Why Gilead Sciences Is So Cheap

Gilead Sciences and Google are the only two firms that have come into existence during my lifetime that I would feel comfortable classifying as very long-term buy and holds. After hitting a high of $123 in June, the price of Gilead has languished around the $100 mark–currently trading at $102 per share. This should seem at least a little bit mystifying. After all, Gilead has grown earnings by 36.5% annually over the past ten years and has an analyst consensus for growth of 22.5% in annual earnings over the next five years.

The Foster City, CA pharmaceutical giant currently earns $16.7 billion in annual profits, for a per share equivalent of $11.40. For a $102 share price, that amounts to a P/E ratio of 8.94. What gives?

There are two reasons why Gilead Sciences is trading at a valuation that seems to create such a mismatch with its historical and … Read the rest of this article!