Surging inflation has battered global markets this year. And despite pharmaceutical stocks tending to fare well in times like this, GSK (LSE: GSK) shares are down nearly 12% in 2022.

This fall has caught my eye. I think it presents a great opportunity to snag some cheap shares as we head into 2023 and to hold them for the long term. Here’s why.

GSK share price history

Before we get into it, let’s take a look at how the GSK share price has performed in recent times.

Inflation has peaked above 10% in both the UK and the US this year, meaning markets have taken a beating, including GSK. At this time last year, a share in the business would have set me back £16.24. Today, at the time of writing, it would cost me just £14.32.

Across the past five years, the stock has returned over 8% to shareholders, a significantly better return than that of the FTSE 100.

Is it time to buy?

So, is now the time to buy GSK? I believe so.

Its main attraction for me is the strong results the business has posted recently. For example, in its Q3 update, it announced sales growth of 9% to £7.8bn, fuelled by record sales of its shingles vaccine, Shingrix. On top of this, GSK also managed to reduce its net debt by £3.7bn in Q3 year on year to just over £18bn, while free cash flow came in at £723m.

With the macroeconomic headwinds that we’ve been facing, these are encouraging signs. As a result, GSK raised its full-year forecasts, with sales growth now expected to sit between 8% and 10%.

The business has also made great strides in streamlining its operations, predominantly through the Haleon demerger. The move will allow GSK to focus on developing vaccines and medicines. And with over 60 currently in development, this could boost profits in times ahead.

What also draws me to the stock is its dividend yield. At 7%, this isn’t inflation-beating. However, it does sit comfortably above the average of its FTSE 100 peers. With inflation predicted to persist in 2023, the cash generated from these dividends will come in handy.

The price-to-earnings ratio of around four also signals to me that the stock may be currently undervalued.

GSK concerns

The largest concern I have with GSK is rising inflation. As it continues to persist into 2023, this could see costs spike.

There’s also the persistent issue of potential legal action. The firm recently had a legal ruling thrown out after it was suggested that its Zantac heartburn treatment causes cancer. And while the outcome of this ruling was positive (at least for now), it highlights the potential risks and complications that come with investing in businesses such as GSK.

The verdict

Should I have some spare cash, I’ll be looking to pick up GSK shares as we head into the New Year. The business has posted some strong results during a tough year. And with its meaty dividend yield and low valuation, I like the look of the stock.

The post Why I’d buy GSK shares in 2023 appeared first on The Motley Fool UK.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Gsk Plc and Haleon Plc. 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.

I see interesting times ahead for the GSK (LSE: GSK) share price. GlaxoSmithKline is one of the largest UK biotech stocks trading on the London Stock Exchange. It’s a global giant, with an impressive £1.7bn free cash flow in Q1 alone.

But its share price has been losing ground against its competitors, barely moving over the last five years. It’s not even kept up with inflation.

Could that be about to change as it goes through what it describes as “the most significant corporate change for GSK in the last 20 years”?

Change ahead for the GSK share price?

For some time, the company has been seen to be lagging behind its peers. The last decade has seen it fall from being the third-largest pharmaceutical company in the world down to 14th, based on its market cap.

CEO Emma Walmsley’s response has been the slow progression of plans to split the company in two. And next month should finally see the spin-off of its Consumer Healthcare division into a separate company called Haleon.

But will the estimated £2.4bn cost of the split, one of the most expensive ever, be worth it?

Can GSK benefit from the deal?

The deal will give the company a one-off pocketful of £7bn in cash to spend. That’s seen as fundamental for developing its drugs pipeline, especially in areas such as cancer where it’s noticeably lagging competitors.

This is something that should have a positive impact on its share price. But that’s only if it’s able to transform itself from a global giant into the nimble biotech-focused company it says it wants to be.

In particular, it wants its R&D teams to focus on the science of the immune system, use of human genetics and advanced technologies.

That all sounds wonderful and exciting on paper – but I’m politely curious (read a little sceptical) as to whether reality will match its ambitions. 

Can the ‘new’ GSK compete in the biotech world?

With the pandemic bringing vaccine development sharply into the limelight and increased competition, it’s probably fair to say the biotech world is a tougher place to win these days.

The average business spend for companies developing new drugs may have fallen sharply from a high of $2.8bn to $1.3bn, but that’s still a huge chunk of cash to bet on a single product.

