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Gilead Sciences Is Still a Buy

Gilead Sciences (GILD) continues to offer one of the best long-term investment opportunities despite reporting weak numbers this week.

  • Revenue off 6%.
  • Guidance lowered with key product sales coming in mixed: Harvoni down 28.9%; Sovaldi up 5.2%; Truvada up 11.0%; Atripla down 13.9%; Stribild down 4.0%; Viread up 5.9%.
  • Net ncome down 22% to $3.497 billion (-22.2%).
  • EPS of 2.58.

Currently, the company has a market cap of $99.51 billion, generates over $17 billion in net income, pays out 15% of its earnings in dividends and continues to boast gross margins close to 90%. It's grown substantially in the last five years alone, yet this year the stock is down 20%, in part because of government pressure to reduce the cost of high-end drugs.

Gilead warned of higher operating expenses to reflect research and development costs and lower SG&A expenses based on a revised prescription drug fee. The chances are good that if the company doesn't grow, it will continue to throw off higher and higher dividends. Sometime this year, its earnings per share will outpace its book value, which is also growing at a double-digit rate.

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