Does GSK’s Recent 8% Rise Signal More Upside After Pharma Tariff Headlines?

Thinking about what to do with GSK stock right now? You’re not alone. Whether you’re holding, buying, or just watching from the sidelines, the debate around GSK has definitely heated up. The last year has seen some pretty notable moves in its price. If you’re tracking those short-term swings or watching how GSK’s long-term story unfolds, you’ll spot signs that risk perceptions are shifting alongside the company’s growth potential.

Let’s break it down: Over the last month, GSK shares are up nearly 8%, which is quite a leap for a well-established pharmaceutical name. Zooming out, even though the 1-year total return is down about 3%, the stock has climbed almost 25% over the past five years. That’s a solid long-run showing, and recent volatility seems tied to industry-wide events like tariff talk and global economic news. So far, nothing has fundamentally shaken GSK’s business model.

Now, if you’re looking for a quick number to know whether GSK is undervalued, here it is: the company earns a 5 out of 6 on our official value score. That means in five of the six ways we check for undervaluation, GSK comes out looking cheap compared to its earnings, assets, and overall potential. But how do we get to that verdict, and which methods matter the most? Let’s walk through those valuation checks together. Then, stick around, because there’s a smarter way to judge valuation that most investors overlook.

GSK delivered -3.4% returns over the last year. See how this stacks up to the rest of the Pharmaceuticals industry.

Approach 1: GSK Cash Flows

The Discounted Cash Flow (DCF) model is a classic valuation method that projects a company’s expected future cash flows and then discounts them back to today's value. This allows investors to estimate what GSK shares could be worth based on real underlying performance rather than current market trends.

Currently, GSK’s last twelve months of Free Cash Flow (FCF) stands at £5.25 billion, and analysts expect this figure to increase each year. If these projections are realized, GSK’s annual cash flow may reach nearly £9.2 billion by 2035. These projected income streams, when adjusted for risk and inflation, result in an estimated intrinsic value of £43.68 per share using a two-stage FCF to equity model.

When compared to the current share price, this valuation indicates that GSK is trading at a 66.1% discount to its estimated fair value. According to this DCF analysis, GSK appears significantly undervalued based on its cash generation potential.

Result: UNDERVALUED

Our DCF analysis suggests GSK is undervalued by 66.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: GSK Price vs Earnings

For companies like GSK that deliver consistent profits, the Price-to-Earnings (PE) ratio is a reliable way to judge stock valuation. This metric highlights how much investors are willing to pay for each pound of earnings GSK generates, providing perspective on the company’s current and expected profitability.

Whether a PE ratio is considered "normal" or "fair" depends on expectations for future growth and the level of risk investors associate with the business. Higher growth rates and lower risks typically justify higher PE ratios, while slower-growing or riskier companies generally trade at lower multiples.

Currently, GSK trades at a PE ratio of 17.4x. This is below both the pharmaceuticals industry average of 25.1x and the average of its closest peers at 18.1x. Simply Wall St’s proprietary Fair Ratio for GSK is 37.8x, a figure that considers the company’s earnings growth prospects, size, margins, and risk profile.

Since GSK’s current PE is significantly below its Fair Ratio, this may suggest the stock is undervalued on an earnings basis. The numbers indicate potential upside if the company’s fundamentals remain stable.

Result: UNDERVALUED

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

Upgrade Your Decision Making: Choose your GSK Narrative

Instead of just relying on numbers, Narratives allow you to tell your story about a company like GSK by connecting your expectations for its future revenue, earnings, and margins to a Fair Value, all grounded in your perspective on where the business is headed.

A Narrative is more than data; it is a simple but powerful way to link the company’s underlying story (why things may change) to a detailed financial forecast. This connection then leads directly to your view on what GSK is worth today.

On platforms like Simply Wall St, anyone can build, share, or follow Narratives. This makes them accessible whether you’re a first-timer or part of a community of millions of investors. Narratives help you make disciplined choices on when to buy or sell by showing you how your Fair Value compares with the market price. As a result, decisions are shaped by your outlook and logic, instead of just market noise.

Best of all, Narratives are dynamic. Whenever new news or earnings are released, each Narrative is automatically updated with the latest information and market context. For example, some investors currently see GSK’s fair value as high as £78, while others are as cautious as £11.2, so your Narrative should reflect your unique view of its future.

Do you think there's more to the story for GSK? Create your own Narrative to let the Community know!

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.

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