Home
| Ratio page
Analysis is working on
Report example for GILEAD Sciences (13Jan2010)
Technical Analysis
A wedge figure is pinching now a days since GILD
touched a top in August 2008 and a bottom in October 2008.
Top and bottom boundaries of the wedge are narrowing and converging
to the $45 line.
Still I can't said anything on a probable strong move.
I see a lot of supports and resistances all well weighted.
Volumes are on the average .Pulls back are going deeply while breaks up are more smoothing
so I think that this side trend could go on up and down from weeks to mounths.
GILD Stock Evaluation
Because of a relatively quiet week from a price movement perspective, there has been little change in the valuation of GILD recently. Furthermore, there has been no change to the earnings guidance given by the company's management in the last week. In accordance with these static factors, nevertheless I see catalyst for rating GILD as undervalued.
Summary
I have found a lot to like about this stock from a fundamental perspective; however, I am a little bit concerned about how much its sector is up in the last twelve months, 23.6%. So, I will continue to monitor this and other members of the Healthcare sector for a sign of being overbought. Right now, I am going to stick with my Undervalued rating until I see a change.in price or fundamentals
The price change of 2.94% since 01/03/2010 has little impact on my final outlook for GILD.
Also, there have been no meaningful adjustments in earnings expectations to report in the last week..
GILD Revenue
I am interested in seeing how GILD's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. This allows me to find weighted average historical high and low Price to Sales ratios, which give me a better idea of the stock's current underlying value. Using this method, I have established a high range for Price to Sales of 14.67x and the low end of the range at 9.12x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for GILD of 6.26x is well below its normal historic Price to Sales levels. At a price of $44.54, GILD is 48% below where I would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect my analysis because it is rare to find a stock this far below historical norms, and I would expect some price appreciation to bring this metric back towards a more normal range.
GILD Cash Earnings
GILD's current price (latest close of $44.54) and most recent level of Cash Earnings reported, I see significant opportunity from a value perspective. At its current price level, GILD is 51% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn't exist in a vacuum. So if the market doesn't recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with GILD.
GILD Dividends
A positive rating does not require a company to pay out an inviting dividend or a dividend at all. However, I believe dividends provide a useful measure of a company's inherent expectations. GILD may pay a dividend at this time; however, there is an insufficient amount of history to incorporate it into my analysis. Therefore, I am not utilizing the dividends in my analysis. As GILD more consistent dividend history had to be available, I will begin to factor this into my study.
Evaluating Management
In evaluating management, I focus on three key measures, which combined,
produce Return on Equity (ROE). These measures are the investing of company
assets, the use of leverage, and the day to day operation of the business. Below
I summarize where each of these measures are currently compared to their
average levels over the last five years. This gives a good indication of the
strengths and weaknesses of each area.
Asset Turnover Ratio
First, I want to evaluate managements ability to efficiently invest the company assets. For that purpose, I will utilize the Asset Turnover Ratio (ATO) which consists of sales divided by assets. I can see that this measure of management's investing ability was GILD's current rate of 0.76x as of last data reporting, and it is moderately above its 5 year average.
Leverage
In evaluating GILD's management team, I will look at how effeciently are they utilizing leverage. I find that the most clear way to demonstrate this is through the Assets to Equity Ratio, and as you can see, as of their last reporting GILD's Assets to Equity Ratio was 1.69x which is below its historical average over the last five years by 2%. To the extent that ROE is not significantly diminished, reduced leverage can be seen as an improvement in shareholder safety.
Profit Margin
The last of my three inputs on management analysis is profit margin. Currently, GILD's profit margins is significantly above the 5 year average for GILD. Profit Margin (MGN) is a well known and highly visable measure of management's performance. Using the most current available data, GILD has a Profit Margin of 37.69% significantly above it’s historical average over the last five years by 97%.
Notes for Management
I regard each of these factors as important on their own, but a better understanding of management efficacy is Return on Equity or ROE which combines all of these factors. I generally consider 15% a normal level of ROE as most firms generate an after-tax ROE of somewhere between 10% and 20% each year. In the case of GILD, at its last reporting, the ROE of 48.40% was 33.40% above the average and is an excellent indicator of superior management.