Gilead Sciences Inc. (NASDAQ:GILD)

The valuation ratios exhibit a period of relative stability followed by extreme volatility in earnings-based metrics and a sustained upward trajectory in asset and revenue-based multiples.

Earnings and Operating Profit Multiples

The Price to Earnings (P/E) and Price to Operating Profit (P/OP) ratios remained consistent between early 2022 and late 2023, with P/E fluctuating between 16.17 and 29.30 and P/OP ranging from 10.78 to 16.27. A period of severe instability occurred throughout 2024, characterized by anomalous spikes. The P/E ratio reached a peak of 925.87 in September 2024, while the P/OP ratio peaked at 143.05 during the same period. These fluctuations suggest a significant, temporary contraction in net income and operating profits. By March 2025, both ratios normalized, returning to a stable range between 14.06 and 21.68 through early 2026.

Revenue Valuation Trend

The Price to Sales (P/S) ratio demonstrates a steady long-term expansion. After maintaining a range of 2.84 to 3.86 from March 2022 through December 2023, the ratio entered a consistent growth phase. Starting from 2.97 in March 2024, the P/S ratio climbed progressively to reach 6.88 by September 2026. This trend indicates an increasing market premium attributed to each dollar of revenue generated over the analyzed period.

Book Value Expansion

The Price to Book Value (P/BV) ratio shows the most aggressive growth pattern among the analyzed metrics. Initial values fluctuated between 3.82 and 4.90 during 2022 and 2023. Beginning in 2024, the ratio trended upward, surpassing 8.00 by December 2025. A sharp acceleration is observed in the final two quarters of the data set, with the ratio jumping from 7.08 in March 2026 to 16.23 by September 2026, reflecting a substantial increase in market valuation relative to the company's equity base.

Overall, the data reveals a divergence between earnings-based valuations and asset-based valuations. While P/E and P/OP ratios returned to historical norms after a volatile 2024, the P/S and P/BV ratios indicate a fundamental shift toward higher valuation multiples relative to sales and book value.

The valuation ratios demonstrate significant volatility across the analyzed period, characterized by a period of extreme expansion in 2024, a subsequent normalization, and an eventual breakdown of the price-to-earnings metric in 2026.

Initial Valuation Phase (2022–2023)

During this period, P/E ratios remained relatively stable, fluctuating between a low of 16.17 and a peak of 29.30. This stability coincided with earnings per share (EPS) consistently remaining between 2.66 and 4.71, indicating a balanced relationship between market pricing and realized earnings.

Valuation Anomaly (2024)

A dramatic surge in the P/E ratio occurred throughout 2024, reaching a peak of 925.87 in September. This expansion was driven by a severe contraction in EPS, which dropped to a low of 0.10, rather than an equivalent spike in share price. The ratio reached 296.57 by year-end, reflecting a significant decoupling of share price from quarterly earnings.

Normalization and Growth (2025–Q1 2026)

Valuations returned to historical norms as EPS recovered strongly, rising from 4.80 in March 2025 to 7.42 by March 2026. During this recovery, the P/E ratio stabilized within a narrow range of 18.06 to 21.68. Notably, the share price continued an upward trend, climbing from 98.90 to 134.06, but the recovering earnings prevented a repeat of the 2024 valuation spike.

Earnings Divergence (Q2–Q3 2026)

A critical divergence is observed in the final two quarters. While the share price reached a period high of 170.68 in September 2026, EPS plummeted into negative territory, ending at -3.11. Consequently, the P/E ratio became inapplicable, as the company transitioned from profitability to net losses despite the continued increase in market valuation.

An analysis of the valuation metrics reveals three distinct phases in the relationship between share price and operating profitability: a period of relative stability, a phase of extreme valuation volatility, and a subsequent transition toward operating losses despite rising equity prices.

Share Price Trajectory

A long-term upward trend is observed, with the share price increasing from 62.08 US$ in March 2022 to 170.68 US$ by September 2026. While the growth was gradual through 2023, a more aggressive acceleration occurred between March 2024 and December 2024, and again throughout 2025 and 2026.

Operating Profit per Share Performance

Operating profitability exhibited significant instability. From March 2022 to December 2023, profits remained consistent, generally ranging between 4.79 US$ and 7.09 US$. A sharp contraction occurred in 2024, where profits dropped to a low of 0.66 US$ in September 2024. Although a recovery was noted in 2025, with profits peaking at 8.46 US$ in September 2025, the trend reversed sharply in mid-2026, resulting in operating losses of 2.01 US$ and 1.90 US$ in the final two quarters.

