Should Value Investors Buy GlaxoSmithKline (GSK) Stock?

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 company to watch right now is GlaxoSmithKline (GSK). GSK is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 14.07 right now. For comparison, its industry sports an average P/E of 14.19. Over the past year, GSK's Forward P/E has been as high as 14.41 and as low as 12.29, with a median of 13.67.

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 2.64. This compares to its industry's average P/S of 3.76.

Finally, we should also recognize that GSK has a P/CF ratio of 11.01. 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 stock's P/CF looks attractive against its industry's average P/CF of 14.54. Over the past year, GSK's P/CF has been as high as 25.46 and as low as 10.34, with a median of 12.52.

These are just a handful of the figures considered in GlaxoSmithKline's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that GSK is an impressive value stock right now.

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