That’s why having a diverse pipeline of drugs is essential for GSK (just like my Foolish investing approach in shares). If one drug fails to perform as hoped, others may plug the revenue gap.

Right now, its focus appears to be on buying its way out of its pipeline problem, such as its recent £1.5bn purchase of Sierra Oncology. Or there’s the £2.1bn upfront payment to Affinivax, a clinical stage vaccine developer.

That’s an expensive approach and not one I’d be keen on seeing it adopt as its main strategy.

The market may well want to see tangible proof of its R&D investments paying off before it rewards GSK with a higher share price.

So to answer my question in the title, I don’t think the fact of the demerger alone will drive the price higher. For now, I’ll hold off on buying GSK shares. But I’ll watch with interest to see if it takes advantage of its post-demerger opportunities.

The post After its £2.4bn demerger, can the GSK share price blossom? appeared first on The Motley Fool UK.

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Michelle Freeman holds shares in GlaxoSmthKline. The Motley Fool UK has recommended GlaxoSmithKline. 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.

Despite having seen its share price rise nearly 10% from the beginning of the year, GlaxoSmithKline (LSE: GSK) has had a turbulent past 18 months. Although the FTSE 100 stock saw a rise in its share price after Elliott Management announced back in April that it had built a large stake in the pharmaceutical giant, over the past year the stock has underperformed compared to competitors. So, does this present an opportunity to get a hold of cheap shares?

GSK latest results

In its Q2 results, released at the end of July, GSK reported 6% growth in sales from Q2 2020. This was mainly due to vaccine sales, up 39% for the quarter. On top of this, the firm also offered a solid outlook for the period. For example, it had a positive phase III result for medical treatment for chronic kidney disease. CEO Emma Walmsley highlighted how the positive results from the latest quarter would provide momentum for the second half of the year and beyond. This is positive news for investors.

With that said, not all of the results provided as much reason for optimism. Total earnings per share (EPS) came in at 27.9p for Q2, 39% lower than EPS for Q2 2020 (45.5p). GSK also offered adjusted EPS for Q2 2021. This metric strips out non-recurring components, such as disposals. Adjusted EPS for Q2 came in at 28.1p, an improvement on the 19.2p for Q2 2020. Half-year sales were down 7%, while profits also took a slight hit. This mixed bag of results may reflect the inconsistency witnessed recently in the FTSE 100 stock’s share price.

Elliott Management

As an activist fund, Elliott has not simply bought its large stake in GSK to sit back and relax. Instead, it will be actively pursuing ways to increase the value of the company — and therefore, the share price. A factor like this is highly persuasive for me when considering whether to buy the shares or not. Not only is the presence of an activist fund enticing for me, but I also think GSK has the potential to thrive with the correct guidance. The stock has experienced a decline in its share price, yet the firm possesses strong qualities such as a strong brand and large workforce, which in the future could allow it to succeed.  

Another factor is the recent decision to split GSK into two divisions: a consumer healthcare business and a biopharma business. I think this will boost performance, allowing the respective businesses to streamline their operations.

So, should I buy?

Although the GSK share price has been far from exciting over the past 12 months, I think the business could see a bounce back in the future. The stock has a solid foundation, and if all goes to plan, the split, planned for 2022, should further boost growth. What worries me is its inconsistency and pretty poor long-term performance. The Elliott investment should provide a lift, but there are certainly no guarantees of this – and its long-term record proves this. For this reason, I’ll be avoiding GSK shares for the time being.

The post Should I buy this FTSE 100 stock? appeared first on The Motley Fool UK.

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Charlie Keough has no position in GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. 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.

What caused the GSK share price to fall? And is this a buying opportunity for my income portfolio?

The business during the pandemic

Despite the disruptions from Covid-19, GSK has actually performed relatively well considering the operating environment.

Overall, revenue from both the pharmaceuticals and vaccines divisions were down by 3% and 2%, respectively. But newly approved products within its portfolio have seen a significant average increase in sales of around 10%. And due to rising demand for hand sanitiser, its consumer healthcare business also achieved notable 12% growth.

These are hardly groundbreaking results. But due to cost-cutting, net income for the year actually increased by 24% to £5.75bn. Consequently, dividends weren’t cut in 2020, and roughly £5bn of debt was repaid.

Needless to say, this is all quite positive. So why has the GSK share price dropped by nearly 30% since the start of last year?

Why is the GSK price falling?

