Gilead Sciences Inc. (NASDAQ:GILD) Presents a Compelling Profile for Value Investors

For investors looking for chances where the market price may not completely show a company's true worth, a methodical screening process can help find possible candidates. One method is to look for stocks that show a good fundamental valuation score, meaning they trade at appealing multiples, while also keeping acceptable scores for financial health, profitability, and growth. This mix tries to point out companies that are not just low-priced, but are valued well compared to their business strength and future potential, a central idea of value investing that looks for a margin of safety between price and real value.

A recent screen using these conditions found Gilead Sciences Inc. (NASDAQ:GILD), a top biopharmaceutical company. A detailed look at its fundamental profile suggests it may deserve additional attention from investors concentrated on value.

An Appealing Valuation View

The most noticeable part of Gilead's current profile is its valuation. The company's ChartMill Valuation Rating is a good 8 out of 10, showing it is priced modestly relative to important financial measures. This rating is important for value investors, as a good entry price provides the basic "margin of safety" that guards against mistakes in study or unexpected market declines.

• Price-to-Earnings (P/E) Ratio: At 15.04, Gilead's P/E ratio is much lower than both the S&P 500 average (~26.76) and its biotechnology industry group average (~63.09). It is less expensive than over 95% of its industry competitors on this measure.
• Forward P/E Ratio: The view stays positive looking forward, with a forward P/E of 13.90, which is also below market and sector averages.
• Cash Flow and EBITDA Multiples: The stock also seems low-priced based on cash flow and enterprise value, trading at a lower Price/Free Cash Flow and Enterprise Value/EBITDA than most of its industry peers.

Good Profitability Supports the Business

A low-priced stock is only a real chance if the company is fundamentally healthy and profitable. Gilead does well here, getting a high ChartMill Profitability Rating of 8. This business strength is necessary, as it confirms the company's ability to produce returns from its assets and supports its existence beyond a low stock price.

• High Returns: The company shows very good returns on capital, with a Return on Invested Capital (ROIC) of 18.54% and a Return on Equity (ROE) of 37.80%, both numbers placing in the top group of its industry.
• Good Margins: Gilead keeps healthy profit margins, including an Operating Margin of nearly 39% and a Gross Margin above 78%, showing strong pricing ability and cost control within its main business.

Reviewing Financial Health and Growth

While the valuation and profitability scores are clear positives, a complete view needs checking financial stability and growth paths. Gilead's financial health gets a medium score of 5. The company has no debt, which is a big positive for solvency. However, its liquidity ratios (Current and Quick Ratio) are seen as being lower than many industry peers, which is an area for investors to watch.

The Growth Rating is a 4, showing a varied but getting better view. In the past, Earnings Per Share (EPS) growth has been uneven. However, the report notes a large 85% EPS growth over the last year and, more significantly, a prediction for good forward EPS growth averaging nearly 20% each year. This expected increase is a key positive, suggesting the company's earnings ability is rising, which could help reduce the difference between its current price and seen real value over time.

A Stock for the Value-Concentrated Investor

Bringing these parts together, Gilead Sciences presents a profile that matches a "decent value" plan. It is not a high-growth stock, but instead an established company trading at a clear discount to its industry. Its high profitability and absence of debt give a firm base, while its good valuation multiples offer the possibility for price increase as earnings rise. The prediction for rising EPS growth adds a catalyst that value investors often look for, a reason for the market to value the stock higher.

For investors, this review highlights the need to look past a single measure. Gilead's case shows how good valuation, profitability, and a improving growth view can come together, making a situation where the market may be undervaluing the company's future cash flows.

Interested in seeing the full fundamental study? You can view the complete report for Gilead Sciences here.

This review of GILD was created by using a particular set of fundamental filters. If you are looking for other companies that match a similar profile of acceptable valuation along with acceptable fundamentals, you can run the "Decent Value Stocks" screen yourself here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. Investing involves risk, including the potential loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.