Why are Glaxo Shares Cheap?

VIDEO: GlaxoSmithKline shares are rated 4 stars by Morningstar analysts

James Gard 31 August, 2021 | 10:27AM
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James Gard: Each week we look at one stock that is cheap or expensive and why. This week is the turn of FTSE 100 pharmaceutical giant GlaxoSmithKline, which has a 4-Star rating from Morningstar. The company is at a pivotal moment in its history. It's currently the target of activist investors, who are agitating for change to revive a flagging share price. Next year GSK is being split into two listed companies. It's pharmaceutical division, which makes vaccines and drugs for conditions like asthma will be known as New GSK. This will be separate from the consumer health division, which sells products like Sensodyne toothpaste and Panadol.

Morningstar analysts think this move could be a positive one as consumer health companies are often valued higher by investors than pharma companies. GSK has a fair value estimate of £17.30 but has a current price of around GBP15. Over five years GSK share price has fallen around 10% whereas rival AstraZeneca has seen its shares rise 70% over the period. Still, over the last decade GlaxoSmithKline has been a reliable dividend pay for investors.

For Morningstar I'm James Gard.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard

James Gard  is senior editor for Morningstar.co.uk


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