Price to Operating Profit (P/OP) Ratio Volatility

The P/OP ratio served as a primary indicator of valuation decoupling. Between March 2022 and December 2023, the ratio remained stable, fluctuating between 10.78 and 16.27. However, the collapse in operating profits during 2024, coupled with rising share prices, led to extreme spikes in the ratio, reaching a peak of 143.05 in September 2024. This suggests a period where the market valuation was disconnected from immediate operational earnings.

Late-Stage Valuation Divergence

Following a normalization of the P/OP ratio in 2025 (ranging from 14.06 to 18.29), a final divergence is noted in 2026. During the second and third quarters of 2026, the share price continued to climb toward its peak of 170.68 US$, while operating profits turned negative. Consequently, the P/OP ratio became inapplicable for the final two periods, indicating that the share price growth was sustained despite a decline into operating losses.

The analysis of the price-to-sales (P/S) ratio from March 2022 through September 2026 reveals a significant expansion in valuation multiples. The P/S ratio began at 2.86 and experienced a period of relative stability and moderate fluctuation before entering a steep upward trajectory starting in 2024, ultimately reaching a peak of 6.88 by the end of the observed period.

Price to Sales (P/S) Ratio Trajectory

Between March 2022 and March 2024, the P/S ratio fluctuated within a range of 2.84 to 3.86, suggesting a consistent market valuation relative to revenue. A notable trough occurred in March 2024, where the ratio dipped to 2.97. Following this point, a sustained increase is observed, with the ratio climbing to 4.18 by September 2024 and accelerating to 6.88 by September 2026.

Share Price Influence

The expansion of the P/S ratio is primarily driven by a substantial increase in the share price. The stock rose from a low of 61.60 in June 2022 to 170.68 in September 2026. This price appreciation is most aggressive between March 2024 and December 2024, and again throughout 2025 and 2026, which directly correlates with the rising valuation multiple.

Sales per Share Stability

In contrast to the volatility and growth of the share price, sales per share remained remarkably stable. Revenue per share grew marginally from 21.69 in March 2022 to 24.80 in September 2026. The lack of significant volatility in sales per share indicates that the increase in the P/S ratio is not a result of organic revenue growth, but rather a shift in investor sentiment or market expectations regarding the company's future value.

The divergence between the stagnant growth of sales per share and the rapid escalation of the share price indicates a fundamental shift in valuation. The market is attributing a significantly higher premium to each dollar of sales in 2026 compared to 2022, moving from a valuation of approximately 2.8x sales to nearly 6.9x sales.

The Price to Book Value (P/BV) ratio exhibits a significant long-term upward trajectory, evolving from a state of relative stability between 2022 and 2023 to a period of rapid expansion through 2026. The ratio progressed from a low of 3.82 in June 2022 to a peak of 16.23 by September 30, 2026, reflecting a substantial increase in the market valuation of the company relative to its accounting equity.

Share Price Appreciation

A consistent growth trend in the share price is observed, particularly starting in 2024. The price rose from 62.08 US$ in March 2022 to 170.68 US$ by September 30, 2026. This upward movement provided the primary impetus for the rising P/BV ratio, as market sentiment drove the price significantly higher over the five-year period.

Book Value Per Share (BVPS) Erosion

The book value per share demonstrated volatility with an overall downward trend in the latter half of the period. While BVPS peaked at 18.33 US$ in December 2023, a notable decline occurred in March 2024 to 14.08 US$. A more severe contraction was observed in 2026, with the value dropping to 9.54 US$ in March 2026 and recovering only slightly to 10.51 US$ by September 2026.

Valuation Divergence and P/BV Acceleration

The P/BV ratio's acceleration is attributed to the diverging paths of share price and book value. From March 2022 to December 2023, the ratio remained constrained between 3.82 and 4.90. However, starting in March 2024, the combination of an appreciating share price and a declining book value caused the ratio to climb. This divergence reached an extreme in 2026, where the P/BV ratio spiked from 7.08 in December 2025 to 16.23 in September 2026, indicating that the market valuation became increasingly decoupled from the company's net asset value.