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Should Value Investors Buy GlaxoSmithKline (GSK) Stock?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

GlaxoSmithKline (GSK - Free Report) is a stock many investors are watching right now. GSK is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A.

Investors should also recognize that GSK has a P/B ratio of 5. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 6.35. Over the past 12 months, GSK's P/B has been as high as 27.58 and as low as 4.61, with a median of 21.19.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. GSK has a P/S ratio of 2.6. This compares to its industry's average P/S of 3.96.

Finally, our model also underscores that GSK has a P/CF ratio of 11.56. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 14.96. Within the past 12 months, GSK's P/CF has been as high as 25.46 and as low as 10.34, with a median of 12.17.

These are only a few of the key metrics included in GlaxoSmithKline's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, GSK looks like an impressive value stock at the moment.


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