GSK’s (LSE: GSK) share price is down 21% from its 15 Could 12-month traded excessive of £18.19. That is regardless of the 5 February launch of very robust 2024 outcomes that pushed the inventory up 7% on the day.

Such a price slide in current months may point out that the agency is essentially value lower than it was earlier than. Or it might be {that a} main hole between the inventory’s price and its truthful worth has opened. This might present me with a terrific alternative to lock in substantial worth at a bargain-basement price.

To determine which it’s, I ran the important thing numbers and appeared extra carefully at what has been occurring.

Why is the share price down?

I believe ongoing authorized motion over GSK’s Zantac drug’s hyperlink to most cancers is the important thing purpose for the price drop.

It agreed final October to pay $2.2bn to resolve 93% of the related instances within the US. However additional lawsuits are pending and stay a key threat for the agency.

Shortly after this, the destructive tone for the share price was compounded by a reduce in GSK’s 2024 vaccine gross sales forecasts.

And in December, the US Meals and Drug Administration de-authorised its Sotrovimab Covid antibody-based drug for emergency use.

How had been the 2024 outcomes?

Complete gross sales in 2024 elevated 7% yr on yr to £31.376bn. Over This autumn they rose 4% to £8.117bn, simply surpassing analysts’ consensus forecasts of £7.75bn.

Full-year working revenue jumped 11% to £9.148bn, whereas earnings per share (EPS) leapt 10% to 159.3p. Over This autumn, EPS was 23.2p, once more outpacing consensus analysts’ forecasts of 19.01p.

General, the loss in vaccine gross sales flagged by the agency was greater than offset by main rises elsewhere. Particularly, vaccine gross sales fell 4%, whereas respiratory/immunology jumped 13%, its specialty medicines unit elevated 19%, and oncology soared 98%.

For my part, This autumn’s $1.15bn acquisition of US biotech agency IDRx was constructive as nicely. That is a part of GSK’s strategic shift in direction of gastrointestinal cancers to additional compensate for a declining vaccine enterprise.

The 2024 outcomes additionally noticed the agency improve its 2025 gross sales progress goal to five% towards analysts’ earlier expectations of three.5%.

It additionally lifted its 2031 gross sales goal to £40bn+ from £38bn+.

Analysts forecast GSK’s earnings will improve by 18.26% annually to end-2027. And it’s earnings progress that in the end powers an organization’s share price (and dividend) greater.

So, are the shares undervalued proper now?

On every of the three relative pricing measures I most belief, GSK is extraordinarily undervalued towards its opponents.

It trades at a price-to-earnings ratio of twenty-two.9 in comparison with a peer common of 29.7. On the price-to-book ratio, it trades at 4.3 towards its peer common of 6.7. And on the price-sales ratio, it’s at 1.9 in comparison with a 5.9 common for its opponents.

To seek out out what all these imply in share price phrases, I ran a reduced money move analysis utilizing different analysts’ figures and my very own.

This reveals GSK shares are 65% undervalued at their current price of £14.38. So their truthful worth is technically £41.09, though they might go decrease or greater as a result of market unpredictability.

Given these and the supporting elements, the shares look an irresistible cut price to me now and I’ll purchase extra very quickly.