GlaxoSmithKline – A Few Reasons Not To Buy In Now

Current shareholders should continue to hold GlaxoSmithKline (GSK) until at least the next earnings release; interested investors may consider other pharmas as more viable ROI opportunities for the near term. GlaxoSmithKline’s success in the near term seemingly will rely predominately on partnerships, improving the public perception of the brand and expanding the applications for products in its current pipeline. GlaxoSmithKline is going to great lengths to improve its transparency both to the public and practitioners alike; the change in protocol could be the beginning of an industry trend. GlaxoSmithKline has also had positive clinical trials comparing the efficacy of its Votrient treatment to Pfizer’s (PFE) Sutent.

Pfizer, Sanofi (SNY), Novartis (NVS), and AstraZeneca (AZN) are the major pharmas that are most comparable to GlaxoSmithKline. AstraZeneca is over 7 times earnings, GlaxoSmithKline’s price is around 10.2 times earnings; all of the other three major pharmas have higher price-to-earnings ratios. GlaxoSmithKline’s EPS is around $3.34; only Novartis and AstraZeneca have higher EPS rates for 2012. GlaxoSmithKline’s 223.8% EPS growth in 2012, and its 8.78% projected growth in 2013 are the highest among these pharmas. GlaxoSmithKline’s 3.3% sales growth through the past five years is the lowest among these firms. GlaxoSmithKline’s current ratio is around 1.1 while its 2.4 debt-to-equity ratio is the highest among these firms.

GlaxoSmithKline’s 66.2% ROE, 28.5% operating margin and 20% profit margin are some of the highest margins among these firms. GlaxoSmithKline’s 0.13% float short and 1.6 short ratio are the lowest among these firms, exceeding only Sanofi’s 0.12% float short and 1.2 short ratio. To continue reading, click here.

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