Evaluating GSK's 34% Rise as Pipeline Progress Sparks New Valuation Debate

Wondering if GSK is actually undervalued or if there's more to the story than recent headlines suggest? You're not alone, and we're about to dive into what those numbers really mean. Despite a slight dip of 0.7% in the last week, GSK shares have surged 9.1% over the past month and are up 34.0% over the last year, adding plenty of fuel to the "value" vs. "momentum" debate. Much of the recent price movement follows news of GSK's progress in its pharmaceuticals pipeline and strategic moves in respiratory and vaccine segments. These developments have kept the stock in the spotlight and sparked conversation about GSK's future growth prospects. If you're looking for a quick valuation snapshot, GSK scores a strong 5 out of 6 on our value checks, suggesting it is undervalued by several key measures. However, keep reading as we compare different valuation approaches and share a more nuanced way to decide if it's worth adding to your portfolio.

GSK delivered 34.0% returns over the last year. See how this stacks up to the rest of the Pharmaceuticals industry.

Approach 1: GSK Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company is truly worth by projecting its future cash flows and discounting them back to today's value. This method is particularly useful for evaluating businesses like GSK, where future cash flow is a key driver of value.

GSK's latest reported Free Cash Flow is approximately £5.1 billion, with analyst estimates indicating robust annual growth for the foreseeable future. Within five years, projections place Free Cash Flow at over £8.0 billion by 2029. Analyst estimates guide the initial years, and output for years six through ten is extrapolated to maintain a forward-looking view, following Simply Wall St's methodology.

By plugging these cash flow projections into the DCF model, the intrinsic value is estimated at £45.89 per share. This amount is 61.5% below the stock's current trading price, suggesting that GSK may be significantly undervalued by the market based on this approach.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests GSK is undervalued by 61.5%. Track this in your watchlist or portfolio, or discover 870 more undervalued stocks based on cash flows.GSK Discounted Cash Flow as at Nov 2025

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for GSK.

Approach 2: GSK Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is a widely used valuation metric and is particularly well-suited for profitable companies like GSK. It allows investors to quickly compare how much the market is willing to pay for each pound of current earnings, making it a powerful tool for gauging whether a stock is priced attractively relative to its profit generation.

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A "normal" PE ratio can vary considerably between companies and industries, and is often influenced by growth expectations and perceived business risks. Generally speaking, higher earnings growth prospects or lower risks warrant a higher PE, while mature or riskier companies tend to see lower multiples.

GSK currently trades at a PE ratio of 12.9x, which is notably lower than both the pharmaceuticals industry average of 23.4x and its key peers at 16.8x. This already hints at potential undervaluation versus broader benchmarks in its sector.

Simply Wall St’s proprietary “Fair Ratio” estimates what a reasonable PE should be by blending in factors such as GSK's earnings growth potential, risk profile, profit margins, industry positioning, and market cap. This holistic approach minimizes the pitfalls of simple peer or industry comparisons and delivers a more tailored and forward-looking gauge of fair value.

For GSK, the Fair Ratio lands at 25.4x, meaning the current PE is well below where it could reasonably trade given its fundamentals and outlook. This supports the case that, based on its earnings and risk profile, GSK shares are undervalued at current levels.

Result: UNDERVALUEDLSE:GSK PE Ratio as at Nov 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1395 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your GSK Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story or perspective about a company, connecting the latest facts and your assumptions, such as future revenue, profit margins, or risks, to a financial forecast and then to a fair value. This approach goes beyond static ratios by letting you build, test, and share your outlook for GSK in a way that is easy to follow and highly personal.

Narratives are available to every investor within the Community page on Simply Wall St’s platform, used by millions worldwide. By comparing your Narrative’s fair value with the current share price, you can see at a glance whether your story says "buy," "hold," or "sell," making decision-making clearer and more actionable. Plus, Narratives are automatically updated whenever there is fresh news, results, or a major event, so your view always stays relevant.

For GSK, some investors see a fair value as high as £78 per share, banking on breakthrough innovation and strong margins, while the most cautious currently estimate fair value around £11 based on risks like litigation and patent loss. Narratives empower you to decide which story you believe, and give you the tools to back it up with real numbers.

For GSK however, we'll make it really easy for you with previews of two leading GSK Narratives:

🐂 GSK Bull Case

Fair Value: £78.00

Undervalued by 77.3%

Forecast Revenue Growth: 49.03%

GSK's "March Madness Lineup" features major events, including FDA decisions and high-profile conferences, which are driving bullish investor momentum. The company is advancing 71 pipeline assets, with 19 in Phase 3 and targeting 5 new FDA product approvals this year, highlighting strong innovation and potential revenue growth. Recent share price increases, along with anticipated earnings, have led some to consider GSK a popular choice for potential further gains, with this narrative targeting a much higher fair value than the current share price.

🐻 GSK Bear Case

Fair Value: £17.36

Overvalued by 1.9%

Forecast Revenue Growth: 4.17%

GSK is positioned for growth in vaccines and specialty medicines but faces risks from patent expiries, legal liabilities, and increased competition in its core segments. Revenue is expected to rise moderately, with analysts forecasting a shift toward higher margins. However, ongoing legal and regulatory pressures may limit outperformance. The analyst consensus fair value is only slightly above the current share price, suggesting the market already reflects most anticipated improvements and that future upside may be limited unless new catalysts emerge.

Do you think there's more to the story for GSK? Head over to our Community to see what others are saying!LSE:GSK Community Fair Values as at Nov 2025

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include GSK.L.

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