Is Now the Time to Buy GlaxoSmithKline?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today I am looking at�GlaxoSmithKline� (LSE: GSK  ) (NYSE: GSK  ) to determine whether you should consider buying the shares at 1,445 pence.

I am assessing each company on several ratios:

• Price/Earnings (P/E):�Does the share look good value when compared against its competitors?
• Price Earnings Growth (PEG):�Does the share look good value factoring in predicted growth?
• Yield:�Does the share provide a solid income for investors?
• Dividend Cover:�Is the dividend sustainable?

So let's look at the numbers:

Stock	Price	3-yr EPS growth	Projected P/E	PEG	Yield	3-yr dividend growth	Dividend cover
GlaxoSmithKline	1,445 pence	110%	12.4	4	5.1%	14%	1.5

The consensus analyst estimate for next year's earnings per share is 116p (3% growth) and dividend per share is 77p (5% growth).

Firstly, I must say that although GlaxoSmithKline's three-year earnings-per-share growth is 110%, the company had an extremely bad year in 2010, and this has skewed my figures. I believe over a four-year period, GlaxoSmithKline's EPS has fallen 7%.

Anyway, trading on a projected P/E of 12.4, GlaxoSmithKline appears cheaper than its peers in the pharmaceutical sector, which are currently trading on an average P/E of around 13.6.

Unfortunately, GlaxoSmithKline's P/E and low single-digit growth rate give a PEG ratio of around 4, which implies the share price is expensive for the near-term earnings growth the firm is expected to produce.

Offering a 5.1% yield, GlaxoSmithKline's dividend yield is above the pharmaceutical sector average of 4.8%. Furthermore, GlaxoSmithKline has a three-year compounded dividend growth rate of 14%, implying the yield could continue to outpace that of its peers.

However, the dividend is only one-and-a-half times covered, which does not give GSK much room for further payout growth.

Lastly, GlaxoSmithKline has a strong history of returning cash to shareholders. During 2012 alone, GlaxoSmithKline returned 8.8 billion pounds to shareholders through share buybacks and dividends.

Growth is slow, but should you buy GlaxoSmithKline for its dividend?
Like its close competitor�AstraZeneca, GlaxoSmithKline's earnings are currently coming under pressure due to the loss of patents covering various over-the-counter treatments and falling sales in Europe.

That said, GlaxoSmithKline is still reporting sales growth in emerging markets. In particular, during the last year alone, sales grew 17% in China and emerging market sales now account for 26% of the group's total sales.

Furthermore, GlaxoSmithKline is taking action to cut costs and is targeting yearly cost savings of 1 billion pounds by 2016. In addition, GlaxoSmithKline has a strong product pipeline, and 14 new treatments are expected to be on sale within the next two years.

The company is also seeking acquisitions to bolster organic growth and recently acquired U.S.-based Human Genome Sciences, which I believe should further boost the company's pipeline and longer-term prospects.

Overall, despite the current challenges, I believe GlaxoSmithKline's future is looking up, and the company has a solid history of returning cash to shareholders. So all in all, I feel now looks to be a good time to buy GlaxoSmithKline at 1,455 pence.

More FTSE opportunities
As well as GlaxoSmithKline, I am also positive on the FTSE shares highlighted in "8 Dividend Plays Held by Britain's Super Investor." This exclusive report reveals the�favorite�income stocks owned by�Neil Woodford�-- the City legend whose portfolios have thrashed the FTSE All-Share by 200% during the 15 years to October 2012.

The report, which explains the full investing logic behind Woodford's dividend strategy and his preferred blue chips, is free to all private investors.�Just click here for your copy. But do hurry, as the report is available for a limited time only.

In the meantime, please stay tuned for my next verdict on a FTSE 100 share.