Gilead Sciences Stock Hits a New All-Time High: Is it Still a Good Buy?

Shares of pharma giant Gilead Sciences (NASDAQ:GILD) have been taking off this year, recently hitting new all-time highs. Since the start of the year, the company's valuation has risen by 38%, as it has done far better than the broader market, with the S&P 500 rising by just 10%. It's even done better than top growth stock Eli Lilly, which has risen by roughly 31%.

Gilead has historically been a low-volatility stock to own, a solid one for its dividend. Returns like this haven't been the norm. What's behind the surge in value, and can the healthcare stock still be a good buy at its current valuation?

Image source: Getty Images.

Gilead's growth rate has been showing significant improvement

A big problem with Gilead in recent years is that the business simply hasn't given investors much reason to be optimistic, at times struggling to generate any positive growth at all. Lately, however, that hasn't been the case. While its revenue is by no means skyrocketing, Gilead has diversified over the years and built a strong pipeline of drugs, enabling it to generate more solid numbers in recent quarters.

GILD Revenue (Quarterly YoY Growth) data by YCharts

Its growth is even more impressive when excluding the declining revenue from Veklury, Gilead's antiviral medication for COVID-19. It declined 69% in the September quarter, with revenue totaling just $86 million. When excluding Veklury, Gilead's growth rate is far higher at 16%, including double-digit growth from the sale of HIV (18%) and liver disease medications (13%). Its oncology business also grew at a rate of 9%. The company has raised its guidance for the year, in light of its strong results, giving investors reasons to remain bullish on its business.

Can Gilead's stock still rise higher?

When a stock hits a new all-time high, that's often great news that the business is doing well. Many investors, however, may worry that it also means it may not have a whole lot of room to rise higher, and that its valuation may have gotten too pricey.

Gilead, however, is trading at a forward price-to-earnings multiple of just 17, based on analyst expectations. That's lower than the S&P 500 average of 19, suggesting that Gilead may indeed still be a cheap stock to buy.

With the company generating strong growth, its valuation remaining modest, and the stock yielding 2% (which is also better than the S&P 500 average of 1.1%), there are plenty of reasons for investors to want to buy Gilead’s stock right now, as it can be a solid long-term investment to simply buy and hold.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly and Gilead Sciences. The Motley Fool has a disclosure policy.