NEW YORK (TheStreet) --Drug maker GlaxoSmithKline (GSK) is facing increasing skepticism from shareholders regarding the erosion of the company's U.S. business as well as the allegations of corruption brought against GlaxoSmithKline in China, Reuters reports.
The company agreed to pay a $489 million fine in order to settle its issues in China, but investors are still concerned over the company's strategic direction and its ability to improve financial returns, Reuters said.
One thing that would quell investor concern is if the company's chairman, Chris Gent, were to agree to step down sooner then the end of 2015. "A new chairman must be overdue. Someone needs to look at the strategic direction of the business with a fresh pair of eyes," a top-50 shareholder told Reuters.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
One of the main reasons investors have been unhappy with GlaxoSmithKline is that despite the fact the European healthcare sector has been rising over 20%, due to favorable outlook regarding new drugs, Glaxo shares have lost 10% as forecasts for earnings and sales have declined, Reuters added.
GlaxoSmithKline is facing further investigations and potential fines in the U.S., Britain and allegations of bribery in Poland, Syria, Iraq, Lebanon, and Jordan, Reuters said.
Shares of GlaxoSmithKline are up 0.08% to $47.42 in late morning trading on Monday.
Separately, TheStreet Ratings team rates GLAXOSMITHKLINE PLC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate GLAXOSMITHKLINE PLC (GSK) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, GLAXOSMITHKLINE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- GLAXOSMITHKLINE PLC's earnings per share declined by 26.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GLAXOSMITHKLINE PLC increased its bottom line by earning $3.68 versus $2.92 in the prior year. This year, the market expects an improvement in earnings ($97.40 versus $3.68).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.7%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for GLAXOSMITHKLINE PLC is currently very high, coming in at 70.72%. Regardless of GSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.43% trails the industry average.
- The share price of GLAXOSMITHKLINE PLC has not done very well: it is down 7.77% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full analysis from the report here: GSK Ratings Report