There are always plenty of numbers to evaluate when weighing up whether to buy a particular share.
Today I’m going to quickly review three figures for anyone thinking about investing in GlaxoSmithKline (LSE:GSK) (NYSE: GSK.US).
According to chief executive Sir Andrew Witty’s second-quarter update, 13 is the number of new treatments GlaxoSmithKline is expecting to deliver Phase III trial data on during 2013/14.
Like most pharmaceutical companies, GlaxoSmithKline has not been immune to the challenge of patent expiries eroding its profit margins over the past several years
It’s therefore vital that GlaxoSmithKline keeps continuously developing its pipeline of new treatments and ensures enough of them make it through the testing and approval stages to become fully fledged commercial products.
I’ll be watching closely to see how many of the 13 candidates make it through the Phase III stage, ready to be submitted for regulatory approval.
Not all of them will, but the higher the number, the greater my confidence in GlaxoSmithKline’s ability to keep on generating profits in the medium to long term.
That’s management’s year-end prediction for earning per share, according to its Q2 statement in July, when is said it expected core EPS growth in 2013 to be in the range of 3-4%.
With the shares currently trading at around 1,662p, that projection puts GlaxoSmithKline on a trailing P/E of 14.7 and a forecast P/E of 14.3, which is just below the FTSE 100 average of 14.8.
But while the EPS growth is welcome, if achieved, it will only bring earnings back to a level seen in 2011.
3. 1,428p per share
That’s the average price paid by GlaxoSmithKline for the 174.5 million shares it bought back in 2012 — some £2.5bn worth.
In its Q1 statement, GlaxoSmithKline stated its intention to buy back a further £1-2bn worth of shares in 2013/14.
With the recent price at 1,661p, GlaxoSmithKline is sitting on a 16% gain on last year’s buybacks — the kind of return to shareholders that I like to see!
And just imagine how much further the share price could run up if GlaxoSmithKline delivers on its guidance to deploy a further £2bn on buybacks before the end of the year.
So there you go, three numbers that may or may not have some bearing on whether you buy shares in GlaxoSmithKline.
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> Andrew owns shares in GlaxoSmithKline. The Motley Fool has recommended shares in GlaxoSmithKline.
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