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Should Value Investors Pick Gilead Sciences (GILD) Stock?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Gilead Sciences, Inc. (GILD - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Gilead Sciences has a trailing twelve months PE ratio of 10.6, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.1. If we focus on the stock’s long-term PE trend, the current level puts Gilead Sciences’ current PE ratio slightly above its midpoint (which is 9.3) over the past five years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 44.0. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Gilead Sciences has a forward PE ratio (price relative to this year’s earnings) of just 11.2, so it is fair to expect an increase in the company’s share price in the near future.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Gilead Sciences’ P/CF ratio of 26.6 is higher than the industry average of 18.1, which indicates that the stock is somewhat overvalued in this respect.
Broad Value Outlook
In aggregate, Gilead Sciences currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes GILD a solid choice for value investors.
What About the Stock Overall?
Though Gilead Sciences might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of F. This gives GILD a VGM score—or its overarching fundamental grade—of F. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen nine estimates go higher in the past sixty days and one lower, while the full year estimate has seen 14 upward and no downward revisions in the same time period.
This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has risen about 3.8% in the past two months, while the full year estimate has increased nearly 7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Gilead Sciences is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (top 38% out of more than 250 industries) and a strong Zacks Rank, the company deserves attention right now. However, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends to turn around first. When it does, this stock could be a compelling value pick.
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Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022.
Image: Bigstock
Should Value Investors Pick Gilead Sciences (GILD) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Gilead Sciences, Inc. (GILD - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Gilead Sciences has a trailing twelve months PE ratio of 10.6, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.1. If we focus on the stock’s long-term PE trend, the current level puts Gilead Sciences’ current PE ratio slightly above its midpoint (which is 9.3) over the past five years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 44.0. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Gilead Sciences has a forward PE ratio (price relative to this year’s earnings) of just 11.2, so it is fair to expect an increase in the company’s share price in the near future.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Gilead Sciences’ P/CF ratio of 26.6 is higher than the industry average of 18.1, which indicates that the stock is somewhat overvalued in this respect.
Broad Value Outlook
In aggregate, Gilead Sciences currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes GILD a solid choice for value investors.
What About the Stock Overall?
Though Gilead Sciences might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of F. This gives GILD a VGM score—or its overarching fundamental grade—of F. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen nine estimates go higher in the past sixty days and one lower, while the full year estimate has seen 14 upward and no downward revisions in the same time period.
This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has risen about 3.8% in the past two months, while the full year estimate has increased nearly 7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Gilead Sciences, Inc. Price and Consensus
Gilead Sciences, Inc. Price and Consensus | Gilead Sciences, Inc. Quote
This bullish trend is why the stock boasts a Zacks Rank #1 (Strong Buy) and why we are expecting outperformance from the company in the near term.
Bottom Line
Gilead Sciences is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Boasting a good industry rank (top 38% out of more than 250 industries) and a strong Zacks Rank, the company deserves attention right now. However, over the past one year, the sector has clearly underperformed the broader market, as you can see below:
Despite positive estimate revision activity, investors should wait for industry trends to turn around first. When it does, this stock could be a compelling value pick.
Best Electric Car Stock? You'll Never Guess It.
Zacks Research has released a report that may shock many investors. One stock stands out as the best way to invest in the surge to electric cars. And it's not the one you may think!
Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022.
See Zacks Best EV Stock Free >>