|52 Wk High
|52 Wk Low
|Market Growth LT||A+|
|Market Growth ST||A+|
The Company's Growth Indicators are Very Strong Across the Board Sugesting Market Share Gains
Gilead Sciences, booked a total of $28.54 billion in revenue during the 12 months ended last quarter, which represents a remarkable 215.33% increase from the equivalent period ended three years ago, in which total revenue was $9.05 billion. Such strong sales growth momentum seems to have carried into the company's latest quarterly report, in which total revenue of $7.88 billion represented a 20.16% increase from the year earlier period's $6.55 billion. This kind of top line growth is typical of companies gaining market share and, if managed smartly, should produce strong profits in the next few quarters. Also based on its latest report, profits grew very strongly last quarter when compared to the year earlier period and when measuring full year results against those of three years ago. It posted a Second quarter profit increase of 22.88% to $4.49 billion from $3.66 billion (excluding extraordinary items) a year earlier, compared to a 487.68% full year profit increase to $15.04 billion in the 12 months ended last quarter from $2.56 billion three years earlier. The company's margins, including cash flow, operating and net margins, grew by an average 17.17% in the latest quarter relative to the year earlier period, a significant increase; however this is a slower growth rate compared to the two previous quarters.
The company's stock climbed 4.27% following the company's Second quarter report, meeting analyst estimates of $3.15 per share. Investors' positive reaction to the July 29, 2015 announcement may signal an increase in expectations for future earnings growth. It has now exceeded the consensus earnings estimate by an average of 26.96% in its last six reported quarters, a favorable indicator for the stock.
|Price/Cash Flow Ratio||A+|
Company's Shares Are Attractively Priced Considering the Strength of its Overall Fundamentals
Trading currently at 10.56 times 12-month earnings per share, Gilead Sciences,'s stock is priced inexpensively relative to its EPS growth rate in the last five years. Our indicator looks at the 12-month period ended in each quarter within the last five years and calculates the company's annualized growth rate, which is then used to compute the stock's "optimum" P/E. Based on this analysis, Gilead Sciences,'s earnings per share have grown strongly at an annualized rate of 42.01%. which translates into an optimum P/E ratio of 33.10, 73.44% higher than where the stock trades now. The combination of such a high growth rate with an apparent margin expansion probably means the company has been gaining market share in recent quarters without sacrificing financial performance, evidenced by its superior overall Profitability grade. This combination offers a strong case for future gains in the stock price. The stock also trades at 8.79 times forward earnings estimates for the next four quarters, lower than its trailing P/E and the S&P 500 index's forward P/E of 15.20. By placing a lower multiple on the company's future earnings than it does on the market as a whole, investors may see the company as financially strong but with relatively poor growth prospects. This may offer a valuable opportunity for patient investors willing to wait for future earnings reports.
Gilead Sciences,'s price to book ratio varies significantly depending whether intangible assets (which make up an astounding 72.65% of total stockholders' equity) are included into total assets. If they are, the stock's price to book ratio is a moderate 9.52, while removing intangible assets such as goodwill results in a much richer price to book ratio of 34.79, attaching very high expectations to the company's future earnings power. Based on the $11.96 in cash flow per share generated by the company in the last twelve months, at the current price of $100.65 the stock trades at 8.41 times cash flow, an attractive valuation considering the strength of its overall fundamentals. Its price to sales ratio of 5.20, based on trailing 12-month sales, is 9091.30% lower than the Biotechnology's average ratio of 57.17, a very large discount to its peers. Finally, from a value perspective, we look at how much bigger the company's market capitalization is than its latest operating profits after subtracting taxes. By this measure Gilead Sciences, is priced very attractively with a total value of $147.71 billion , only 9.16 times higher than its latest quarterly net income plus depreciation.
