GSK plc (GSK) is arguably undervalued. The stock currently has a forward price-to-earnings ratio of 9.91. It also offers a dividend yield of 3.5%.
The underlying business is in a transition. Activist hedge fund Elliott Management took a position in the company in 2021, pushing for changes to unlock value. In 2022, the company spun off its consumer health-care division into a new independent firm called Haleon. The spinoff was said to be financially beneficial for GSK. "One of the perks for GSK of the demerger was also a £7bn dividend which helped to reduce net debt of £19.8bn at the end of 2021," reported the Financial Times.
The company has been focused on its core pharmaceuticals and vaccine products. This seems to be delivering growth. In 2023, GSK raised its guidance for the year twice. It expects revenue to be as much as 13% higher and adjusted earnings per share to be as much as 20% higher than the previous year.
Strong sales and a low valuation should put this megacorporation on your radar of undervalued stocks.
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Google’s parent company Alphabet (GOOGL) is in the midst of an interesting battle. Rivals have deployed billions into large language models and artificial intelligence that some say could erode Google’s dominance in the search market.
“[Google is] the 800-pound gorilla in this [market] … I want people to know that we made them dance,” Microsoft (MSFT) CEO Satya Nadella told The Verge shortly after OpenAI released ChatGPT.
Meanwhile, Jeff Bezos has bet on another AI startup, Perplexity AI, that’s also trying to capture some of this lucrative market.
For now, Google retains its crown as the king of search engines. The platform holds 91.61% market share, as of December 2023, according to data from StatCounter. Google is also actively competing in the AI race with its ChatGPT rival Bard, which is being gradually integrated across the company’s portfolio of apps.
These initiatives could help the company sustain its growth momentum. In the third quarter of 2023, the firm reported 11% growth in revenue and 41.5% growth in net income year-over-year. The stock trades at a forward price-to-earnings ratio of 22.22, which isn’t cheap but could be justified by this robust growth rate.
This fair-valued stock should certainly be on your watchlist for 2024 as the AI race heats up.
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