The Motley Fool

I’d buy both the Glaxo share price and AstraZeneca’s growth prospects today

Image source: Getty Images.

I remember the days when everybody wanted pharmaceutical giant GlaxoSmithKline (LSE: GSK) in their dividend portfolio. Now investors are more sceptical.

Glax on the tracks

The Glaxo share price has had a bumpy ride for the last six years, although it is up 13% year-to-date and jumped more than 1% after today’s results showed a rise in second-quarter sales and profits, with full-year earnings now set to drop less than expected.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

FTSE 100 pharmaceutical rival AstraZeneca (LSE: AZN) has had a much better time of it lately, its share price up almost 45% in five years to hit record highs. It is up 5% this morning after a far more bullish set of results than Glaxo’s, with first-half product sales up 12% to $11.18bn, a rise of 17% at constant exchange rates.

Astra’s strong

AstraZeneca said sales growth accelerated in Q2, rising by 14% to $5.72bn (19% in constant currency). Better still, they grew in every region with all three therapy areas delivering an encouraging performance.

Highlights included 51% oncology sales growth and 34% sales growth in China to $1.17bn (a whopping 44% at constant exchange rates), while US sales rose 16% to $1.88bn, and even Europe returned to growth up 1% to $1.04bn.

Investors will have been excited by talk of further positive pipeline developments, with the second half of the year anticipated to be an exceptionally busy period”.

Glaxo grows too

Glaxo’s results were good, although not as good. Q2 group turnover up 7% to £7.8bn, or 5% at constant exchange rates. Its Vaccines arm did particularly well, with turnover up 26% to £1.585bn at actual exchange rates, driven by meningitis vaccine Shingrix.

Consumer Healthcare turnover was up a healthy 5% to £1.9bn, although Glaxo’s key Pharmaceuticals division grew at a slower pace of 2%, to £4.3bn.

Total operating profit was £1.48bn in the quarter, up from £779m in 2018. However, once accounting for restructuring charges and write-downs, adjusted operating profit rose 3% to £2.17m at actual exchange rates.

AstraZeneca is now the bigger group by market cap, £87.93bn against £83.44bn.

But which to buy?

So the smart money says buy AstraZeneca?

I’m not so sure, and neither is my colleague Roland Head, who recently warned of the group’s surging debt, up from $7.8bn four years ago to $13bn in today’s report. Management is whittling it down, to be fair, as net debt stood at $15.34bn one year ago.

However, with the AstraZeneca share price trading at 22.7 times earnings, investors are pricing an awful lot of growth into the stock.

Glaxo is notably cheaper at 14.8 times forecast earnings. Operationally, it is in a better place than before. It offers a higher dividend income too, with a forecast yield 4.8% and cover of 1.4, against AstraZeneca’s 3.5% yield with cover of 1.2. Don’t expect too much progression from either, both have been holding their dividends for years while pumping money into replenishing their pipelines.

Momentum is on AstraZeneca’s side as it races ahead of Glaxo but high investor hopes mean it cannot afford any slippage.

If I had to buy one, it would be Glaxo, though. With luck, you might catch it at an earlier stage in its recovery cycle.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.