Under £19, here’s why GSK’s share price looks cheap to me anywhere below £42.92

Years of scepticism over GSK’s (LSE: GSK) product pipeline and growth prospects have weighed on its share price, in my view.

Yet a 43% rebound from the stock’s 9 April £12.61 one-year low suggests sentiment may finally be turning.

But because value is not the same thing as price, I think the shares could still have plenty of room to run.

So how high might they go?

What will drive earnings growth?

Earnings growth powers long-term rises in a company’s share price. For GSK, I think the next phase will come from three places.

First, following the 2022 demerger of Haleon, it now operates as a pureplay pharma and vaccines business. That cleaner structure should support better margins and more predictable cash generation. 

Second, its vaccines portfolio — led by Shingrix and the respiratory vaccine Arexvy — continues to deliver strong, repeatable cash flows. In Q3 2025, Shingrix sales jumped 36% year on year to £0.3bn, while Arexvy rose 13% to £0.8bn.

Third, the late‑stage pipeline is finally producing meaningful candidates. The Q3 update highlighted 15 major pipeline launches between 2025 and 2031. Each has peak-year sales potential above £2bn.

A risk to GSK’s earnings is US tariffs being applied to pharmaceutical exports. This follows US President Donald Trump’s recent statement that the UK will face a 10% levy on “any and all goods” from 1 February, rising to 25% from June. He said these measures would remain until a deal is reached over Greenland’s future.

That said, a US-UK agreement reached in December 2025 exempted pharmaceuticals — including GSK’s products — from these measures.

Before the statement, GSK lifted expected turnover growth guidance to 6%-7% (from 3%-5%). It did the same for core operating profit growth: to 9%-11% (from 6%-8%).

Analysts’ earnings growth forecasts are a more conservative 7% a year to end-2028.

How high might the shares go?

To gauge GSK’s value, I ran a discounted cash‑flow (DCF) analysis. This estimates a company’s fair value by projecting its future cash flows and then discounting them back to today. It does this using a rate that reflects the risk of owning the shares.

The present value of the next 10 years of cash flows is then added to the stock’s terminal value, giving the total equity value. Divide that by the number of shares outstanding, and we have an estimate of what each share is worth.

In GSK’s case, I used a discount rate of 7.1%, and a perpetual growth rate of 3% (the five-year average UK 10-year gilt yield). Other DCF models may use different inputs, of course, which could produce different valuations — lower or higher.

However, based on these numbers, my modelling suggests GSK shares are 58% undervalued at their current £18.48 price.

That implies a fair value of £42.92 — more than double where the stock trades today.

And because asset prices can trade towards their fair value in the long run, it suggests a potentially terrific buying opportunity to consider today if those DCF assumptions hold.

My investment view

I bought GSK shares years ago, based on their strong earnings growth potential and deeply discounted valuation.

As neither of those factors has changed, I intend to add to my position very shortly.

The post Under £19, here’s why GSK’s share price looks cheap to me anywhere below £42.92 appeared first on The Motley Fool UK.

More reading

• 2 top income stocks for January 2026, according to experts
• 2 top FTSE 100 shares to buy in a recession, according to experts
• 2 dividend shares for investors to watch closely in 2026
• 3 FTSE 100 powerhouses to consider buying for passive income in 2026
• I asked ChatGPT if £20,000 would work harder in an ISA or SIPP in 2026 and it said…

Simon Watkins has positions in GSK. The Motley Fool UK has recommended GSK and Haleon Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

See author's posts