Gilead Sciences Inc Valuation – July 2016 $GILD

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Gilead Sciences Inc (GILD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Gilead Sciences, Inc. is a research-based biopharmaceutical company. The Company focuses on the discovery, development and commercialization of medicines in areas of unmet medical need. The Company’s principal areas of focus include human immunodeficiency virus (HIV), liver diseases, such as chronic hepatitis C virus infection and chronic hepatitis B virus infection, cardiovascular, hematology/oncology and inflammation/respiratory. Its HIV products include Genvoya, Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta. The Company’s liver diseases products include Harvoni, Sovaldi, Viread and Hepsera. The Company’s cardiovascular products include Letairis, Ranexa and Lexiscan/Rapiscan. Its oncology product is Zydelig. Its respiratory products include Cayston and Tamiflu. Its other products include AmBisome and Macugen. The Company’s Nimbus Apollo program is a Phase II ready clinical program for NDI-010976 and related metabolic and liver diseases.


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Downloadable PDF version of this valuation:

ModernGraham Valuation of GILD – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $115,490,208,587 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.77 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 819.70% Pass
6. Moderate PEmg Ratio PEmg < 20 9.93 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.10 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.77 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.52 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

GILD value chart July 2016

EPSmg $8.69
MG Growth Estimate 15.00%
MG Value $334.69
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $126.05
MG Value based on 0% Growth $73.89
Market Implied Growth Rate 0.72%
Current Price $86.34
% of Intrinsic Value 25.80%

Gilead Sciences, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.61 in 2012 to an estimated $8.69 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.72% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Gilead Sciences, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

GILD charts July 2016

Net Current Asset Value (NCAV) -$10.69
Graham Number $49.80
PEmg 9.93
Current Ratio 1.77
PB Ratio 9.10
Current Dividend $1.72
Dividend Yield 1.99%
Number of Consecutive Years of Dividend Growth 2


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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $19,267,000,000
Total Current Liabilities $10,910,000,000
Long-Term Debt $21,077,000,000
Total Assets $47,765,000,000
Intangible Assets $11,095,000,000
Total Liabilities $34,367,000,000
Shares Outstanding (Diluted Average) 1,412,000,000

Earnings Per Share History

Next Fiscal Year Estimate $11.09
Dec2015 $11.91
Dec2014 $7.35
Dec2013 $1.81
Dec2012 $1.64
Dec2011 $1.78
Dec2010 $1.66
Dec2009 $1.41
Dec2008 $1.05
Dec2007 $0.84
Dec2006 -$0.65
Dec2005 $0.43
Dec2004 $0.25
Dec2003 -$0.05
Dec2002 $0.04
Dec2001 $0.03
Dec2000 -$0.04
Dec1999 -$0.05
Dec1998 -$0.06
Dec1997 -$0.03
Dec1996 -$0.02

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $8.69
Dec2015 $6.63
Dec2014 $3.61
Dec2013 $1.71
Dec2012 $1.61
Dec2011 $1.51
Dec2010 $1.21
Dec2009 $0.86
Dec2008 $0.52
Dec2007 $0.22
Dec2006 -$0.05
Dec2005 $0.21
Dec2004 $0.08
Dec2003 -$0.01
Dec2002 $0.01
Dec2001 -$0.02
Dec2000 -$0.04

Recommended Reading:

Other ModernGraham posts about the company

58 Companies in the Spotlight This Week – 1/31/15
Gilead Sciences Inc. Annual Valuation – 2015 $GILD
14 Companies in the Spotlight This Week – 1/18/14
Gilead Sciences Inc. (GILD) Annual Valuation

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

One thought on “Gilead Sciences Inc Valuation – July 2016 $GILD

  1. Ronald E. Baker says:

    What has caused a hyperbolic rise in share prices, from $20 to $120 and back to $87 is the phenomenal rise in EPS since the 2006 loss. For 2 years it has lost shareholders some money in total returns, although these have turned up in the most recent quarter. While the company spends heavily (9% of sales) on research, GILD floats on a sea of debt and depends upon sky-high product prices. Too often it depends upon government financed patient care where delays can block market growth. That’s a precarious mixture for all but the fearless speculator. For that reason, Weiss rates it a C+, (Firm Hold) while calm heads watch and weigh up progress. It may take another year to confirm if this is a true, long-term, winner like ABBV or JNJ. GILD looks a bit like a bet today on a very pretty horse sure to be Kentucky Derby & triple crown winner!! Watch & Pray is O.K. for me (until next May).

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