After nearly a year of giving GlaxoSmithKline (LSE: GSK) a wide berth, the market finally seems to be waking up to the company’s potential. Indeed, so far this year Glaxo’s shares have outperformed the broader FTSE 100 by 8% as investors are beginning to buy into the company’s turnaround story and wake up to the value locked away within Glaxo’s corporate structure. 

The number of investors calling for a break-up of the pharma giant has also increased. The UK’s best-known fund manager, Neil Woodford has been calling for a break-up of Glaxo for some time, but he’s been joined by the London arm of Och-Ziff Capital Management, the activist hedge fund headquartered in New York, which has built a stake of 0.5% in the company.

A break-up could unlock value for Glaxo’s shareholders but even if the company’s management refuses to go down this route, its earnings are set to return to growth this year after a year of stagnation and this should re-ignite interest in the company’s shares. 

Back to growth

Glaxo’s management expects the company’s revenue to rise at a compound annual growth rate of “low-to-mid single digits” over the five years from 2016 to 2020.

Over the same period, core earnings per share are expected to expand at a rate in the “mid-to-high single digits”. Admittedly, a large part of Glaxo’s earnings growth will come from cost savings. The group is on track to achieve annualised cost savings of £3bn by the end of 2017, but these savings should help streamline the group’s business. 

Still, City analysts expect Glaxo to report earnings per share growth of 11% for 2016, recovering some of the ground lost last year. Based on these forecasts from the City, Glaxo is trading at a forward P/E of 15.8. Most of the company’s peers trade at a P/E in the low-20s. As Glaxo returns to growth, the market should re-rate the company and Glaxo’s shares should attract a higher valuation. 

A great income stock

So, over the next year as Glaxo racks up its first growth in five years, investors should begin to view the company in a more positive light once again. What’s more, Glaxo is on track to issue a special dividend of around 20p per share during the first quarter of this year. 

The special dividend is connected to Glaxo’s asset swap with peer Novartis. As part of the transaction, Glaxo announced that it would be returning £1bn to shareholders in the form of a special dividend along with the company’s regular fourth quarter payout that’s scheduled for Thursday 14 April 2016. The shares will go ex-dividend on Thursday 18 February 2016. Together, the regular and special payout will amount to approximately 40p per share, putting Glaxo on track to return 100p per share to investors this year and giving a yield of 7%. 

Next stop 1,600p?

Overall, Glaxo's return to growth coupled with the company's market-leading dividend yield indicates that the group's shares could be on track to return to 1,600p this year. 

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Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.