Three Reasons to Love GlaxoSmithKline plc (GSK)

None of these drugs is expected to replace Seretide’s 5 billion pounds of sales on its own, but combined they could exceed Seretide’s sales and they give Glaxo a much more balanced product portfolio for the future.

Diversity built-in
For all of Glaxo’s strengths, the diversity of its business within health care may be where it really shines. Glaxo is primarily a pharmaceutical company, but it still gets 25% of its sales from over the counter health care products such as Sensodyne, Citrucel, and Horlicks, which has become a big seller in India of late.

The international spread of Glaxo’s sales is another way it provides diversification for investors. Most pharmaceutical and health care companies have a large focus on developed markets, but Glaxo’s sales are truly global with 33% of pharmaceutical sales in the U.S., 21% in Europe, 8% in Japan, and 20% in emerging markets. The rest come from specialty sales, and the previously mentioned consumer goods business is global in nature, too.

A good investment?
After their recent gains, GlaxoSmithKline plc (LON:GSK) shares suddenly look expensive at 20 times trailing earnings. I believe the market is betting on earnings growth from new product sales in the coming years and that Glaxo’s shares are more affordable than they appear at first glance. I also believe the market is probably right — do you think Glaxo’s shares warrant a rather lofty valuation?

The article 3 Reasons to Love GlaxoSmithKline originally appeared on and is written by Nathan Parmelee.

Nathan Parmelee — lead advisor for Motley Fool Champion Shares PRO and a co-advisor for Share Advisorowns shares of GlaxoSmithKline. The Motley Fool recommends GlaxoSmithKline.

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