Stock Analysis on Net

Gilead Sciences Inc. (NASDAQ:GILD)

Dividend Discount Model (DDM) 

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.


Intrinsic Stock Value (Valuation Summary)

Gilead Sciences Inc., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 6.33%
0 DPS01 3.00
1 DPS1 -0.24 = 3.00 × (1 + -108.04%) -0.23
2 DPS2 -0.05 = -0.24 × (1 + -80.49%) -0.04
3 DPS3 -0.02 = -0.05 × (1 + -52.93%) -0.02
4 DPS4 -0.02 = -0.02 × (1 + -25.38%) -0.01
5 DPS5 -0.02 = -0.02 × (1 + 2.17%) -0.01
5 Terminal value (TV5) -0.41 = -0.02 × (1 + 2.17%) ÷ (6.33%2.17%) -0.31
Intrinsic value of Gilead Sciences Inc. common stock (per share) $-0.62
Current share price $73.69

Based on: 10-K (reporting date: 2023-12-31).

1 DPS0 = Sum of the last year dividends per share of Gilead Sciences Inc. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.53%
Expected rate of return on market portfolio2 E(RM) 13.63%
Systematic risk of Gilead Sciences Inc. common stock βGILD 0.20
 
Required rate of return on Gilead Sciences Inc. common stock3 rGILD 6.33%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rGILD = RF + βGILD [E(RM) – RF]
= 4.53% + 0.20 [13.63%4.53%]
= 6.33%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Gilead Sciences Inc., PRAT model

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Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Dividends declared 3,814 3,725 3,618 3,464 3,239
Net income attributable to Gilead 5,665 4,592 6,225 123 5,386
Product sales 26,934 26,982 27,008 24,355 22,119
Total assets 62,125 63,171 67,952 68,407 61,627
Total Gilead stockholders’ equity 22,833 21,240 21,069 18,202 22,525
Financial Ratios
Retention rate1 0.33 0.19 0.42 -27.16 0.40
Profit margin2 21.03% 17.02% 23.05% 0.51% 24.35%
Asset turnover3 0.43 0.43 0.40 0.36 0.36
Financial leverage4 2.72 2.97 3.23 3.76 2.74
Averages
Retention rate -5.17
Profit margin 17.19%
Asset turnover 0.39
Financial leverage 3.08
 
Dividend growth rate (g)5 -108.04%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Retention rate = (Net income attributable to Gilead – Dividends declared) ÷ Net income attributable to Gilead
= (5,6653,814) ÷ 5,665
= 0.33

2 Profit margin = 100 × Net income attributable to Gilead ÷ Product sales
= 100 × 5,665 ÷ 26,934
= 21.03%

3 Asset turnover = Product sales ÷ Total assets
= 26,934 ÷ 62,125
= 0.43

4 Financial leverage = Total assets ÷ Total Gilead stockholders’ equity
= 62,125 ÷ 22,833
= 2.72

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= -5.17 × 17.19% × 0.39 × 3.08
= -108.04%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($73.69 × 6.33%$3.00) ÷ ($73.69 + $3.00)
= 2.17%

where:
P0 = current price of share of Gilead Sciences Inc. common stock
D0 = the last year dividends per share of Gilead Sciences Inc. common stock
r = required rate of return on Gilead Sciences Inc. common stock


Dividend growth rate (g) forecast

Gilead Sciences Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -108.04%
2 g2 -80.49%
3 g3 -52.93%
4 g4 -25.38%
5 and thereafter g5 2.17%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= -108.04% + (2.17%-108.04%) × (2 – 1) ÷ (5 – 1)
= -80.49%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= -108.04% + (2.17%-108.04%) × (3 – 1) ÷ (5 – 1)
= -52.93%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= -108.04% + (2.17%-108.04%) × (4 – 1) ÷ (5 – 1)
= -25.38%