Gilead Sciences Inc (GILD)

Conclusion

Gilead Sciences is a US biopharmaceutical company that develops and sells medicines, including treatments for HIV-1 infection, hepatitis and cancer cell therapies. On 2026-11-09 the share price was 169.32 USD, giving a market capitalisation of 210.0 billion USD.

The verdict is fair. The fair value band runs from 113.45 to 170.18 USD with a midpoint of 141.81 USD, and the margin of safety is -16.3% at the current price. The DCF gives 187.17 USD per share at a discount rate of 8.9%, while the fair value from historical multiples is 96.45 USD. Against their ten-year medians, the price to free cash flow is 15.0x against 11.1x and the price to sales is 6.8x against 3.9x. The reverse DCF implies growth of 2.0% a year, compared with revenue growth of 3.6% a year over five years and free cash flow per share growth of 4.8%.

What holds the case up: free cash flow conversion over five years of 1.82x, a Piotroski score of 8 out of 9, and eight earnings beats in eight quarters. What would break it: net debt to EBITDA of 15.3x, interest coverage of -1.5x, and ROIC of -4.0% against a WACC of 8.4%.

Financial health

Financial strength is red, held back by leverage and weak interest coverage, with the current ratio and the Altman Z-score as the supporting measures. The current ratio is 1.38 and the quick ratio is 0.95. Net debt to EBITDA is 15.3x and debt to equity is 2.01. Interest coverage is -1.5x on a trailing twelve-month basis, so operating earnings do not cover interest expense. The Altman Z-score is 3.97, in the safe zone. The Altman model was designed for manufacturers; Gilead is classified as a drug manufacturer, so the reading is usable with that caveat. Insolvency risk: low, about 0.2% by the estimate of the Ohlson model over one to two years. The balance sheet is therefore not under near-term stress, but the debt load is heavy relative to earnings.

Earnings quality

Earnings quality is green, supported by a Piotroski score of 8 out of 9, a Beneish M-score of -2.49 that is consistent with a low probability of manipulation, and an accrual ratio of -2.6%. Free cash flow conversion over five years is 1.82x, but the trailing twelve-month conversion is not available. Stock-based compensation is 1.5% of revenue, and free cash flow after it is 13.57 billion USD. The share count has fallen at a compound rate of -0.13% over five years, so buybacks have more than offset dilution. The company beat earnings estimates in all eight of the last eight quarters, with an average surprise of 7.9%. Analysts have cut the current-year estimates in the last 30 days (10 downgrades, no upgrades), while next-year estimates were raised (14 upgrades, 3 downgrades) with projected growth of 11.2%.

Profitability

Profitability is red. The gross margin is 79.9% against a ten-year median of 79.2%, but the operating margin is -4.0% against a median of 32.2%, and the net margin is -12.5% against a median of 21.8%. Operating margin stability is 0.48. ROIC is -4.0% against a WACC of 8.4%, so the ROIC minus WACC value is -12.4%, which destroys value; the five-year median ROIC is 16.3%. Return on equity is -29.6%. The DuPont split for the 2025 year-end shows a net margin of 28.9%, an asset turnover of 0.50 and an equity multiplier of 2.60, so leverage has been a large part of the equity return. That year-end margin differs sharply from the current trailing figure, which is negative.

Growth

Growth is green, though the revenue record is modest. Revenue compounded at 2.6% over three years, 3.6% over five years and -1.0% over ten years. Revenue grew in five of the last ten years. Earnings per share compounded at 23.1% over three years and 133.7% over five years, but at -5.5% over ten years, so the recent rebound follows a long decline. Free cash flow per share compounded at 4.5% over three years, 4.8% over five years and -5.7% over ten years. The colour rests mainly on earnings growth and the next-year estimate of 11.2%, while long-run revenue growth remains close to flat.

Valuation

Valuation is yellow, with the verdict fair and a margin of safety of -16.3%. Current multiples sit above their ten-year medians: the price to free cash flow is 15.0x against 11.1x, a premium of 34.9%; the price to sales is 6.8x against 3.9x, a premium of 75.6%; the price to book is 16.1x against 4.7x, a premium of 246.4%; and enterprise value to EBITDA is 177.9x against 13.0x, a premium of 1,273.1%. The current price to earnings ratio is not available because earnings are negative. The DCF gives 187.17 USD per share at a discount rate of 8.9%, with 55.4% of its value in the terminal period. The fair value band is 113.45 to 170.18 USD, and the fair value from historical multiples is 96.45 USD. The reverse DCF implies 2.0% growth. The dividend yield is 1.95% and the payout on free cash flow is 29.2%.

Risks

The main risk is leverage: net debt to EBITDA of 15.3x and interest coverage of -1.5x leave little room if operating earnings do not recover, since the company does not currently cover its interest from operations. Negative operating margin of -4.0% and ROIC below WACC mean the business is not yet earning its cost of capital, which would weigh on the fair value if sustained. The premium multiples leave the valuation exposed to any slowdown in earnings growth. The trailing free cash flow conversion, a key earnings-quality measure, is not available. The analysis has no debt maturity schedule and no revenue by segment, so refinancing timing and the contribution of individual products cannot be assessed. The valuation rests on fixed assumptions, including a 5% equity risk premium and capped long-term growth, and is an order of magnitude rather than a price target.