GILD Stock: 36% Growth Per Year Is Hard To Argue With

A couple of weeks ago I presented a simple question: After rising by 48% in 2013 is the biotech sector too hot for its own good?
I concluded then that it was not – that there is still a lot of upside in select biotech stocks based on growth prospects and relative valuation. After reviewing full year and Q4 results from biotech heavyweight Gilead Sciences (NASDAQ:GILD) last week, I’m still convinced this is the right perspective.
Gilead’s 2013 revenue was up 15% to $11.2 billion, and net income was up 19% to $3.075 billion. That is very respectable growth, but it is just the tip of the iceberg.
Gilead’s new hepatitis drug, Sovaldi, just launched in December 2013 and it already hit $139.4 million in sales. Some of this is due to stocking up, but regardless, the drug is off to a great start. By 2017, I expect Gilead’s hepatitis treatments to generate more than $10 billion in annual sales.
That is a massive number. Remember, GILD’s 2013 revenues totaled $11.2 billion. In just 4 years Sovaldi has the potential to add 90% revenue growth for GILD. This is a $117 billion company, not some small cap, so this kind of growth is not normal.
Sovaldi is just one product though. GILD’s HIV treatments are also growing. If we put everything together, we’re looking at 2017 revenues in the neighborhood of $24 billion. That should translate into net income of roughly $10.7 billion. In other words, GILD could grow net income at a 36% annual rate over the next four years.
By comparison, analysts expect the S&P 500 is to grow at a CAGR of just 5.5% to 7% over the same timeframe.
This is what historical and estimated revenues and net income look like for GILD.

Biotech is moving into its 4^th year as the best performing sector in the market. The sector’s rise is fueled by rampant earnings growth as new blockbuster products, like GILD’s Sovaldi, hit the market. While this growth will not last forever, I also don’t think the end is nigh. In some cases, like with GILD stock, growth is just about to accelerate.
Until there is some major stumbling block, it’s difficult to advise against owning leading biotech companies like GILD.
For those of you interested in a little more detail into GILD’s sales, here are the results by product in 2013. Just take a few seconds to look these over and you’ll see that GILD is growing product sales almost across the board (Sovaldi had no 2012 sales so there is no growth rate noted).

GILD stock slumped a bit after reporting Q4, but we shouldn’t make too much of that. This stock is one I own for the long haul, and you should too.

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