A look at the charts of GSK indicates that the stock has been on an uptrend since February 2009 when it made its low of around $30. Since it is a dividend income stock, the growth of 50% in price over the past 4 years is only part of the story. In addition to the decent capital appreciation, the 5 year average dividend yield of 5% makes the stock appear a good bet for the long term. However, the fundamentals have not been too supportive of growing dividends as the payouts have increased consistently. Sales have declined by 3.4% in 2012, and the net income is down by more than 13%. Last 52 weeks have been relatively volatile for this quiet stock. It is up by around 12% from the lows of $41.68 made in November 2012. In fact, the stock had fallen dramatically from the 52 week high of $47.70 made a month before that based on fundamental news flow. It has since recovered, and is now touching the highs again. The trailing P/E is around 16 and the forward P/E is 13.5 indicating that there is not much optimism about robust growth. This is also signaled by a high PEG of close to 4. The price to book ratio is high at around 12, and price to sales is 2.67. The debt equity ratio is also extremely high at 271, and the low current ratio (0.99) indicates that liquidity is not very comfortable. Most of these ratios compare poorly with peers like PFE, MRK etc. Considering that the company has plans to file patents for 15 drugs over the next three years, it is possible that these statistics may change for the better. This is the story of several big pharma companies which are making efforts to come up with new products to increase sales. Popular areas of research are Cancer, diabetes, heart, nervous system and respiratory diseases. Companies like PFE, MRK have pipeline for several segments while smaller companies like Senesco Technologies (SNTI) are specializing in cancer research.
My biggest concern that i have been following with GSK is Europe. It still accounts for a large portion of their earnings and has been a complete diaster with austerity since Greece started in 2011. They have been working hard on cost cutting which has been helping offset some of the impacts. The big growth driver from GSK. Will be Emerging markets where it has been strongly focused over the past year and its sales there have really helped offset the topline shrinkage from Europe. This is a wait and see in my book. Right here at 47$ it seems to be overbought so i have taken some gains and will wait for the next pull back to probably the 43$ level.