How Should Investors View GSK’s Valuation After Its Strong 2025 Share Price Rally?

• If you are wondering whether GSK is still a smart buy after its big run or if most of the upside is already priced in, this article will help you frame that decision through a valuation lens.
• Despite a minor 0.5% slip over the last week, GSK is still up 1.4% over 30 days, 33.1% year to date and 43.1% over the past year, which naturally raises the question of whether the current price fairly reflects its prospects.
• That strong share price performance has come as investors have refocused on GSK as a pure play vaccines and specialty medicines business after its consumer health spin off, and as the pipeline and product portfolio have looked more compelling to the market. At the same time, ongoing legal overhangs and shifting sentiment toward large cap pharma have injected bursts of volatility that make valuation even more important to get right.
• On our framework GSK scores a solid 5 out of 6 on valuation checks, suggesting it still appears undervalued on most fronts, and next we will break down what that means across different approaches, before circling back to a way to think about valuation by the end of the article.

GSK delivered 43.1% 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 model estimates what a company is worth by projecting the cash it can generate in the future and discounting those cash flows back to today, to account for risk and the time value of money.

For GSK, the latest twelve month free cash flow is about £5.1 billion. Analysts expect cash flows to grow steadily, with projections used directly for the next few years and then extrapolated by Simply Wall St, reaching roughly £9.4 billion by 2035. These rising cash flows are fed into a two stage Free Cash Flow to Equity model, which captures a higher growth period before fading toward a more mature rate.

On this basis, the DCF model estimates a fair value of about £43.45 per share. Compared to the current share price, this implies GSK trades at roughly a 58.3% discount, suggesting the market is still pricing the stock well below its projected cash generating power.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests GSK is undervalued by 58.3%. Track this in your watchlist or portfolio, or discover 918 more undervalued stocks based on cash flows.

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

For a profitable company like GSK, the Price to Earnings (P/E) ratio is a useful way to judge valuation, because it directly links what investors are paying for each share to the earnings that business is currently generating.

What counts as a normal P/E depends on how fast earnings are expected to grow and how risky those earnings are. Higher growth and lower perceived risk usually justify a higher multiple, while slower or more uncertain growth tends to cap how much investors are willing to pay.

GSK currently trades on a P/E of about 13.2x, which is well below both the Pharmaceuticals industry average of roughly 22.3x and the broader peer group at around 17.2x. Simply Wall St also estimates a Fair Ratio of about 26.0x, a proprietary P/E that reflects GSK’s specific growth outlook, profitability, industry, size and risk profile. This Fair Ratio is more informative than simple peer or industry comparisons because it adjusts for what actually makes GSK different rather than assuming all pharma names deserve the same multiple.

With the Fair Ratio of 26.0x sitting significantly above the current 13.2x, GSK still screens as undervalued on an earnings multiple basis.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your GSK Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of GSK’s story to concrete forecasts and a fair value estimate. A Narrative is your own explanation of what you think will happen to a company, translated into assumptions about future revenue, earnings, margins and, ultimately, what you believe the share is really worth. On Simply Wall St’s Community page, millions of investors build Narratives that turn those assumptions into dynamic fair values, which update automatically as new information like earnings reports, FDA decisions or major news hits the market. Narratives then make buy or sell decisions more intuitive by letting you compare your Fair Value to today’s Price and see whether GSK looks attractive, fairly priced or expensive given your story. For example, one GSK Narrative might see blockbuster vaccine momentum, expanding margins and assign a Fair Value around £78 per share, while a more cautious Narrative, focused on policy risk, patent cliffs and litigation, might land closer to £18.64, showing how different perspectives can sensibly lead to very different target prices.

Do you think there's more to the story for GSK? Head over to our Community to see what others are saying!

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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