Cabot Benjamin Graham Value Investor

03/06/2017 7:00 am EST


Roy Ward

Chief Analyst, Cabot Benjamin Graham Value Investor

Gilead Sciences (GILD) reported weak fourth-quarter results. Sales fell 14% and EPS dropped 26% after decreasing 10% and 19% in the previous quarter. 

Management revealed that sales of the company’s hepatitis C drugs could plummet 40% to 50% in 2017, causing total Gilead sales to fall more than 20%.

Gilead has a huge cash hoard of $32 billion ($24 per share), much of which is sitting in overseas accounts. If President Trump declares a tax holiday to repatriate overseas funds, Gilead will become a major beneficiary. 

In addition, Trump will likely allow the FDA to fast-track new drugs, which could help Gilead bring new drugs to market. At 7.1 times current EPS, a PEG ratio of 0.55, and with a recently increased dividend yield of 3.0%, Gilead shares are super cheap. 

The company is a good candidate to be acquired because of Gilead’s expanding HIV drug sales and several additional drugs in development that could add significant sales in future years. Buy at $76.44 or below.

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