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GlaxoSmithKline’s Valuation after 1Q18 Earnings

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GlaxoSmithKline’s Valuation

GlaxoSmithKline (GSK) reported revenues of ~7.2 billion pounds in 1Q18, a ~2% decline from its ~7.3 billion pounds in 1Q17.

The above chart shows revenues and earnings per share (or EPS) since 1Q16. GlaxoSmithKline beat Wall Street analysts’ estimates for earnings per share (or EPS) and revenues for 1Q18, and it reported EPS of 24.60 pence on revenues of 7.22 billion pounds. 

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Forward PE

The forward price-to-earnings (or Forward PE) ratio considers the current stock price over its estimated earnings per share. As of April 27, GlaxoSmithKline is trading at a forward PE multiple of 13.5x, which is lower than the industry average of 13.8x. Competitors Novartis AG (NVS), Allergan (AGN), and Merck & Co. (MRK) are trading at forward PEs of 14.3x, 10.0x, and 13.8x, respectively.

Forward EV-to-EBITDA

On a capital structure–neutral basis, GSK currently trades at a forward EV-to-EBITDA multiple of ~8.5x, which is lower than the industry’s average of ~11.3x as of April 27. Competitors Novartis (NVS), Allergan (AGN), and Merck & Co. (MRK) have higher forward EV-to-EBITDA multiples of 13.3x, 11.1x, and 11.3x, respectively.

The Vanguard FTSE All-World ex-US ETF (VEU) invests 0.4% of its portfolio in GlaxoSmithKline (GSK) and 0.8% in Novartis AG (NVS).

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