GSK Share: Strong H1, Weak Price – Down 16% but Still 68% Undervalued

GlaxoSmithKline, widely known as GSK, recently reported a robust first half of 2025, with strong performance in its specialty medicines division and a bold forecast upgrade. Yet, paradoxically, the GSK share price remains weak, down around 16% from its year-high, despite evidence pointing to deep undervaluation.

Solid H1 Performance but Price Lags

GSK delivered a stellar H1, posting a 5% constant-currency increase in turnover to approximately £15.5 billion, while operating profit rose 41%, and EPS climbed 45% year on year. Specialty medicines, the company’s growth engine, grew 16% CER, underscoring strength in areas like oncology, immunology, respiratory, and HIV treatments.

The second quarter alone saw sales near £8 billion, net profit up, and core operating profit climbing 12% at constant currencies. GSK also declared a 16p dividend per share for Q2, maintaining full-year guidance toward the top end of its projected range.

These results, alongside GSK’s substantial share buyback and R&D pipeline progress, including recent FDA approvals, should command investor interest, and yet…

Despite positive fundamentals, the GSK share price has dropped significantly, roughly 16% below its 12-month high. Several factors explain this disconnect:

Legal overhang: Ongoing litigation relating to its heartburn drug Zantac continues to weigh on sentiment.
Vaccine challenges: Weak RSV vaccine sales and weaker vaccine revenues have tempered enthusiasm.
Patent expirations and pricing pressures: Uncertainties in pricing and patent cliffs remain a constant concern.

All of these contribute to investor caution, even amid strong operational performance.

Valuation Gap: Is GSK Undervalued by 68%?

Independent analysis indicates that the GSK share remains strikingly undervalued. One discounted cash flow (DCF) model pegs the fair value at around 68% higher than the current price of approximately £14.02, implying a target near £43.81. These numbers suggest a substantial margin of safety for long-term investors.

Supporting this view, comparative metrics highlight deep value:

P/S ratio: 1.8 for GSK vs. peer average of 4.7.
P/E ratio: 16.3 for GSK vs. peer average of 24.8.
P/B ratio: 3.8 for GSK vs. peer average of 6.1.

Morningstar and other analyses reinforce this conclusion: GSK is undervalued relative to both its financial performance and future growth prospects.

Growth from Specialty Medicines

With specialty medicines now 40% of GSK’s revenue, growth is accelerating across multiple therapeutic areas. Success in R&D, especially in oncology and respiratory therapies, could significantly re-rate the stock.

Strong Cash Flows and Returns

GSK’s H1 free cash flow nearly tripled year on year, allowing aggressive share buybacks and supporting dividend payouts.

Risk from Litigation and External Pressures

Legal liabilities (e.g., Zantac), regulatory setbacks, and global pricing scrutiny remain material risks. Investors should weigh these against the valuation gap carefully.

Long-term Targets

GSK’s leadership remains confident, aiming for more than £40 billion in sales by 2031, up from its current trajectory.

How GSK Fits Into a Diversified Stock Market Portfolio

For investors building a diversified portfolio, GSK shares can serve as a defensive anchor. As a global pharmaceutical leader with consistent dividend payments and a robust drug pipeline, GSK provides exposure to healthcare, a sector often less volatile than cyclical industries.

Combining GSK with growth-oriented investments such as AI stocks or tech leaders can balance risk while maintaining upside potential. The company’s undervaluation also offers a built-in margin of safety, making it a strategic component for long-term wealth building.

The GSK share price tells a story of market caution amidst booming performance. For investors conducting stock research amid the stock market, this gap presents a compelling opportunity: a company delivering strong growth, pipeline momentum, shareholder returns, and yet trading at a deep discount.

For patient, long-term investors, GSK may offer a compelling value proposition if you can look past short-term sentiment and focus on fundamentals.

FAQs

Why is the GSK share price down even with strong results?

The decline stems from litigation risk (notably Zantac lawsuits), weak vaccine sales, and patent expirations, which overshadow the strong H1 figures.

Is GSK 68% undervalued?

Valuation models like DCF suggest so, and relative metrics like P/S, P/E, and P/B ratios further reinforce that GSK trades at a substantial discount to peers.

What makes GSK’s future outlook positive?

Robust growth in specialty medicines, improved cash flow, consistent R&D wins, and a clear path toward hitting its £40 billion sales target by 2031.

Disclaimer:

This content is made for learning only. It is not meant to give financial advice. Always check the facts yourself. Financial decisions need detailed research.