Author: admin

Track your investments for FREE with Simply Wall St, the portfolio command center trusted by over 7 million individual investors worldwide.

• If you are wondering whether Gilead Sciences is still reasonably priced after its run in recent years, the valuation story is where things get interesting.

• The share price closed at US$143.93, with returns of 18.4% year to date and 26.0% over the last year, set against shorter term moves of a 3.4% decline over 7 days and a 3.6% decline over 30 days that may hint at changing risk appetite.

• These recent moves are playing out against a backdrop of ongoing attention on large pharmaceutical names and how investors are weighing long term pipelines against current product portfolios. Market reactions to sector news and shifting sentiment toward established drug makers provide useful context for Gilead Sciences’ recent price action.

• On our valuation checklist, Gilead Sciences scores 4 out of 6 for being undervalued, giving it a value score of 4. Next we look at how different valuation approaches line up on that score before turning to another way to think about what the stock may be worth.

Gilead Sciences delivered 26.0% returns over the last year. See how this stacks up to the rest of the Biotechs industry.

A Discounted Cash Flow, or DCF, model takes the cash Gilead Sciences is expected to generate in the future, then discounts those projected cash flows back to what they might be worth in today’s dollars.

Gilead Sciences last twelve month Free Cash Flow is about $9.44b. Using a 2 Stage Free Cash Flow to Equity model, analyst and extrapolated estimates project Free Cash Flow reaching about $19.44b by 2035, with intermediate years such as 2026 and 2030 at around $12.35b and $15.66b respectively. Simply Wall St uses analyst inputs for the earlier years, then extends the series using its own growth assumptions for later years.

When all those future cash flows are discounted back and aggregated, the implied intrinsic value comes out at about $290.68 per share. Compared with the recent share price of $143.93, the model suggests Gilead Sciences trades at about a 50.5% discount to this estimate, which points to the stock screening as materially undervalued on this DCF view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Gilead Sciences is undervalued by 50.5%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Gilead Sciences.

For a profitable company like Gilead Sciences, the P/E ratio is a useful way to think about what you are paying for each dollar of current earnings. Investors typically accept a higher P/E when they expect stronger growth or see lower risk, and a lower P/E when they are more cautious on either earnings growth or risk.

Gilead Sciences currently trades on a P/E of 20.99x. That is close to the Biotechs industry average P/E of 20.98x and well below the peer group average of 42.42x. On the surface, that suggests the market is valuing Gilead Sciences more in line with the broader industry than with higher rated peers.

Simply Wall St’s Fair Ratio for Gilead Sciences is 28.09x. This is a proprietary estimate of what a reasonable P/E could be, given the company’s earnings growth profile, profit margins, industry, market cap and specific risk factors. Because it is tailored to the company, the Fair Ratio can be more informative than a simple peer or industry comparison, which may mix businesses with very different growth and risk profiles.

Comparing the Fair Ratio of 28.09x with the current P/E of 20.99x suggests the shares trade below this Fair Ratio estimate.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simple stories you create about a company that connect your view of its future revenues, earnings and margins to a financial forecast and then to a fair value. This all happens within an easy tool on Simply Wall St’s Community page that millions of investors use to compare their own fair value against the current price. Investors can see, for example, how a more cautious Gilead Sciences view with a fair value of about US$126.09 and assumptions like mid single digit revenue growth and profit margins around 29% can sit alongside a more optimistic view with a fair value of about US$159.00 based on higher assumed revenue growth and profit margins above 33%. Each Narrative updates automatically as new news or earnings are added so your story and numbers stay aligned in real time.

For Gilead Sciences, however, we will make it really easy for you with previews of two leading Gilead Sciences Narratives:

Each one ties a clear story about the HIV, PrEP and oncology franchises to specific numbers on revenue growth, margins and what that could mean for fair value. You can use them as starting points, then adjust the assumptions to match your own view of the business.

🐂 Gilead Sciences Bull Case

Fair value in this bullish narrative: US$159.00 per share

Implied discount to that fair value at the recent price of US$143.93: about 9.5%

Revenue growth assumption used in this narrative: 6.63% a year

• Frames Gilead as a long term cash generator, with extended strength in HIV and PrEP plus oncology and cell therapy launches that support higher margins over time.

• Assumes earnings rising to US$10.8b by around 2028, helped by profit margins moving toward about 32% and a future P/E of 19.5x on those earnings.

• Highlights key risks such as pricing pressure, competition in HIV and oncology and dependence on the success of drugs like lenacapavir and Trodelvy, then asks you to check whether those assumptions feel realistic to you.

🐻 Gilead Sciences Bear Case

Fair value in this more cautious narrative: US$132.57 per share

Implied premium to that fair value at the recent price of US$143.93: about 8.6%

Revenue growth assumption used in this narrative: 3.69% a year

• Sees Gilead as more reliant on HIV and PrEP, with oncology and other launches helping but not fully resolving long run risks around regulation, pricing and competition.

• Builds to earnings of about US$10.0b by 2028 on margins near 31%, using a future P/E of 18.7x, which leads to a consensus style fair value close to current analyst targets.

• Spells out risks such as policy and pricing changes, future patent cliffs, execution challenges in oncology and PrEP markets and the need for ongoing high R&D spend to support growth.

Together these Narratives bracket a reasonable range around Gilead Sciences, using different revenue, margin and P/E assumptions. Your next step is to decide which story feels closer to how you see the HIV, PrEP and oncology pieces playing out, then adjust the inputs so the fair value reflects your own view of the stock.

Curious how numbers become stories that shape markets? Explore Community Narratives

Do you think there’s more to the story for Gilead Sciences? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include GILD.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com