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GlaxoSmithKline’s Valuation on June 29

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Dec. 4 2020, Updated 10:53 a.m. ET

GlaxoSmithKline’s valuation

GlaxoSmithKline (GSK) is a global pharmaceutical company with a focus on sustainable growth through strategizing its business beyond pharmaceuticals. GlaxoSmithKline reports its financial statements in British pounds.

In the first quarter, GlaxoSmithKline surpassed analysts’ estimates for EPS and revenue and reported EPS of 24.60 pence on revenue of 7.2 billion pounds, a 2% fall year-over-year.

The chart above shows the company’s revenue and EPS since the first quarter of 2017. For the second quarter, analysts expect EPS of 25.96 pence on revenue of 7.1 billion pounds. Further, GlaxoSmithKline completed its acquisition of Novartis’s (NVS) stake in the Consumer Healthcare joint venture in June. The acquisition is expected to improve the company’s cash flows and help it in its future capital allocation. Let’s take a look at GlaxoSmithKline’s valuation multiples.

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Forward PE

The forward PE multiple considers a stock’s current price over its estimated EPS. As of June 29, GlaxoSmithKline is trading at a forward PE multiple of 13.8x, slightly higher than the industry average of 13.6x. Competitors Pfizer (PFE), Novartis, and Merck & Company (MRK) are trading at lower forward PEs of 12.0x, 13.4x, and 13.6x, respectively.

Forward EV-to-EBITDA

On a capital-structure-neutral basis, GSK is currently trading at a forward EV-to-EBITDA (enterprise value-to-EBITDA) multiple of ~9.4x, lower than the industry average of ~11.1x, as of June 29. Other competitors Pfizer, Novartis, and Merck & Company have higher forward EV-to-EBITDA multiples of 10.4x, 12.6x, and 11.2x, respectively.

The First Trust Value Line Dividend ETF (FVD) holds 0.5% of its total investments in GlaxoSmithKline, 0.5% in Pfizer, 0.5% in Novartis, and 0.5% in Merck & Company.

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