Balm in Gilead

Rapidly sinking sales of drugs that essentially cure hepatitis C have hammered Gilead Sciences stock (Nasdaq: GILD) so hard you’d think it’s bleeding money. But nothing could be further from the truth.

While its hepatitis C drug revenue has been shrinking and HIV drug competition is heating up, the drugmaker’s balance sheet still boasted a whopping cash balance of $36.6 billion at the end of June after its operations generated a stunning $2.6 billion in free cash flow during the second quarter alone. At this pace, the world’s leading seller of antiviral drugs would produce about $0.12 of distributable profits for every $1 used to purchase shares at recent prices.

Gilead has used its massive cash flows to lower its share count by about 14 percent over the past three years, plus the stock offers a tempting 2.8 percent dividend yield at recent prices. Its cash can also let it spend a lot acquiring other companies (or just some of their drugs) or inking profitable partnerships with smaller companies developing promising drugs.

With double-digit sales growth in its HIV treatment segment and a diverse clinical pipeline that sports compelling candidates in high-value areas such as rheumatoid arthritis, Gilead’s stock is arguably a great value buy for any investor right now simply because of its immense cash position. (The Motley Fool owns shares of and has recommended Gilead Sciences.)