One of the most impressive gains reported so far this quarter are those of Gilead Sciences (GiLD) . Quarterly earnings per share were up 50% to 78 cts , or $673 million, and quarterly sales were up 31% to $1.8 billion. Their HIV drug Truvada and Atripla had sales gains of 13% and 43% respectively. Their Tamiflu royalties rose sharply, about 5 fold, given the strong demand from the swine flu vaccine. At a run rate of 78 cts per quarter or $3.12 per year, their P/E is 14.25 ( 44.49 / 3.12). For a growth company with a sustainable business their P/E should be closer to 20 times earnings and their price closer to $62 per share vs $45 now. Given that huge discount, and margin of safety, this company is an outright buy.
Gilead’s 5 year return on capital exceeds 21%, its long term debt to equity ratio is .21, its cash on hand exceeds its long term debt, and its free cash flow exceeds it accounting earnings. Today the stock is down probably because of the inside game played by Wall Street analyst and hedge funds in front running the numbers with insiders information and then distorting the results. Gilead’s numbers easily beat expectations for both sales and earnings. The sustainability of demand for HIV products is for now assured, as there is no remedy that effectively eliminates the HIV virus.
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