|Return on Equity||A+|
|Quality of Revenues||A+|
Company's Profitability Is Remarkable, Reflective of Excellent Operating Conditions and Strong Management
Gilead Sciences, is a very profitable company with strong overall indicators in this section of our analysis. The company's different measures of return to shareholders and margins are typically above those of its peers. In the last four quarters Gilead Sciences, earned a profit of $15.04 billion, equivalent to 52.71% of its sales in the period. The Biotechnology industry had an average operating margin of 8.69% in the period. The company's operating margin of 63.80% exceeded that average by 625.75%. Gilead Sciences,'s return on equity, based on trailing 12-month earnings, is not only outstanding at 92.36%, but it's higher than the 46.38% return on equity from the year earlier period. This is an important metric of management efficiency in our grading system, as it measures the amount earned on an investment in the company's common stock.
The company's capital structure is pretty conservative relative to its recent performance, with a debt to equity ratio of just 0.75. Its long term debt accounts for 42.28% ot total capital, a very manageable level. Gilead Sciences,'s $19.88 billion in twelve month trailing core earnings, or EBITDA, shows a remarkable increase of 88.33% from the twelve months ended a year earlier, in which its core operations generated $10.56 billion. EBITDA is used to measure the company's true earnings power by including interest costs, income taxes, depreciation and amortization, all non-operating charges, which are nevertheless accounted for in several EPS and net income measures of our fundamental analysis.
|Cash Flow Growth||A+|
|Debt/Cash Flow Ratio||A+|
|Interest Cov. Capacity||A+|
Outstanding Cash Flow Indicators Show the Company Is Managed Smartly and in the Best Interest of its Shareholders
Gilead Sciences, reported a 35.19% growth in cash flow during the latest quarter to $5.66 billion, an impressive increase from the $4.19 billion in the same period last year. This is significantly lower than the 154.71% growth in twelve month trailing cash flow, an indication of a sharp slowdown in the company's core operating income and overall business environment. At the end of last quarter the company's net debt to EBITDA ratio was 0.61, significantly higher than the year earlier ratio of 0.16. Despite such a large increase the latest number is very low and doesn't imply there are any issues with the company's leverage or its ability to finance it with the cash flow generated by its operations. Gilead Sciences, net debt, defined as total debt minus cash on hand, was $3.67 billion last quarter and EBITDA was $6.02 billion. During the same period Gilead Sciences,'s total debt went from accounting for 37.22% of its total capital to 42.99% in its latest quarter, while its cash on hand fell by 2.14%. Unless it begins generating a larger cash flow from operations, all this increased leverage may start hindering future growth and further erode the company's profitability.
An important indicator of management efficiency used by MarketGrader is Economic Value Added, or EVA, which measures each company's true return to shareholders after accounting not only for the cost of running the business (operating costs) but also the cost of the capital it employs. By measuring the real cost of capital, both equity and debt, EVA measures the creation of true economic profit. In this case Gilead Sciences, had $28.22 billion in invested capital in its most recent quarter, a combination of both equity and long term debt. However, the company's weighted cost of equity of 5.33% is much larger than the weighted cost of debt, which is 1.47%. When combined, the two result in a total cost of capital of 6.80%, quite low compared to the company's total return on invested capital of 64.53% based on 12-month trailing operating income. The result is an excellent economic value added of 57.72%, a very high return to investors after all capital costs are covered. The company recently reiterated its 43.00 cent a share dividend payout in its June 30, 2015 earnings report, which results in a 0.85% yield at the stock's current price. Gilead Sciences, initiated its dividend payments during N/A and has been paying regularly since then. The $633.00 million in common dividends paid out by the company in the 12 months ended last quarter accounted for 3.44% of its cash flow and 4.21% of total earnings after taxes. This relatively modest payout was smaller than the 4.50% of earnings paid out in the 12 months ended just a quarter before. Combined with generally favorable fundamentals, the current payout level affords the company flexibility in raising its dividend in the future without eroding its balance sheet should it choose to do so.