GSKThe company’s (LSE: GSK) share price is down 18% from its February 18 high of £22.82. Much of this occurred after the release of first-quarter results, even though they showed another excellent quarterly result that exceeded analysts’ expectations.

In my opinion, one of the reasons for the decline was profit-taking after the previous robust price escalate. Another reason could be the decline in sales of the general medicines division, even though other divisions were doing better than expected.

In both cases, the decline only deepens the glaring disconnect between the company’s share price and the core value of its core business. And it is on this gap that experienced long-term investors have been able to make large profits in the past.

How large is it?

How good are the results?

The latest results – for the first quarter of 2026, published on April 29 – are just the latest in a string of robust numbers that highlight growing earnings momentum across GSK. And it is growth that ultimately drives any company’s share price to rise over time.

The risk for the company is the slower-than-expected implementation of modern products in the vaccine and specialty medicines departments. Another problem is a earnest problem in one of the company’s key products that could result in costly litigation.

However, underlying operating profit rose 10% year-on-year to £2.8 billion, highlighting robust momentum in the vaccines and specialty medicines segment. Vaccine revenue rose 15% to £3.1 billion, highlighting the continued strength of Shingrix and newer launches.

The specialty medicines market grew by 12% to £2.6 billion, illustrating how expanding the respiratory and HIV portfolio is improving the mix. Continued investment in late-stage pipeline assets also provides medium-term growth visibility, providing GSK with multiple engines for future earnings.

What is the “fair value” of the stock?

Price and value are very different measures of a stock. Price reflects whatever buyers and sellers are willing to trade at any given time. However, value depends on the strength and prospects of the underlying business.

This distinction matters for long-term investor returns. Over time, market prices tend to move closer to the true value of the company (“fair value”). This is why understanding and quantifying the difference between price and value is so powerful in building profits.

Discounted cash flow (DCF) analysis helps investors understand where the fair value of a stock lies. It does this by forecasting a company’s future cash flows and discounting them back to the present. The more uncertain these forecasts are, the higher the return investors expect, increasing the discount applied.

Analysts’ DCF models differ because their assumptions are different. Based on my own data – including a discount rate of 7.2% – GSK shares are 58% undervalued at the current level of £18.73. This means the fair value is £44.60, more than double today’s price.

So if markets continue to move towards fair value, this could be a great buying opportunity if DCF assumptions hold.

My view on the investment

GSK’s latest results highlight that the company can boast much higher profits than the current share price suggests. The scale of the discount relative to my estimate of fair value seems unusually gigantic for a company of this quality.

Given that the stock is trading at such a steep discount, I will be increasing my current holdings at bargain levels. I also have my eye on other deeply undervalued stocks in other sectors at the moment.