- Gilead Sciences has massively outperformed Nasdaq Composite YTD.
- Gilead stock is facing resistance from the 100 day SMA
- The company has strong fundamentals and attractive valuations.
Gilead Sciences (NASDAQ:GILD) has been on the list of best growth stocks for quite a few investors, generating an overall return of more than 500% in the last five years. Gilead stock analysis shows that the company has registered strong revenue growth and high profitability. Gilead stock is our one of the top rated stocks. And it’s not only us, many analysts’ are bullish on the stock. The company has been rated a “strong buy “ by Zacks. Gilead stock has outperformed the market, returning more than 17% Year to date compared to 2.63% gains in Nasdaq.
An Acquisition On The Anvil?
Recently Gilead sciences announced its intention to raise $10 billion in low interest bearing debt. While the company said that the proceeds will be used for general corporate purposes, there are speculations that Gilead is preparing for its next big acquisition. The speculation has gained currency because Gilead already has a strong cash balance and an increasing free cash flow, which is more than enough to cover Gilead’s buyback programme and its dividend payouts.
Gilead is not new to acquisitions. Gilead has taken the acquisition route multiple times, the most famous being its acquisition of Pharmasset for $11 billion in 2011. The acquisition has enabled Gilead to develop Sovaldi and Harvoni, two of its best selling drugs.
While we can speculate about the method in which Gilead is likely to deploy the cash, we can be quite certain about the fact that Gilead is an investment opportunity.
Gilead Technical Analysis
Gilead Stock is facing resistance from 100 day and 50 day SMA. However, in a bullish crossover the MACD has crossed over the signal line, indicating that the stock is gathering momentum. This would mean that Gilead is likely to trade around current levels in next few trading sessions before it breaks above the resistance line.
Gilead Has Strong Fundamentals
The company has seen its revenue grow at compounded annual growth rate of 48% over the last three years (ttm basis). In last quarter, YoY revenue growth stood at 26.2% and the revenue growth is likely to continue, with analysts estimating Gilead’s Q3 2015 revenues to be around USD 7.78 billion, indicating yoy growth of 28.8%.
Gilead is also a highly profitable company with operating margin of 68.1% and net profit margin of 54.5%. The 3 years average operating margin stood at an impressive 52.6%. Gilead has a return on equity of 93.6% and return on invested capital of 79.5%.
Low Relative Valuation
What makes Gilead stock even more attractive is its cheaper valuation. Gilead is trading at a Price to Earnings (ttm) multiple of 11.65 compared to 23.3 for Pfizer (NYSE:PFE), 15.5 for Merck (NYSE:MRK) and 47 for AbbVie (NYSE:ABBV). And Gilead has higher profitability and stronger revenue growth than its competitors.
The recent dip in Gilead’s stock price is a good opportunity for those investors who want to increase their exposure to Gilead. The company has strong fundamentals and low valuation. While Gilead has always been in the list of growth stocks, the current valuation makes it a strong contender for entering the list of value stocks.
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