Gilead Sciences Inc Valuation – January 2019 $GILD

Company Profile (excerpt from Reuters): Gilead Sciences, Inc., incorporated on June 22, 1987, is a research-based biopharmaceutical company that discovers, develops and commercializes medicines in areas of unmet medical need. The Company’s portfolio of products and pipeline of investigational drugs includes treatments for Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS), liver diseases, cancer, inflammatory and respiratory diseases and cardiovascular conditions. Its products include AmBisome, Atripla, Cayston, Complera/Eviplera, Descovy, Emtriva, Epclusa, Genvoya, Harvoni, Hepsera, Letairis, Odefsey, Ranexa, Sovaldi, Stribild, Truvada, Tybost, Vemlidy, Viread, Vitekta and Zydelig. The Company’s areas of focus include HIV; liver diseases, such as chronic hepatitis C virus (HCV) infection and chronic hepatitis B virus (HBV) infection; hematology/oncology; cardiovascular, and inflammation/respiratory diseases. The Company had operations in more than 30 countries, as of December 31, 2016. The Company, through its subsidiary Kite Pharma, Inc. (Kite), is engaged in the development of cancer immunotherapies. Kite is focused on chimeric antigen receptor (CAR) and T cell receptor (TCR) engineered cell therapies designed to empower the immune system’s ability to recognize and kill tumors. Kite’s pipeline includes axicabtagene ciloleucel, KTE-C19, Human anti-CD19 (2nd Gen), Humanized anti-CD19 Control CAR (3rd Gen), KITE-585 (anti-BCMA), KITE-796 (anti-CLL-1 Control CAR), MAGE A3/A6, KITE-718 (MAGE A3/A6), MAGE A3, HPV-16 E6 & E7, KITE-439 (HPV-16 E7), KRAS, SSX-2 and Neoantigens.


Downloadable PDF version of this valuation:

ModernGraham Valuation of GILD – January 2019

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 $87,772,115,026 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.45 Pass
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 293.60% Pass
6. Moderate PEmg Ratio PEmg < 20 9.88 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.85 Pass
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 3.45 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.99 Pass
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

EPSmg $6.87
MG Growth Estimate 13.56%
MG Value $244.68
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $99.60
MG Value based on 0% Growth $58.38
Market Implied Growth Rate 0.69%
Current Price $67.84
% of Intrinsic Value 27.73%

Gilead Sciences, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all value 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 $3.61 in 2014 to an estimated $6.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.69% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Gilead Sciences, Inc. revealed the company was trading above its Graham Number of $44.37. The company pays a dividend of $2.08 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.88, which was below the industry average of 35.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.88.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.88
Graham Number $44.37
PEmg 9.88
Current Ratio 3.45
PB Ratio 3.85
Current Dividend $2.08
Dividend Yield 3.07%
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $34,918,000,000
Total Current Liabilities $10,116,000,000
Long-Term Debt $24,570,000,000
Total Assets $64,305,000,000
Intangible Assets $20,432,000,000
Total Liabilities $41,298,000,000
Shares Outstanding (Diluted Average) 1,307,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.60
Dec2017 $3.51
Dec2016 $9.94
Dec2015 $11.91
Dec2014 $7.35
Dec2013 $1.81
Dec2012 $1.64
Dec2011 $1.77
Dec2010 $1.66
Dec2009 $1.41
Dec2008 $1.03
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 -$0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.87
Dec2017 $7.30
Dec2016 $8.31
Dec2015 $6.63
Dec2014 $3.61
Dec2013 $1.71
Dec2012 $1.61
Dec2011 $1.51
Dec2010 $1.20
Dec2009 $0.85
Dec2008 $0.51
Dec2007 $0.22
Dec2006 -$0.06
Dec2005 $0.21
Dec2004 $0.08
Dec2003 -$0.01
Dec2002 $0.01

Recommended Reading:

Other ModernGraham posts about the company

Most Undervalued Stocks of the S&P 500 – August 2018
10 Undervalued Stocks for the Enterprising Investor – August 2018
10 Undervalued Stocks for the Enterprising Investor – July 2018
10 Best Dividend Paying Stocks for the Enterprising Investor – May 2018
10 Stocks for Using A Benjamin Graham Value Investing Strategy – May 2018

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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.

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