|52 Wk High
|52 Wk Low
|Market Growth LT||B|
|Market Growth ST||A+|
The Company's Financials Show Very Solid Top and Bottom Line Growth in the Short and Long Term
Gilead Sciences, booked $13.71 billion in total revenue during the 12 month period ended last quarter, 77.78% higher than the equivalent period ended three years ago, when total revenue was $7.71 billion. This already-healthy top line growth trend seems to have accelerated recently based on the company's revenue of $5.02 billion reported in its latest quarter, 98.31% above the $2.53 billion in total sales posted during the same quarter a year earlier. A few more quarters of such strong growth will eventually translate into a higher long term growth rate, positively impacting some of Gilead Sciences,'s growth grades. If, on the other hand, growth tapers off moderately, the company's long term sales growth is likely to remain at current levels, not a bad thing at all. Profits grew very strongly last quarter compared to a year ago while full year net income showed healthy gains from three years before. It posted a First quarter profit increase of 208.43% to $2.23 billion from $722.19 million (excluding extraordinary items) a year earlier, compared to a 69.79% full year profit increase to $4.58 billion in the 12 months ended last quarter from $2.70 billion three years earlier. The company's ongoing margin expansion accelerated during its latest quarter with an average 15.37% increase in EBITDA, operating and net margins relative to the year ago period.
First quarter earnings per share of $1.48, reported by the company on April 23, 2014, were in line with what analysts had been expecting. The stock had a modest 1.67% gain from the day before to the day after the announcement. It has now exceeded the consensus earnings estimate by an average of 3.08% in its last six reported quarters, a favorable indicator for the stock.
|Price/Cash Flow Ratio||D|
Company's Shares Seem Fully Priced and Buying at this Level Would Be Highly Speculative
Gilead Sciences,'s stock, currently priced at 11.64 times 12-month forward earnings per share, trades at a 39.13% discount to our "optimum" P/E ratio of 19.12. This is calculated by MarketGrader based on the company's EPS growth rate in the last two years, using reported quarterly figures. By this measure, Gilead Sciences,'s earnings per share have increased at an annualized rate of 28.24% in the last two years. 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 11.64 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 96.21% of total stockholders' equity) are included into total assets. If they are, the stock's price to book ratio is a moderate 11.19, while removing intangible assets such as goodwill results in a much richer price to book ratio of 11.19, attaching very high expectations to the company's future earnings power. The company generated $2.38 in cash flow per share over the last twelve months, which translates into a 37.45 price to cash flow ratio. Such a rich multiple suggests investors have very high hopes that the company's strong fundamental performance continues in the future. Its stock price is also 10.00 times its trailing 12-month sales, a 7436.20% discount to the Biotechnology industry's average price to sales ratio of 39.02. Our final value indicator looks at the relationship between the company's current market capitalization and its operating profits after deducting taxes. From that perspective Gilead Sciences,'s $136.97 billion market cap seems pretty rich, 26.90 times higher than the net income (plus depreciation) it reported in its latest quarter.
|Return on Equity||A|
|Quality of Revenues||B-|
Profitability Record Is Excellent Across the Board Suggesting a Very Well Managed Operation
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 $4.58 billion, equivalent to 33.41% of its sales in the period. The Biotechnology industry had an average operating margin of 11.76% in the period. The company's operating margin of 48.46% exceeded that average by 300.47%. Gilead Sciences,'s return on equity, based on trailing 12-month earnings, is not only outstanding at 34.21%, but it's higher than the 28.29% 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.
In light of the company's strong performance its capital structure might be too conservative, with total debt being only three quarters of its total equity. Its long term debt accounts for only 37.34% of total capital. Gilead Sciences,'s $7.10 billion in twelve month trailing core earnings, or EBITDA, shows a remarkable increase of 61.31% from the twelve months ended a year earlier, in which its core operations generated $4.40 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,'s cash flow grew considerably in its latest quarter to $1.57 billion, a 133.30% increase from $672.10 million reported in the year earlier period. This growth seems to be accelerating considering that in the last twelve months the company's cash flow was 17.20% higher than the twelve months ended a year ago, a nice increase but quite lower than the current pace. This upward trend should boost its margins and overall profitability in the next few quarters. The company's liquidity is not only remarkable but the current amount of debt it carries relative to the cash flow it generates from tis operations is even lower now than it was a year ago. Its net debt (total debt minus cash on hand) at the end of its last quarter was $3.38 billion, only 1.03 times bigger than its $3.27 billion in EBITDA. This ratio fell by an impressive 81.83% from the year earlier period, when EBITDA was $1.06 billion. This reduction means the company is very well capitalized and has room to expand its leverage if necessary to pursue new growth opportunities without unduly impairing its liquidity. Also, in a few more signs that Gilead Sciences, is managing its balance sheet very conservatively, its total debt as a percentage of total capital was reduced during the last twelve months, although it was a small reduction, while its cash on hand grew. Total debt now represents 42.39% of total capital compared to 44.06% a year earlier, while the company had $6.47 billion in cash on hand last quarter, 232.98% more than it did at the end of the year earlier quarter. These developments enhance the company's substantial flexibility in pursuing future growth opportunities and improve total returns to its shareholders.
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 $21.37 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 6.23% is much larger than the weighted cost of debt, which is 0.83%. When combined, the two result in a total cost of capital of 7.06%, quite low compared to the company's total return on invested capital of 31.09% based on 12-month trailing operating income. The result is an excellent economic value added of 24.03%, a very high return to investors after all capital costs are covered. Gilead Sciences, does not pay a dividend and hasn't done so within at least the last five years.