GlaxoSmithKline (GSK) shares are falling, and I’m thinking of buying

GlaxoSmithKline (LSE: GSK) seems to have been neglected in recent years. The focus of the pharmaceuticals sector has been on Covid-1. And, perhaps as a result, Glaxo shares have fallen 14% in the last five years.

The company did some coronavirus work, but did not catch the limelight, e.g. Astrageneca. Its peers ’shares have risen nearly 70% in five years. AZN was doing well before the epidemic, but has made big gains since the end of 2019.

The more I watch, the more I see GlaxoSmithKline as a tempting purchase. And I might be a little away from my stock and shares in ISA.

In July, Glaxo announced Q2 results. The figures are comparable to the previous year, with a slight decline in EPS after 2020. But we still saw a 6% increase in sales in the second quarter at the actual exchange rate (AER).

Earnings figures have probably caused a mixed reaction. On a statistical basis, Glaxo recorded 27.9p per share for a 39% drop (in AER), but the firm’s consolidated EPS figure of 28.1p represented a 46% increase. Added to the Q1 figure of 22.9p, it suggests that 2021 earnings could be closer to 2020. And it can’t excite too many people.

But two things in the Q2 update make me think that the future will be more beautiful. First, “GSK expects a portfolio of high-quality vaccines and specialized drugs and driven by the late-stage pipeline, sales from 2022, is expected to bring a step-by-step change in operating profit growth and performance.. ”

GlaxoSmithKline share price is cheap

If it closes, I think it could be a wards upward re-rating. At the moment, on the current GSK share price, we see Plax of Glaxo a little behind 12.

Another snippet from Glaxo’s Q2 update confirmed that it was “Demerger will create the new world-leading consumer healthcare company“In the middle of 2022.

I think this is a good move, which echoes the reflection of AstraZeneca in drug development. But if things look so good, what’s holding GlaxoSmithKline’s share price up?

I think there are several things. One is the demerger itself. Consumer Healthcare is a completely different business from Glaxo’s core R&D work. And there’s still some clarity about what the two separate companies are going to be like.

It also helped keep me away. I mean, I want to invest in a development company, not a toothpaste trader. But if I buy Glaxo shares now, I can still finish something even after the split.

Dividend uncertainty

I think Glaxo’s dividend is also having a negative effect on investors. It has remained unchanged at 80p for several years. This is a very decent 5.6% yield.

But it has only been covered by little earnings, and has been for some time. Confidence is probably weak. And we don’t know how dividends will be divided in demerger.

All of this uncertainty makes me suspect that GSK share prices may remain depressing for a while longer. But, overall, this is a strong candidate for my next investment.

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Alan Oscroft has no position on any of the shares mentioned. Motley Flower UK recommends GlaxoSmithKline. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.

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