Glaxosmi. Pharma (GLAXO)

FairStock Score: 62/100 — STEADY

Score breakdown: P/E: 0/3 · ROCE: 2/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Superb capital efficiency: ROE 52.32% and ROCE 63.25% with debt/equity at only 0.02.
• Strong financial health: Piotroski F-Score 8/9 and Altman Z-Score 8.79 indicate very low bankruptcy risk.
• High free cash flow of ₹1,244 Cr supports payout and reinvestment flexibility.
• Promoter holding at 75% aligns management with minority shareholders.
• Profit growth of 18.83% despite only 2.59% sales growth points to operating leverage/pricing power.

Concerns

• Valuation is rich: P/E 43.31, P/B 21.66, and PEG 2.54 give little room for disappointment.
• Graham Number of ₹395.22 suggests a very large gap from current price; margin of safety is -550.67%.
• Top-line growth is muted: latest sales growth 2.59% and 5-year revenue CAGR 5.08%.
• Dividend yield of 1.63% is modest, so the return is heavily dependent on price appreciation.

AI Analysis

Let me start with what I admire. Glaxo has the balance sheet of a fortress: debt/equity of 0.02, Altman Z-score of 8.79, Piotroski score of 8/9, and free cash flow of ₹1,244 crore. Returns are exceptional—ROE at 52.32% and ROCE at 63.25%. When a promoter owns 75% and the business still grows profit 18.83% while sales grow only 2.59%, that tells me there is real pricing power and discipline. This feels like a quality compounder. But Graham would tap his pencil now. At ₹2,494.60, I am paying 43.31 times earnings and 21.66 times book value; book value is just ₹115.19 per share. The Graham Number is only ₹395.22, so the price is far above any conservative estimate—the data shows margin of safety at -550.67%. A PEG of 2.54 tells me the 18.83% profit growth is no longer cheap. Dividend yield of 1.63% will not save me if the multiple compresses. I respect the DCF intrinsic value of ₹3,376.45; it suggests the business can generate enough cash to justify a higher price than today's quote. But I have seen wonderful businesses become poor investments when the entry price ignores Mr. Graham's margin of safety. Five-year revenue CAGR is just 5.08%; a 43 P/E on a slow-top-line grower leaves little room for error. If the stock ever falls close to a price that makes sense against those conservative figures, I will happily study it. Until then, this is a wonderful stalwart, but not a wonderful buy at this price.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer