Are GILD Stock Investors Taking HCV Sales Concerns Too Seriously?
Up to now, I have been very vocal with respect to my bullish opinion regarding Gilead Sciences, Inc. (NASDAQ:GILD). Many investors and analysts alike have been trying to pick a bottom in the stock this year, but the stock stubbornly continues to trade below $75 a share. Worrying downward trends with respect to the company’s HCV division remain the dominant theme among investors. Gilead’s HCV division slipped by a whopping 31% last quarter, which resulted in HCV sales of $3.3 billion, which was well below expectation. The stock is now down almost 40% from its high back in June 2015. At present, investors simply can’t see a swift turnaround in the company’s quarterly sales. This has resulted in the company now trading with a price-to-earnings ratio of 6.94 which is ludicrously cheap for a company with a market cap of around $100 billion. Nevertheless, the question still remains whether the stock is going lower.
Why GILD Stock Is A Value Play Right Now
Value investors have shown up en masse as of late and with good reason. In a nutshell, Gilead Sciences, Inc. (NASDAQ:GILD) has increased its revenues by a factor of 10 over the past decade whereas it’s debt as a percentage of its equity has only doubled. Gross margins remain above 85% which is the main reason why this company’s balance sheet is so strong. The recently incorporated dividend yield of 2.51% still only results in a payout ratio of 16.7% on a trailing 12-month average. Furthermore, the company’s price-to-sales ratio and the price-to-cash-flow ratio of 3.3 & 5.8 respectively fall well below industry average numbers as well as Gilead’s historic averages. Finally, the company’s present position in HIV where its new TAF regimens are beating expectations and are patent protected well beyond 2020, has to be seen as another strong competitive advantage. The one outlier is whether the company can stabilize its HCV sales as the market will need to see this before the share price can truly rally.
Also Read: Gilead Sciences Inc: Can GILD Stock Make A Comeback In 2017?