Buying a stock near its low can be a good way to lock in a low price and hopefully set yourself up for some stronger returns later on. In the case of Gilead Sciences (GILD 0.76%), the stock isn't just at a 52-week low -- it's trading at around the lowest it has been in seven years. While the stock has occasionally dipped lower than the $63 that it trades at today, the last time that the stock was below that mark for an extended period of time was back in 2013 when it was on its way up.

Over the past year, Gilead's stock has declined by 7%, even as the Health Care Select Sector SPDR Fund has risen 17%. It may be tempting to believe that Gilead has bottomed out and it's due for a rally. But it's important to first understand why the stock is struggling as badly as it is, whether it can recover, and whether the stock is a good value at its current price, or if it is only likely to decline further.

Profits and sales have been falling -- fast

It's no big mystery why Gilead is struggling. The company just isn't producing the results that it once did. In 2018, sales of $22.1 billion were down more than 27% from the $30.4 billion that Gilead reported in 2016. Its margins have been shrinking as well. Through 2014 to 2016, Gilead's net profit margin didn't fall below 40%, but in 2018 it was only 25% -- which was still an improvement from 18% the year before.

Pills spilled out from a bottle.

Image source: Getty Images.

The company's product sales were down 14% in 2017 and then 16% again in 2018. Although HIV drug sales increased $2.9 billion during that time , that's not enough to offset the losses from Harvoni. Sales from the Hepatitis C drug totaled just $1.2 billion in 2018, and that's down nearly $8 billion from the $9.1 billion in revenue it generated in 2016. Gilead now offers a generic, lower-priced drug for patients with Hepatitis C which will help keep sales going, but at a much lower pace. That means the company is going to need another drug to help drive future growth.

Where the company is today

With more than 100 clinical studies that Gilead is working on today, there are many opportunities for the drug manufacturer to find a way to help replace the sales it has lost over the years. The problem is that clinical trials are hit or miss, and there's no guarantee any of them will result in a drug that will be as successful as Harvoni once was.

At a minimum, the company needs to show more growth than it has been achieving thus far. During the first three quarters of the year, Gilead's product sales have risen by only 2% from the same period last year. Sales from HIV drugs remain strong and up 12% year over year, but it's the lagging drug sales from all its other products that are weighing Gilead's top line down. In the company's third quarter, sales of Ranexa and Letairis were down 83% and 50%, respectively. The availability of generic drugs has led to a decline in their demand.

Developing new drugs is key, and that poses a big question mark over whether the stock is a good investment today or not.

Why the stock may be a good buy

Gilead could be a calculated risk for investors to take today. At a forward price-to-earnings (P/E) ratio of just nine, and with the company still generating some good growth from its HIV drugs, there's reason to still be optimistic that the company can turn things around. By comparison, rivals GlaxoSmithKline and Bristol-Myers Squibb trade at higher forward P/E ratios of 15 and 10, respectively. 

With many clinical trials in the works, the company has many opportunities to find more growth in the future. And with Gilead paying shareholders a dividend of 4% per year, investors will be well compensated for their patience.