|
Can you
name a stock that is poised to see its stock price rise for the
12th consecutive year? No, it’s not Apple or Walmart.
Nor is it an energy stock or some unknown small cap either.
In fact,
it is one of the largest biotechnology companies in the world.
This year it is expected to report over $5.3 billion in revenues
– an increase of 26% over last year.
The
company is Gilead Sciences.
Every year
since 1997 the stock has appreciated in value. Not only has the
share price gone up, but it’s gone up a lot. In 10 out of the
last 12 years it has appreciated by over 10% and is poised to do
so again in 2008. To date the shares are up 11% for the year.
Through
the post-dot com boom of the early 1990’s, through the recession
of 2001-2002, and even through this year’s massive stock market
crash, Gilead Sciences shareholders have continued to smile
while their fellow investors have thrown up their hands in
despair.
Of course
it would have been great to have bought shares in 1997 and got
to experience the average 35% return for yourself. However, for
those investors who haven’t participated in this run, the
question is can it continue?
With its
shares currently trading at $50 per share, the market values the
company at 21x next year’s earnings. While not cheap on a value
basis, Gilead Sciences is not a value stock. It is a true growth
stock and a good one at that.
Wall
Street analysts expect the company to grow revenues by another
19% next year. And the profits just keep rolling in. With EBITDA
margins of over 50% and net profit margins of over 35%, the
company is generating tremendous amounts of cash.
While
there are other good cash flow machines out there, many don’t
know what to do with the cash once they earn it. It simply sits
on the balance sheet earning marginal interest. However, Gilead
Sciences has a track record of investing in the growth of the
company and those investments have paid off. In 2007, the
company had a return on invested capital (ROIC) of almost 40%.
And the return on equity (ROE) was over 61%.
In a time
when investors are desperately looking about for stock market
winners, Gilead Sciences should not be overlooked.
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
Read
Disclosure Policy |
