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Is GlaxoSmithKline (GSK) a Great Value Stock Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One stock to keep an eye on is GlaxoSmithKline (GSK). GSK is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 14.85, which compares to its industry's average of 14.87. GSK's Forward P/E has been as high as 15.35 and as low as 12.29, with a median of 13.81, all within the past year.

Investors should also recognize that GSK has a P/B ratio of 5.03. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 6.47. Within the past 52 weeks, GSK's P/B has been as high as 27.58 and as low as 4.61, with a median of 21.19.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. GSK has a P/S ratio of 2.64. This compares to its industry's average P/S of 4.

Finally, investors should note that GSK has a P/CF ratio of 11.63. 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. GSK's current P/CF looks attractive when compared to its industry's average P/CF of 15.63. Within the past 12 months, GSK's P/CF has been as high as 25.46 and as low as 10.34, with a median of 12.07.

These are only a few of the key metrics included in GlaxoSmithKline's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, GSK looks like an impressive value stock at the moment.


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