As value investors, we rarely get a chance to buy dynamic
biotech companies since they typically sell at 20x (or more) earnings. In the
last two decades, in those rare cases where a biotech company has sold for
under 10x earnings, we have ultimately done quite well on the investment. We
think Gilead Sciences (GILD) represents one of those opportunities today and
feel the stock is a "table-pounding" buy.
By simple valuation metrics, the shares are dirt cheap. The
company sells at 6.6x 2016's EPS of $11.40, 6.9x 2017's EPS of $10.87, and pays
a 2.5% dividend. Beyond selling at a great price, the company has leading drug
franchises in the HIV and hepatitis C markets and has a respectable pipeline.
It also has a solid balance sheet with $4 billion of net cash, strong free cash
flow at $14 billion per year and a top-tier, shareholder-oriented management
team.
Source: TheStreet
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