In early 2020, the company announced that its consumer healthcare business will be spun off in a joint venture with Pfizer in 2022. The cost of this separation is expected to be around £2.4bn, with £1.6n being covered by disposals. Given that GSK is still a £60bn company even after the decline in share price, this doesn’t seem too expensive to me.

Once the consumer healthcare segment has been separated, GSK will become a pureplay R&D drug development company. Which, rightfully, has created concern among income investors.

Why? Because as I’ve previously discussed, drug development is a risky business. Creating new medicines is a lengthy process that typically takes up to 10 years. And even after reaching the final phase of clinical trials, there’s still a possibility that a drug won’t receive regulatory approval or become economically viable.

I believe the increased risk profile of the business has undoubtedly contributed to its share price decline. However, the primary catalyst appears to be the fact that the company is going to be much smaller after the split. The consumer healthcare division currently contributes 40% of total revenue and that will disappear after 2022.

Consequently, GSK’s famous 4% average dividend yield is expected to be cut some time in the future, making the stock look far less appealing for income investors.

Is this a buying opportunity?

But the collapse in the GSK share price looks quite attractive to me. Don’t forget that the company isn’t splitting for another year. And so, due to the falling share price, the dividend yield today is now around 6.4%, a payout that’s more than achievable in 2021. At least that’s what I think.

However, once the company has split, it will be significantly different. Developing new drugs is a difficult task, as I said. But the firm already has 20 new products expected to launch between now and 2026. What’s more, 10 of these new drugs are expected to generate over $1bn in revenue each.

To me, GSK looks like it’s transforming itself into a growth stock. And with decades of experience under its belt, this is one business I’d be keen to add to my portfolio.

The post The GSK share price is down 30% since the start of 2020. Should I buy now? appeared first on The Motley Fool UK.

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Zaven Boyrazian does not own shares in GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. 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.

“Further good progress“

Group sales over this quarter came in a touch under £9.4bn — a rise of 16%. This brings the total turnover for the first nine months to £24.9bn — 7% higher than over the same period in 2018 once currency fluctuations are considered.

Positively, all three of Glaxo’s businesses registered solid growth. While the majority of sales (£4.5bn) continue to be generated by its pharmaceuticals business — with respiratory bringing in £806m (+25%) and HIV hitting £1.3bn (+5%) — it’s the other parts of Glaxo that will be grabbing the headlines today.

Sales at its consumer healthcare and vaccines businesses soared by 30% and 20% respectively. The £2.5bn generated by the former was largely the result of the company’s recent joint venture with US giant Pfizer (a new business that will eventually become a separate listed entity). A good portion of the latter’s £2.3bn can be attributed to an 87% jump in sales of its Shingrix shingles vaccine over the period.  

All told, adjusted operating profit grew 10% over the period to £2.8bn and 9% over the first nine months to £7.1bn, adding substance to CEO Emma Walmsley’s claim that the company had “made further good progress” over the quarter. 

But there was more good news. Glaxo also announced today that it would be revising its guidance for the full year, with flat adjusted earnings per share now expected as a result of recent performance, increased investment and lower tax rates. This is clearly a great improvement on the prediction of -3% to -5% made back in July. 

Dividend hero

All things considered, I really can’t see anything in today’s release for current investors to complain or worry about. 

But let’s not kid ourselves here: the vast majority of people holding Glaxo probably aren’t that bothered about performance over a single three-month period. They’re in it for the income its shares generate, even if the annual payout hasn’t budged for years.

And I don’t blame them, particularly as the extent to which these payouts are covered by profit is now starting to look far more healthy. Before markets opened this morning, the predicted 80p per share cash return translated to a yield of 4.6%.  

What’s perhaps more surprising is that Glaxo’s shares still look reasonably priced, despite hitting heights not seen in almost 20 years and the firm boasting an encouraging pipeline with “advanced assets in Respiratory, HIV and […] Oncology“.

At 15 times earnings for the current financial year, they’re still far below the company’s 5-year average price-to-earnings (P/E) ratio of 23 and a lot cheaper than the 26 times earnings prospective buyers of FTSE 100 peer Astrazeneca are currently being asked to cough up.

The above, when combined with the defensive qualities that pharmaceuticals offer, make it a great company to own in times of trouble. It will never be completely immune to general stock market shudders but it certainly shouldn’t keep you awake at night.

With a general election now in the calendar and no telling where we might be at the beginning of 2020, Glaxo looks a strong buy to me.

The post The GlaxoSmithKline share price won’t stop rising. Is there still time to buy? appeared first on The Motley Fool UK.

