• ISSN: 2301-3567 (Print), 2972-3981 (Online)
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    • DOI: 10.18178/JOEBM
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HOME > Archive > 2022 > Volume 10 Number 2 (Apr. 2022) >
JOEBM 2022 Vol.10(2): 85-90 ISSN: 2301-3567
DOI: 10.18178/joebm.2022.10.2.678

An Equity Research for Investment on Pharmaceutical Companies Based on Ratio Analysis

Jiaxi Cai, Longyue Hong, Nuofan Hu, and Yun Liu

Abstract—Contemporarily, human beings live in an uneasy time with global economic and financial unrest, especially stirred by the COVID-19. Health and wellness are more important than ever; hence pharmaceutical companies have become an attractive investment target. We selected key statistics from the balance sheet, income statement, and cash flow statement to evaluate and compare major pharmaceutical companies' valuation, growth, profitability, and payout, based on the DDM model. These companies include GlaxoSmithKline Plc, Johnson & Johnson, AstraZeneca Plc, MERCK & Co, Amgen Inc, Bristol Myers Squibb Co, Pfizer Inc, and Novo Nordisk A/S. According to the calculation of ratios and the comparison of growth rates and profitability to other selected pharmaceutical companies, GlaxoSmithKline is the best investment target among the eight companies in the comparison list. Specifically, GlaxoSmithKline has both P/E and EV/Sales ratios ranked the lowest in 2020; both average sales growth and average EPS growth rates are ranked at 2nd, average EBITDA growth ranked at 5th for the financial year 2020. The GP/A ratio for GlaxoSmithKline is above the list's average. In a broad sense, there is still an opportunity for growth in medical company equities as the epidemic continues. In particular, we need to choose a firm that has a stable and sustainable growth rate, advanced medical technology, and a suitable and mature system. Our pharmaceutical equity research can lend more insight to other researchers or investors interested in healthcare stocks.

Index Terms—Pharmaceutical companies, equity research, GSK, valuation.

J. Cai is with the Smith College, MA 01063 USA (e-mail: jcai@smith.edu). L. Hong was with University of California, Irvine, CA 92697 USA (e-mail: longyuh@uci.edu). N. Hu is with the Zhongnan University of Economics and Law, Hubei Province, P. R. China 430073 (e-mail: nuofanhu@stu.zuel.edu.cn). Y. Liu was with Boston University, Boston, MA 02215 USA (e-mail: yunliu1@bu.edu).

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Cite:Jiaxi Cai, Longyue Hong, Nuofan Hu, and Yun Liu, "An Equity Research for Investment on Pharmaceutical Companies Based on Ratio Analysis," Journal of Economics, Business and Management vol. 10, no. 2, pp. 85-90, 2022.

Copyright © 2022 by the authors. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

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