|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 $30.66 billion in revenue during the 12 months ended last quarter, which represents a remarkable 230.60% increase from the equivalent period ended three years ago, in which total revenue was $9.27 billion. Such strong sales growth momentum seems to have carried into the company's latest quarterly report, in which total revenue of $8.16 billion represented a 34.98% increase from the year earlier period's $6.04 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 Third quarter profit increase of 68.42% to $4.60 billion from $2.73 billion (excluding extraordinary items) a year earlier, compared to a 578.06% full year profit increase to $16.91 billion in the 12 months ended last quarter from $2.49 billion three years earlier. The company's margins, including cash flow, operating and net margins, grew by an average 16.11% 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.
Third quarter earnings per share of $3.22, reported by the company on October 28, 2015, were in line with what analysts had been expecting. The stock had a modest 1.58% gain from the day before to the day after the announcement. It has now exceeded the consensus earnings estimate by an average of 10.17% 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 9.10 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 44.98%. which translates into an optimum P/E ratio of 32.50, 72.02% 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 9.10 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 current market value is a moderate 28.04 times total book value; however, when intangible assets such as goodwill are removed from total assets, the price to book ratio jumps significantly to 9.32. Such a difference is attributed to the fact that intangible assets make up an astonishing 66.76% of total stockholders' equity, a level worth monitoring to better understand the company's accounting practices. Based on the $12.29 in cash flow per share generated by the company in the last twelve months, at the current price of $108.00 the stock trades at 8.79 times cash flow, an attractive valuation considering the strength of its overall fundamentals. Its price to sales ratio of 5.10, based on trailing 12-month sales, is 89.49% lower than the Biotechnology's average ratio of 48.55, a very large discount to its peers. Our final value indicator looks at the relationship between the company's current market capitalization and its operating profits after deducting taxes. By this measure Gilead Sciences, is priced very attractively with a total value of $155.65 billion , only 8.64 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 $16.91 billion, equivalent to 55.17% of its sales in the period. Operating income during that same period accounted for 65.82% of sales, 672.19% higher than the average operating margin for the Biotechnology industry, which was 8.43%. Gilead Sciences,'s return on equity, based on trailing 12-month earnings, is not only outstanding at 97.12%, but it's higher than the 69.33% 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.
Such impressive returns amply justify the company's leverage even though its total debt is 1.28 times its shareholder equity. Its long term debt, which represents 55.70% of total capital is very adequate and shouldn't raise any concerns at this time. Gilead Sciences,'s $22.10 billion in twelve month trailing core earnings, or EBITDA, shows a remarkable increase of 69.99% from the twelve months ended a year earlier, in which its core operations generated $13.00 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||C|
|Debt/Cash Flow Ratio||A+|
|Interest Cov. Capacity||A+|
Company's Cash Flow Is Very Well Managed as Our Analysis Reflects a Very Healthy Operation
Gilead Sciences, showed a small improvement in its quarterly cash flow during the latest period, in which it grew by 1.28% to $4.10 billion from the $4.04 billion reported in the same period last year. This is significantly lower than the 75.56% growth in twelve month trailing cash flow, an indication of a sharp slowdown in the company's core operating income and overall business environment. The company has a moderate net debt to EBITDA ratio of 1.11, even though it jumped 30.02% from last year's 0.85. The latest number is based on $6.52 billion in net debt, calculated as total debt minus cash on hand, and EBITDA of $5.89 billion, suggesting the company could pay off its debt with the cash flow it generates from operations with relative ease. In the last twelve months its total debt as a percentage of total capital also increased, in this case by 36.68% from 41.03% a year ago to 56.07% in the company's latest quarter. However, Gilead Sciences,'s cash on hand is now 148.78% more than it was a year before, suggesting its increased leverage is well within its means to service it and might contribute to future growth.
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 $39.31 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 4.04% is much larger than the weighted cost of debt, which is 1.20%. When combined, the two result in a total cost of capital of 5.24%, quite low compared to the company's total return on invested capital of 51.32% based on 12-month trailing operating income. The result is an excellent economic value added of 46.08%, 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 September 30, 2015 earnings report, which results in a 0.80% yield at the stock's current price. Gilead Sciences, initiated its dividend payments during N/A and has been paying regularly since then. The $1.26 billion Gilead Sciences, paid out in dividends during the last twelve months represents 7.45% of its after-tax earnings, a relatively small amount, yet a significant increase from the 4.21% payout in the 12 months ended just a quarter earlier. Total dividends paid in the last year also represent 6.82% of the company's total cash flow. The large payout increase doesn't raise any concerns about the company's liquidity since the overall payout level is still low and its fundamentals are generally healthy.