Gilead Sciences, Inc. (GILD) is a biopharmaceutical company, which focuses on the research, development, and commercialization of antiviral drugs used to treat diseases such as HIV, hepatitis B, hepatitis C, and influenza, including Harvoni and Sovaldi. It offers its products under several brands including Harvoni, Genvoya, Epclusa, Truvada, Atripla, Descovy, and more.
Gilead Sciences’ stock price is close to a one-year high, with one-year gains of 13%, slightly underperforming Nasdaq. I am bullish on GILD stock, not only because of its attractive dividend yield but because of its strong fundamentals despite a bad financial performance in 2020. It is a prime candidate among Top Dividend Stocks.
Gilead Sciences Business News
The biopharmaceutical company has announced a New England Journal of Medicine Publication of Data Demonstrating that Veklury® (Remdesivir) “significantly reduced the risk of hospitalization in high-risk patients with COVID-19.”
On the negative side, there is this: “The U.S. Food and Drug Administration (FDA) has placed a clinical hold on the use of injectable lenacapavir in borosilicate vials in all ongoing clinical studies for HIV treatment and HIV pre-exposure prophylaxis (PrEP).”
Gilead Sciences expressed its confidence about solving this problem soon. The firm has entered into a 10-year collaboration with Arcus Biosciences, exploring a pipeline in the oncology sector as Arcus specializes in medicines for cancer treatment.
Turning again to the pandemic, Gilead Sciences announced that “the European Commission (EC) has approved a variation to the Conditional Marketing Authorization for Veklury® (remdesivir) to include adults who do not require supplemental oxygen and are at an increased risk of progressing to severe COVID-19.”
Q3 2021 Earnings: Another Beat on EPS
GILD stock earnings have beat estimates in the past four out of five quarters.
In Q3 2021, normalized EPS of $2.65 was a beat by $0.87, while EPS GAAP of $2.05 was a beat by $0.68. The revenue of $7.42 billion beat by $1.09 billion, increasing 13% on a year-over-year basis. Net income grew to $2.59 billion compared to $360 million in the same period in 2020.
Fundamentals – Risks
GILD stock has warning signs such as increasing days inventory outstanding, which means the firm may be having difficulties selling its goods, and revenue was declining for a few years up until 2020. Its debt/equity ratio of 129% is considered high, but debt is well covered by operating cash flow, and its interest coverage ratio is 12.6x.
On the positive side, its Piotroski F-Score is 7, indicating a very healthy situation. Its gross and operating margins have rebounded strongly in 2020 and its net margin surged on a TTM basis to 26.9% after having collapsed to 0.5% in 2020.
Valuation
Gilead Sciences’ price-to-book ratio of 4.2 is close to a one-year low of 3.8 and the P/E ratio of 12.3 is close to a three-year low of 11.1. GILD’s P/E ratio is attractive compared to the biotech industry average of 25.8.
Wall Street’s Take
Turning to Wall Street, Gilead Sciences has a Moderate Buy consensus based on nine Buys and seven Holds ratings. The average Gilead Sciences price target of $76.93 represents 7.2% upside potential.
Conclusion
In general, GILD’s business is strong and has improved a lot in the first nine months of 2021 after a bad 2020. The stock has a strong history of beating earnings estimates, an attractive dividend yield, and generates strong positive free cash flows. It could continue moving higher in 2022.
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