GlaxoSmithKline plcs(LSE: GSK) share price isfalling again today, which is great news, as at these prices the company is a steal.
In
deed, after recent declines Glaxos shares look extremely undervalued. The company currently trades at forward P/E of only 14.6, compared to the FTSE 350 pharma sector, which trades at a P/E of closer to 20. Glaxos shares also support a dividend yield of 5.7%.
Whats more, now thecompany has been found guilty of bribery within China and paid a fine of 300m, much of the uncertainty surrounding Glaxos future has been removed. That being said, although the Chinese authorities have finished with Glaxo, the company remains under investigation by regulators within both the U.S. and UK.
Still, its unlikely that regulators in either country would want to impose crippling fines on Glaxo. No government would want to claim responsibility for levying such hefty fines on Glaxo that the group is forced to cut jobs or scale back research and development.
And theres no doubt that Glaxo is at the forefront of drug development. The company has more than 40 new treatments under development a pipeline that has been called best in class by many analysts. No regulators would want to put the development of these treatments at risk.
Expanding presence
Not content with organic growth, Glaxo is signing deals with peers to boost its international presence. For example, Glaxos much touted deal withNovartiswill boost its footprintin the global vaccines business and consumer healthcaremarket.
Additionally, Glaxo has just signed a deal withAspen Pharmacare Holdings Ltd, whereby Glaxo will take a 25% stake in AspensJapanese subsidiary, as part of managements plan to boost commercial operations in Asia.
Like the Novartis deal, Glaxos deal with Aspen Africas biggest generic drugmaker will see Glaxo transfer the distribution rights ofsome products in Japan to Aspens Japanese unit, leaving the door open for further deals down the road and reducing the cost of the deal. Glaxois already a significant Aspen shareholder so this deal is a natural fit for the two companies.
Along with the Aspen deal and Glaxos other growth initiatives, the company is currently working on a vaccine designed to prevent the deadly Ebola virus.
All in all, after taking into account Glaxos lowly valuation, the companys healthy pipeline of new treatments under development, and managements recent spate of deals designed to improve the companys global exposure and growth, the company looks to be a great investment.
A solid pick
Glaxo’s defensive nature makes it the perfect long-term investment and that hefty 5.7% dividend yield cannot be ignored.
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Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
