The FTSE 100’s Hottest Growth Stocks: GlaxoSmithKline plc

Today I am outlining why GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) could be considered a terrific stock for growth hunters.

Pipeline pulling out the stops

The business of drugs testing can never provide the prescription for guaranteed earnings growth, where even the slight delay in getting product to market can result in a huge earnings dent. But in my opinion, GlaxoSmithKline’s terrific record of getting its drugs from lab bench to pharmacy counter makes it an excellent pick for those seeking decent growth prospects.

Indeed, the firm’s ViiV Healthcare subsidiary received European Commission approval for its anti-HIV product Triumeq earlier this month, and follows on from US Food and Drug Administration’s authorisation in August. The revolutionary, triple-combination single pill is GlaxoSmithKlineexpected to experience huge demand from sufferers of the disease.

Elsewhere, the Brentford-based company also received positive Phase III data for its monoclonal antibody mepolizumab. The tests displayed terrific success in helping patients suffering the effects of chronic asthma, and GlaxoSmithKline advised it will be filing for marketing approval by the close of the year.

With more than 40 more products up its sleeve in late-stage testing, I reckon that GlaxoSmithKline is in great shape to finally hurdle the effect of a steady stream of patent lapses across key products and deliver the next generation of revenues-drivers for coming years.

Meanwhile GlaxoSmithKline is also enjoying stunning sales performance in emerging markets. The company’s reputation has been tarnished by ongoing corruption allegations in these new marketplaces more recently, however, and in particular China where sales rattled 25% lower during January-June to £129m due to ongoing investigations there.

But the company’s suite of industry-leading products continues to be swept up in developing regions on the back of hefty population growth and rising economic might. Indeed, GlaxoSmithKline saw Pharmaceuticals and Vaccines sales surge 11% higher in the first half to £822m, even in light of the ongoing travails in Beijing.

And should the company favourably resolve its current troubles in China, I expect sales to thrust still higher in these key growth markets.

Earnings snapback expected from next year

Due to the effect of enduring patent expirations, GlaxoSmithKline is anticipated to experience a hefty 16% earnings decline in the current financial year, to 94.9p per share. But City analysts expect the firm’s pipeline to produce a turnaround to the tune of 5% in 2015, to 100p.

And these projections leave the pharma giant dealing on attractive P/E multiples for this period, with a P/E rating of 15.1 times prospective earnings for 2014 — just above the yardstick of 15 which indicates decent value for money — and which slips to just 14.3 for next year.

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Royston Wild has no position in any shares mentioned. 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.