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Is GlaxoSmithKline (GSK) Stock Undervalued Right Now?

Zacks Equity Research
·3-min read

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is GlaxoSmithKline (GSK). GSK is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 13.67 right now. For comparison, its industry sports an average P/E of 15.07. Over the past year, GSK's Forward P/E has been as high as 15.37 and as low as 10.51, with a median of 14.16.

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Another valuation metric that we should highlight is GSK's P/B ratio of 3.93. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 6.69. Over the past 12 months, GSK's P/B has been as high as 27.58 and as low as 3.39, with a median of 4.72.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. GSK has a P/S ratio of 2.35. This compares to its industry's average P/S of 4.33.

Finally, we should also recognize that GSK has a P/CF ratio of 13.10. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 15.31. GSK's P/CF has been as high as 13.63 and as low as 8.88, with a median of 11.78, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that GlaxoSmithKline is likely undervalued currently. And when considering the strength of its earnings outlook, GSK sticks out at as one of the market's strongest value stocks.


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Zacks Investment Research