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Paul Summers 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.

Business model

Alliance owns or licenses the rights to more than 90 consumer healthcare products and pharmaceuticals. With wide international reach through an extensive network of distributors, it generates sales in more than 100 countries.

Many of its products are sold in a limited number of local markets and require little or no promotional investment. Its promotional investment is focused on a small number of brands with significant international or multi-territory reach, including Kelo-cote (a scar treatment product) and Vamousse (a product for the prevention and treatment of head lice).

Valuation highly attractive

Alliance has a strong record of acquisitions and organic growth. A half-year trading update last month told us group revenue increased 28%, with organic growth of 10%. City analysts’ full-year forecasts are for revenue of £144m, an increase of £100m on the £44m it posted five years ago.

One of the biggest 50 companies on London’s junior AIM market, Alliance’s market capitalisation is £351m at a current share price of 67.6p. Therefore, the forward price-to-sales (P/S) ratio is 2.4. Meanwhile, a City consensus earnings per share (EPS) forecast of 5p (10% ahead of last year) gives a price-to-earnings (P/E) ratio of 13.5, while a forecast well-covered 1.6p dividend produces a prospective yield of 2.4%.

In a defensive sector, and with a low-risk business model and strong record of growth, I think Alliance’s valuation is highly attractive.

More highly rated stock

GlaxoSmithKline is not only a giant — its market capitalisation is £84.5bn at a share price of 1,693p — but also a more highly rated stock than Alliance on P/S and P/E. On forecast revenue of £32.4bn, its P/S is 2.6, and on forecast EPS of 115p (4% down on last year), its P/E is 14.7.

GSK’s dividend yield of 4.7%, on a forecast payout of 80p, is higher than Alliance’s but less well covered by EPS. Alliance’s yield would be 5.1%, if it paid out the same proportion of earnings as its FTSE 100 peer.

On the face of it, GSK may not seem to offer particularly good value. However, I believe there’s one big reason why it does.

Still good value

Earlier this month, GSK announced it had completed its planned transaction with Pfizer to combine their consumer healthcare businesses into a world-leading joint venture. GSK has a 68% controlling interest and Pfizer an interest of 32%. This is a step on the way to GSK demerging the joint venture from the company and listing the GSK Consumer Healthcare business on the UK stock market.

Chief executive Emma Walmsley said: “This is an important moment for the group, laying the foundation for two great companies, one in pharmaceuticals and vaccines, and one in consumer health.”

A number of analysts and institutional investors had long argued that breaking up the group would unlock value for shareholders. Neil Woodford once suggested a potential sum-of-the-parts valuation of £100bn. This compares with GSK’s current market value of £85bn, and is the principal reason why I still see good value in the stock today.

The post Why I’d still buy the GSK share price after its 10% rise appeared first on The Motley Fool UK.

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G A Chester 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 Alliance Pharma. 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.

Are dividend stocks the ideal solution? With these kinds of stocks, you get cash income paid into your account on a regular basis, while you have the opportunity to generate capital gains over time too. With that in mind, here’s a look at three FTSE 100 dividend stocks that I think could suit retirees.

Imperial Brands

Despite the fact that smoking rates are declining across the world today, I continue to see investment appeal in tobacco manufacturer Imperial Brands (LSE: IMB). Smoking is not going to go away entirely any time soon, and as such, the group should be able to continue paying out dividends to shareholders.

In terms of dividend yield, Imperial offers a cracking yield of 8% right now. Often, when a yield is that high you have to be careful as it signals a dividend cut is coming. But I don’t see that happening here. Not only did the group just lift its dividend by 10%, but cash conversion remains strong and Imperial is also selling off assets to reduce debt. With the shares trading on a rock-bottom P/E ratio of 8.7, I see a lot of value here.

GSK

If a tobacco stock is not for you, take a look at healthcare giant GlaxoSmithKline (LSE: GSK). It specialises in pharmaceuticals, vaccines, and consumer healthcare products such as painkillers, so it’s definitely more of an ethical pick. The dividend yield here is currently around 5.2%.

One reason I like GSK shares is that the company appears well placed to benefit from the world’s ageing population. As we age, aches and pains tend to become more of a regular occurrence, and with the number of people aged 60 or over across the world set to rise significantly in the next 20 years, I can see demand for GSK painkillers Panadol, Voltaren, and Fenbid (sold in China) remaining robust.

GSK currently trades on a P/E ratio of 13.9, which I think is quite reasonable. In comparison, rival AstraZeneca trades on a P/E of 21.

