While the point I discussed above, coupled with the restructuring that's going on at Glaxo, makes the company look cheap at current levels, you can't afford to base your portfolio solely on the company.
GSK's share price rise represents a compound annual growth rate (CAGR) of 3.3%. Earnings per share (EPS) have increased at a CAGR of just 1.4%, with the remainder of the share price rise coming from an increase in the price-to-earnings (P/E) ratio.
Like the rest of the pharmaceuticals sector, GlaxoSmithKline has seen sales of key drugs fall through the floor in recent years, as the entry of generic rivals has eaten away at group sales in established markets.
The company's quarterly figures this year have been falling short of expectations too, and at the first-half stage Glaxo reported a 12% fall in core EPS at constant exchange rates, with the statutory reported figure down 14% - at real exchange rates ...