At £16.59, the GSK (LSE: GSK) share price is 8.6% off its 52-week high. While it's still up 12.1% in 2024, could the pharmaceutical giant be the biggest gainer ever FTSE 100 should he give?
Possibly. There are several ways to answer that question. Let's go in.
Measurement
Arguably the most important way to answer my question is to look at the basics like measurement. There are many methods available to value a stock. Another key ratio is price-to-earnings (P/E).
Examining GSK's P/E, the stock looks like good value for money. As seen below, it trades at a P/E of 16.9. Granted, that's higher than Footsie's average of 11. However, it is much cheaper than many of its peers including AstraZeneca (39.4) and Zoetis (37.5).
Created with TradingView
Return yield
Along with its strong valuation, I also like the income it offers. As the chart below highlights, the stock yields a 3.6% dividend.
That's in line with the FTSE 100 average. In addition, it's also higher than AstraZeneca's 1.8% yield and Zoetis' 0.9% payout. Looking ahead, GSK's dividend is predicted to rise to 4.1% by the end of 2026.
Created with TradingView
Accidents
Based on the above, GSK looks like a stock worth further investigation. But what has been holding up the share price for the past few months?
The main feature is its possible litigation problems with Zantac. Painkiller taken off the market in 2019 due to links to cancer. While the company settled previous lawsuits related to the drug, in late May, a US court ruled that 72,000 new lawsuits could go forward.
GSK continues to state that there is no consistent evidence that Zantac gives any risk of cancer. That said, the decision wiped £7bn off the stock price in one day. It has also been predicted to cost the company up to £3bn in payments.
A growing pipe
Legal challenges are always a threat when investing in pharma stocks. So, I'll be watching over the coming months to see how it goes.
But despite this challenge, GSK continues to grow its pipeline, which I like to see. In its latest results, it said it has now received the approval or completion of 10 “.great opportunities“. It is for reasons like these that it has raised its guidance for the whole year. Sales growth should now be between 7% and 9%.
Exchange?
Right now, I think the FTSE 100 is full of bargains. So, would I say that GSK is the biggest gainer in the index? I do not think so.
However, that doesn't mean I wouldn't seriously consider buying the stock today if I had the cash. In fact, it's a business I really like the look of.
GSK looks like it may face challenges in the coming months. However, as a long-term buy, I think the stock would be a smart buy today. I am very attracted to its strong valuation, healthy revenue offering, and growing pipeline.
Source link