Reckitt Benckiser

Finally, I think that Reckitt Benckiser (LSE: RB) could be another top dividend stock for retirees. It’s the owner of a large number of health and hygiene brands including Dettol, Strepsils, and Nurofen. The yield here is not the highest in the FTSE 100 at around 3%, but the company does have an excellent dividend growth track record.

Reckitt Benckiser, in my view, is a classic ‘sleep-well-at-night’ type stock. It’s not going to set the world on fire. But what it is likely to do, is continually sell its well-known trusted products to consumers in over 200 countries and generate fairly stable revenues in the process, which is what you want as a retiree.

RB shares were trading above 8,000p in mid-2017, however since then they have declined to around 6,000p on concerns over the group’s strategy and growth. I see this pullback as an opportunity, and with the shares now trading on a P/E of 17, I think it’s a great time to be accumulating the stock.

The post 3 top FTSE 100 dividend stocks that I think retirees will love appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Imperial Brands, GlaxoSmithKline and Reckitt Benckiser. The Motley Fool has recommended AstraZeneca, GlaxoSmithKline and Imperial Brands. The Motley Fool UK has no position in any of the shares mentioned. 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.

Encouraging start to the year

AstraZeneca released its first-quarter results today. There were some impressive headline numbers. Total revenue rose 11% at constant exchange rates, core operating profit was up 96% on strong margin improvement, and core earnings per share (EPS) increased 100%.

The company described the performance as an “encouraging financial start to the year,” and noted also that “our highly-productive and sustainable pipeline continued to deliver.”

Looking to full-year 2019

Advising that variation in performance between quarters can be expected, AstraZeneca reiterated its previous guidance for full-year 2019 core EPS of between $3.50 and $3.70 (271p-287p at current exchange rates, with 279p at the midpoint). The midpoint EPS would represent an increase of 4% on 2018 earnings, and put the stock on a forward price-to-earnings (P/E) ratio of 21 at the current share price.

Meanwhile, the prospective dividend yield on an anticipated unchanged payout of $2.80 (217p) would be 3.7%.

Rival full-year expectations

GSK will release its first-quarter results next week (Wednesday). As management’s guidance for full-year 2019 currently stands, we can expect a decline in underlying EPS of between 5% and 9% on 2018’s earnings (at constant exchange rates). This would imply EPS of 109p-113p, and at the midpoint 111p would put the stock on a forward P/E of 14 at the current share price.

Meanwhile, the prospective dividend yield on a management-guided unchanged payout of 80p would be 5.1%.

Looking to 2020

In terms of P/E, GSK (14) appears to offer considerably better value than AstraZeneca (21). Its dividend yield is also much superior: 5.1% versus 3.7%.

Looking ahead to 2020 forecast earnings, modest growth for GSK lowers its P/E to 13.5. And while the City consensus is for much stronger growth at AstraZeneca, the P/E remains comparatively pricey at 17.8. No increase in the dividend is forecast for either company, so GSK also retains its status as the superior yield pick.

Predictability and risk

Reading the range of City analysts’ earnings forecasts, as well as the consensus, it’s striking that the range around the GSK consensus is much tighter than the range around the AstraZeneca consensus. For the current year, the GSK high estimate is 8% above consensus, with the low estimate 7% below. In AstraZeneca’s case, the range is from +16% to -20%.

I think this tells us that GSK’s earnings are more predictable than its rival’s, and that AstraZeneca has higher risk of an earnings consensus miss, and a miss of greater magnitude — whether to the upside or the downside. That GSK’s earnings are more predictable makes sense, because unlike pureplay pharma AstraZeneca, it has a large consumer healthcare products business, with superior earnings visibility.

Bottom line

On balance, I see GSK’s valuation (and diversified business) as more attractive than AstraZeneca’s. Furthermore, due to its reasonable P/E and appealing dividend yield, I’d be happy to buy GSK today.

Conversely, I’m avoiding AstraZeneca at this time, on the view its P/E is just too elevated, particularly with the risk presented by the wide range of estimates around the earnings consensus. The inferior dividend yield is an added negative.

The post Should I buy GSK shares or FTSE 100 rival AstraZeneca? appeared first on The Motley Fool UK.

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G A Chester 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.

However, if you’re thinking about buying GSK shares, I wouldn’t let this past performance put you off. Here’s a look at five reasons I think Glaxo is a good stock to own today.

