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...
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.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One company value investors might notice is GlaxoSmithKline (GSK). GSK is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 12.69, while its industry has an average P/E of 14.35. GSK's Forward P/E has been as high as 14.45 and as low as 11.02, with a median of 12.77, all within the past year.
Another notable valuation metric for GSK is its P/B ratio of 3.41. 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 5.62. Over the past year, GSK's P/B has been as high as 3.95 and as low as 3.15, with a median of 3.56.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. GSK has a P/S ratio of 2.35. This compares to its industry's average P/S of 3.64.
Finally, our model also underscores that GSK has a P/CF ratio of 8.21. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 19.19. Within the past 12 months, GSK's P/CF has been as high as 12.79 and as low as 8.05, with a median of 9.05.
These figures are just a handful of the metrics value investors tend to look at, but they help show that GlaxoSmithKline is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, GSK feels like a great value stock at the moment.
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