Is GlaxoSmithKline (GSK) Stock Undervalued Right Now?
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.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company value investors might notice is GlaxoSmithKline (GSK). GSK is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 12.69, which compares to its industry's average of 14.92. Over the past 52 weeks, GSK's Forward P/E has been as high as 15.37 and as low as 10.51, with a median of 14.15.
Another valuation metric that we should highlight is GSK's P/B ratio of 3.86. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 6.69. Within the past 52 weeks, GSK's P/B has been as high as 27.53 and as low as 3.39, with a median of 4.36.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. GSK has a P/S ratio of 2.22. This compares to its industry's average P/S of 4.15.
Finally, our model also underscores that GSK has a P/CF ratio of 12.46. 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 15.31. Within the past 12 months, GSK's P/CF has been as high as 13.65 and as low as 8.86, with a median of 12.08.
Value investors will likely look at more than just these metrics, but the above data helps show that GlaxoSmithKline is likely undervalued currently. And when considering the strength of its earnings outlook, GSK sticks out at as one of the market's strongest value stocks.
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