Consumer healthcare joint venture

One reason I’m bullish on GSK right now is that back in December, the group announced that it had reached an agreement with Pfizer to combine their consumer health businesses. I see this as a positive development.

The combination will bring together two highly-complementary portfolios of trusted consumer health brands – including GSK’s Sensodyne, Aquafresh and Zovirax, and Pfizer’s Advil, Centrum and Caltrate – which will make it a market leader across pain relief, digestive health, and therapeutic oral health with sales of nearly £10bn and a market share of over 7%.

GSK believes the joint venture will help deliver stronger sales, cash flow, and earnings growth and also generate substantial cost synergies, so that has to be a good thing.

Ageing population

Another reason I see appeal in the stock right now is the long-term growth story associated with the world’s ageing population. As people age, their demand for healthcare products and services tends to increase. As a healthcare specialist that owns an impressive portfolio of trusted consumer healthcare brands such as Panadol, Voltaren, and Fenbid (a painkiller sold in China), the group looks well placed to benefit as the global population continues to age.

Defensive nature

I also like the defensive nature of GlaxoSmithKline shares. Healthcare is less correlated to the economy than other industries (people still spend on health during a downturn) meaning that if we do see a global recession in the near term, GSK shares could outperform. Furthermore, with a globally diversified revenue stream, the stock also offers protection from Brexit uncertainty.

Big dividend

Of course, it’s hard to write an article on GSK without mentioning the dividend as for many investors, the stock’s yield is one of its biggest attractions. Now, I’ll point out that GSK isn’t the ‘perfect’ dividend stock. This is due to the fact that the payout hasn’t risen since 2015, which is a little disappointing. However, the yield of 5.2% is still highly attractive in today’s low-interest-rate environment.

Valuation

Finally, GSK’s valuation seems quite reasonable to me. With analysts expecting GSK to generate earnings per share of 114.5p for FY2019, the shares currently trade on a P/E ratio of just 13.7. I think that’s a fair price to pay for a slice of this global business.

Putting this all together, I see considerable appeal in GlaxoSmithKline shares right now. With a market-leading consumer healthcare joint venture and a durable growth story associated with the world’s ageing population, I believe the stock is an excellent long-term ‘buy.’

The post GSK: five reasons I’d buy the shares today appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.

Looking ahead, further outperformance of the FTSE 100 could be ahead. The company appears to offer good value for money, as well as an improving financial outlook. As such, it could be worth buying alongside a sector peer which reported positive results on Thursday.

Positive outlook

The company in question is animal genetics specialist Genus (LSE: GNS). Results for the year to 30 June showed further improvements in sales and profitability, with revenue up 6% to £470.3m, while profit before tax moved 9% higher to £75.9m. The company experienced strong bovine revenues, rising 11% in constant currency. Porcine revenues moved up 1% in constant currency as the business continued to deliver its growth strategy.

Looking ahead, the company continues to see growth opportunities. The successful launch of its sexed semen product, Sexcel, in September 2017 has the potential to improve its financial performance in the medium term. And while there have been challenging operating conditions for some of its customers due to trade disputes, its overall outlook appears to be positive.

With Genus forecast to post a rise in earnings of 6% in the current financial year, it appears to have a bright outlook. With demand for its products likely to increase in the coming years, it could benefit from a tailwind which helps to boost its sales and profitability. As such, now could be a good time to buy it.

Growth potential

Prospects for the GlaxoSmithKline share price also seem to be positive. Although the pharma stock has risen significantly in recent months, it continues to offer a wide margin of safety. For example, it has a dividend yield of 5%, and a price-to-earnings (P/E) ratio of around 15. These figures suggest that it could offer further growth potential due, in part, to the strategy it’s being pursuing.

The company is seeking to restructure in a bid to make itself more efficient. It intends to focus on a more limited range of potential treatments within its pipeline, where it believes the risk/reward ratio is more appealing. It’s aiming to reduce costs by around £400m per year, which could help to deliver a rising bottom line over the medium term.

With GlaxoSmithKline’s dividend having been frozen since 2014, it now has a dividend coverage ratio of around 1.4. This suggests that dividend growth could be ahead for the company over the next few years, which could act as a catalyst on investor sentiment. With strong defensive characteristics (should the world economy’s growth rate slow down), the prospects for the stock seem to be bright.

The post Is the GSK share price primed to beat the FTSE 100? appeared first on The Motley Fool UK.

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Peter Stephens owns shares of GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.