No. of Recommendations: 1
It has been some time, but there has been some talk about how attractive large pharmaceutical stocks might be on this board. I am currently looking at replacing some index fund exposure with GSK soon and wanted to post a couple of thoughts. Comments are welcome. I will warn y'all, though, I have yet to complete the kind of detailed financial profile other have here. I admire that, I just ain't done it with this stock yet.

Anyway, here is a general outline I sent off to a friend who works at GSK when asking her opinion:

[My wife and I} try to review our investments in some detail during April and September. We bought Glaxo once and sold at a nice profit. This year, GSK is back down a fair bit and hit my radar screen again.
If you have an opinion, I would love to hear it. Obviously, skip any material nonpublic info because I like working in finance and try to be careful around securities laws.

Anyway, we like pharmas for several reasons:

The basic demographics of aging people with more money to spend than prior generations.

A hope the third world will improve economically longer term and start paying a bit more for the drugs they need.

An expectation that competition from generics will not be allowed to harm pharmas so much that basic research suffers, that politicians will stop things if they threaten to get out of hand.

An expectation that R&D will get better longer term, possibly with more efficient use of all those computerized systems. If not, we think management will find other ways to rebuild thinning pipelines or
raise prices to keep profits solid longer term.

Fantastic profits, operating margins, return on assets & equity if those thinning pipelines are addressed.

Great dividends these days, with GSK at 5.2% based on [an old] closing price.

GSK adds in a bit of a currency play as well, I think. We think the Euro will probably be stronger than the US dollar over the next 2-5 years or so. Longer term, I gotta go with faster US economic growth. However, I am not sure this is correct, with over half of GSK's
sales going to the US. Does a stronger Euro hurt or help GSK?

We already have 9% of our long term investments split between Merk and Johnson & Johnson. We would probably stop at 1 more pharma and are
looking at GSK along with a couple others.

'Tis a bit old, but this is a bit AdmiralTroll threw together way back in 2001 when looking at GSK's P/E over time. I show GSK's TTM P/E at 14.4X based on last night's close, a forward P/E of 12.95X and a durrent dividend yield of 5.1% FWIW. Anyway, AdmiralTroll wrote...

Glaxo, SmithklineBeecham Average

1997 - HIGH 25.9 17/12/97 33.7 16/12/97 29.8
- LOW 16.5 9/ 1/97 21.5 9/ 1/97 19.0
- AVGE 21.7 27.0 24.35

1998 - HIGH 57.2 29/12/98 43.7 2/ 2/98 50.45
- LOW 25.7 1/ 1/98 30.1 8/10/98 27.9
- AVGE 40.5 37.1 38.8

1999 - HIGH 63.1 8/ 1/99 47.0 24/ 2/99 55.05
- LOW 30.9 10/ 8/99 32.9 1/10/99 31.9
- AVGE 39.0 39.8 39.4

2000 - HIGH 41.5 25/ 4/00 46.8 3/ 7/00 44.15
- LOW 28.5 22/ 2/00 30.8 21/12/00 29.65
- AVGE 35.9 37.9 36.9

2001 - HIGH 34.3 19/ 2/01 34.3
- LOW 27.7 22/ 3/01 27.7
- AVGE 30.8 30.8

I have added the last column which is a simple average of the 2
companies P/E's because their marketcaps were fairly even. There may be
some difference between earnings reported under UK & US GAAP but
figures look pretty close. These are based on today's price

Current TMF P/E = 27.17 TTM
UK P/E = 30.2 on 2001 estimates

The average 5 year P/E from these figures 34.05
Average high P/E is 42.75
Average low P/E is 27.23

This is the best I can do for GSK so I hope it suffices. Looks like GSK
is a reasonable buy based on historical P/E's

Any comments Tom & Collective?



Comments, questions and corrections are welcome.


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