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Gilead (GILD) is a Cheap Growth Stock Worth Buying Now

Gilead Sciences Inc GILD is a biopharmaceutical corporation which develops and markets drugs that treat viral infections, fungal infections, bacterial infections, and cancer.  The company is especially famous for its drugs which treat hepatitis C and HIV/AIDS.

The company recently purchased Nimbus Apollo, a subsidiary of Nimbus Therapeutics, for $400 million.  Nimbus Apollo is developing a drug to treat non-alcoholic steatohepatitis (NASH).  The disease which Nimbus is trying to combat affects 2-5% of Americans, and the disease continues to grow in correlation with rising obesity rates. 

There are over 3 million new cases in the U.S. per year.  If Nimbus Apollo develops a drug which effectively combats NASH, Gilead will be laughing all the way to the bank.  According to an analyst at Deutsche Bank DB, the market for NASH drugs will be worth $35 to $40 billion by 2025.

The recent deal has the potential to bring a lot of growth to GILD over time.  Even without the deal though, Gilead looks pretty attractive based on its current valuations.  

The company currently trades at a forward PE of just 7.78, while the rest of its industry trades at a PE of 22.97.  GILD is also cheaper than the biotechnology industry when looking at its price-to-sales (P/S) of 3.81.  The rest of the industry is lagging behind, trading at a P/S of 11.45.  Gilead has an EV/EBITDA of just 5.74, and is also pretty liquid with a current ratio of 2.5.  It’s worth noting that GILD doles out a cash dividend with a 1.8% yield.

Gilead’s combination of value and growth makes it an especially attractive buy right now.  The company’s net margin is very strong at 55.48%.  The biopharmaceutical company has current cash flow growth of 42.32%, which is way ahead of the industry’s current cash flow growth of 22.58%. 

Gilead has a trailing twelve month ROE of 106.19%, which isn’t too surprising when you see how GILD has been growing over the years.  The company’s revenues have nearly tripled since fiscal 2013, where Gilead saw sales of $11.202 billion.  In fiscal 2015, Gilead posted revenues of $32.639 billion.  What’s even more impressive is the development seen in its ability to increase its net income.  From 2013 to 2015, GILD’s net income has grown by a whopping 488.88%.

Bottom Line  

You should bet on this stock because the company is betting on itself right now.  Proof of this is the fact that the company repurchased $9.683 billion worth of capital stock in 2015. 

The company is a Zacks Rank #1 (Strong Buy), and for good reason.  Analysts have unanimously revised their earnings estimates upwards for this quarter.  The company also has an Earnings ESP of 6.21%.  This is significant, and that’s because stocks with a positive ESP and a Zacks Rank #3 (Hold) or better have a strong chance of beating our EPS consensus estimate.  This is nothing new for Gilead, as the company has beaten our earnings consensus estimate in each of the last four quarters.  GILD is expected to release its earnings in late April.

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DEUTSCHE BK AG (DB): Free Stock Analysis Report
 
GILEAD SCIENCES (GILD): Free Stock Analysis Report
 
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