GILD

[Dividend Watcher]

(01-29-2016, 04:55 PM)Rasec Wrote: So what you are saying is, "take this sale and double down on it, as the only way is up!"

Good, because I bought a bit more earlier today to average down and I needed that sentiment! Seeing the market on the green today helped with the decision.

No, Rasec. The only way is NOT up as was evidenced today. BUT ...

The trailing 12 months GAAP reported earnings are $11.74. At today's close of $83, that gives us a P/E of 7.1. So if you're expecting earnings to drop to 4Q14 levels of $2.43, you're still getting it at the same P/E. That's quite a drop in earnings. The street consensus is expecting $2.98 giving a TTM P/E of 6.8.

In the 3Q15 earnings release, this was there:

"As of September 30, 2015, Gilead had $25.1 billion of cash, cash equivalents and marketable securities compared to $14.7 billion as of June 30, 2015. This increase was primarily due to the issuance of senior unsecured notes in September 2015 for a total aggregate principal amount of $10.0 billion. During the third quarter of 2015, Gilead generated $4.1 billion in operating cash flow, utilized $3.1 billion to repurchase 28 million shares and paid a cash dividend of $627 million, or $0.43 per share."

That was just in the quarter. The dividend was only 15% of cash flow!

They also list Cash & Equivalents of $25,411B vs. Long-Term Liabilities of $23.329B on the Balance Sheet. In other words, they could pay off all their long-term liabilities and still have money left over. How many companies can show that?

I have little concern about GILD being a long-term cash generator. As I said before, eventually the P/E will be so low and the cash (and free cash flow) will be so high either Mr. Market is going to react or someone will attempt to buy them. In the meantime, the price could still be under pressure for a lot a reasons; some inexplicable to me.


This is where patience is a virtue. In the meantime, I'm seriously thinking of cancelling the few low-ball GTC orders I have left and picking up a few more shares despite already being at a full position with an average cost of $103.

ETA:

Probably some of what's concerning some people is GILD's investment in Galapogos. See here. GILD is known as an antiviral drug company, not RA and associated autoimmune diseases. Since filgotinib is still in trials and RA, along with its kin, is so hard to treat, there's no guarantee of success. Even Abbvie's Humira isn't effective for the majority of sufferers. Read this for a feel of the difficulty in treating this awful disease.