples of 15.6x, 16.8x, and 18.8x, respectively.

EV-to-EBITDA

On a capital structure neutral basis, GSK currently trades at an EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~9.0x, which is lower than the industry average of ~11.8x. Competitors Merck & Co. (MRK), Novartis AG (NVS), and Eli Lilly (LLY) have forward EV-to-EBITDA multiples of 11.7x, 16.0x, and 14.0x, respectively.

Article continues below advertisement

Analyst recommendations

According to data on September 29, 2017, GSK stock has fallen 5.3% over the last 12 months, but the stock has risen ~5.4% year-to-date. Analysts are estimating that the stock has the potential to return ~14.1% over the next 12 months. Analyst recommendations show a 12-month target price of $46.33 per share compared to the last price of $40.38 per share on September 29, 2017. There are four analysts tracking GlaxoSmithKline’s ADR (American depositary receipt) listed on the New York Stock Exchange. Of those four analysts, two have recommended a “buy,” and two have recommended a “hold” for the stock. The consensus rating for GlaxoSmithKline’s ADR stands at 2.0, which represents a moderate buy for long-term growth investors.

There are 30 analysts tracking GlaxoSmithKline stock on the London Stock Exchange. Of those 30 analysts, 13 have recommended a “buy,” 15 have recommended a “hold,” and two have recommended a “sell.” The consensus rating for GlaxoSmithKline stock stands at 2.5, representing a moderate buy for value investors.

The VanEck Vectors Pharmaceutical ETF (PPH) holds 4.5% of its total assets in GlaxoSmithKline.

Advertisement

More From Market Realist