Nobody loves you when you're down and out.

Just ask Gilead Sciences (NASDAQ:GILD). The big biotech is down more than 20% over the past 12 months. It's out of favor with several Wall Street analysts. And Gilead certainly isn't getting much love these days from investors.

But if you own shares of Gilead Sciences and are thinking about selling, think again. Here's why it would be a colossal mistake to sell Gilead stock now.

Man hitting head after making mistake

Image source: Getty Images.

No sugarcoating

First, let's be candid about the problems that Gilead faces. Sales for hepatitis C virus (HCV) drugs Harvoni and Sovaldi continue to plunge. If anyone thought there might be a light at the end of the tunnel, Gilead's guidance for 2017 snuffed that light out entirely. The company expects its HCV franchise sales to fall another 40% or more this year.

If Gilead's projections are accurate, the biotech's total revenue will decline by roughly $6.5 billion in 2017. How much money is that? Imagine a stack of dollar bills the height of the Empire State Building, then add the same size stack on top of that stack, and repeat 1,600 times. That's how much money Gilead will miss out on this year.

What's especially concerning about this visual image is that it includes revenue from several new drugs that are performing very well. Gilead's latest HCV drug Epclusa made more than $1 billion in the fourth quarter alone. Sales for HIV drug Genvoya totaled just under $1.5 billion in its first full year on the market.

Am I trying to undermine my own argument that selling Gilead stock would be a mistake? No. However, I don't want to sugarcoat the challenges that the biotech faces. They're real -- and they're significant.

A different perspective

Try looking at Gilead from a different perspective, though. In fact, let's forget we're even talking about Gilead Sciences for a minute. 

Suppose you had the opportunity to own a business that was on track to generate around $24 billion in revenue this year. This company has a gross margin of roughly 87%. It should make a profit of at least $11 billion and probably closer to $12 billion.

This company has a cash stockpile of over $32 billion. If we subtract that amount from its current price tag, the company could be bought for $57 billion. In five years or so at current earnings levels, you would make back your initial investment and then begin to rake in the cash.

There's a twist, though. The company's earnings are probably going to go down in the coming years. It seems likely that earnings will drop by around 6% each year. This means that instead of making total profit of $55 billion to $60 billion over the next five years, you'll probably only have profits of around $49 billion to $53 billion.

It's likely that six or seven years will be required to recover your initial investment instead of just five years. But after the six or seven years, you should make an annual return of at least 12% of your initial investment.

Would you be interested in that business? I suspect many investors would. It sounds like a cash cow in many respects. That's what I believe Gilead Sciences is.

The wild card

While this hypothetical exercise include some assumptions that might change over the next few years, it's actually a pretty realistic description of Gilead's financial potential. However, the scenario omitted one hugely important possibility: Gilead could use its cash stockpile to improve its future profits.

This move by Gilead isn't just possible, though. It's probable. Gilead's management team has already stated the company is planning to make an acquisition. Based on what executives said in the biotech's fourth-quarter earnings call, I expect this acquisition (or acquisitions) to be significant in impact to Gilead's growth prospects.

If you don't believe the right acquisition can dramatically change the future for a company, just take a look at Gilead's own history. In 2012, Gilead Sciences completed the buyout of Pharmasset for around $11.2 billion. That deal brought Sovaldi into Gilead's pipeline. Sovaldi led to Harvoni and Epclusa. This one acquisition transformed Gilead Sciences.

Not every deal winds up being as great as Gilead's Pharmasset acquisition, of course. However, Gilead has shown that it can make smart strategic moves. The company doesn't have to pull off a coup like it did with Pharmasset to change its growth prospects significantly. 

Risk versus reward

Every investment is a trade-off between risk and reward. I think the risks of owning Gilead Sciences have been drastically lowered by the stock decline over the past year. A lot of bad news is already baked into the share price. 

What's not reflected in the current price, however, is Gilead's ability to change its own story through one or more acquisitions. I suspect there are plenty more rewards in the future for Gilead shareholders than meets the eye right now. 

Keith Speights owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has a disclosure policy.