Water pressure on the rise

Britain’s water industry came under fresh scrutiny in Wednesday business after a damning report from the National Audit Office (NAO). The body advised that Severn Trent (LSE: SVT) and its peers have gulped down an £800m windfall since 2010 thanks to a combination of tax reductions and favourable borrowing costs.

The NAO advised that Ofwat has failed to “appropriately balance the risks” between water providers and consumers, and called on the regulator to pass down these discounts more effectively to households. The likes of Severn Trent have already seen their charge plans repeatedly flung back by Ofwat in recent times, and today’s news raises the pressure still further on the industry to refrain from imposing price rises in the future.

Fish for chips play

Investors in microchip manufacturer ARM Holdings (LSE: ARM) would have kept their eyes peeled for the release of American rival Intel’s (NASDAQ: INTC.US) latest results released yesterday. And at first glance the numbers would have made for worrying reading as Intel’s Client Computing division — which encompasses its smartphone and tablet PC operations — saw revenues dive 7% in July-September.

However, this weakness was prompted by the continued slide of PC sales as tech users switch increasingly into mobile devices. And ARM Holdings is the dominant player in this field thanks to its strong relationship with industry titans like Apple, and increasingly with major players in the growth regions of China. I believe the Cambridge firm has little to worry from Intel’s update.

In rude health

Healthcare play Al Noor Hospitals (LSE: ANH) lit up the boards in Wednesday business and was recently tearing 18.3% higher. The company advised that it had recommended an £11.60 per share to merge with Mediclinic, a deal that will see the soon-to-be-created health giant listed on the London Stock Exchange.

The new entity — Mediclinic International — will become the largest private healthcare provider in the United Arab Emirates and the third biggest in South Africa. With exposure to the UK, Switzerland and Namibia, too, the company will control 73 hospitals and 35 clinics globally, giving it terrific exposure to rising healthcare demand in emerging and developed markets alike.

Retailer in fashion

Clothing retailer N Brown (LSE: BWNG) was also in the green in midweek business following a bubbly set of interims, and was last dealing 6.3% higher from Tuesday’s close. The Manchester company advised that total revenues leapt 4.2% during March-August, to £415.8m, helped by encouraging online sales — internet transactions clocked in at 63% of aggregated group sales versus 58% a year earlier.

The operator of the Jacamo and JD Williams brands saw underlying treading pre-tax profit drop 15.9% in the period, to £19.4m, due to the cost of new store openings and other restructuring costs. But I expect total sales, and consequently earnings, to tick resolutely higher in the months and years ahead as N Brown’s transformation strategy from mail order to e-commerce pays off.

Fermenting solid returns

Pub chain Marston’s (LSE: MARS) has failed to stoke investor appetite following its own financial update, however, and was recently 0.7% lower in Wednesday’s session. The firm advised that like-for-like sales advanced 1.8% during the 12 months to September 2015, and that underlying revenues sped up during the final 11 weeks, to 2.2%.

Marston’s rolling restructuring plan is clearly paying off handsomely. The brewery opened 25 new pub-restaurants during the year, and plans to unveil 27 new outlets in the current period. With the closure of many smaller, ‘wet-led’ pubs also driving margin growth, and ale demand steadily increasing — total ale sales excluding Thwaites rose 5% in 2015 — I believe Marston’s is a strong selection for growth hunters.

The post Should You Buy Al Noor Hospitals Group PLC, Severn Trent Plc, ARM Holdings plc, N Brown Group plc & Marston’s PLC Following Wednesday’s News? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and Intel. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In comparison, healthcare peers such as Dechra (LSE: DPH) and Al Noor (LSE: ANH) have performed much, much better. For example, Dechra is up 86% since the start of 2012, while Al Noor has seen its share price rise by 67% over the same time period.

Despite this, I’m more bullish on GlaxoSmithKline’s future prospects, and I would buy it ahead of Dechra and Al Noor. Here’s why.

A Step Change

While 2015 is set to yield more pain for GlaxoSmithKline, 2016 is due to be a marked improvement compared to previous years. So, while the company’s share price may remain relatively weak in the short run as the market sees its bottom line fall by an expected 14% this year, investors could begin to look ahead to 9% earnings growth for next year and bid up the price of the company’s shares.

And, with further cost cutting set to take place, GlaxoSmithKline’s medium term outlook also appears to be positive – especially when you consider that it has a diverse and robust pipeline that includes drugs with considerable future sales prospects, such as HIV treatments within its ViiV Healthcare subsidiary.

Furthermore, GlaxoSmithKline’s earnings growth prospects compare favourably to those of Dechra and Al Noor. They are expected to increase their bottom lines by 11% and 14% respectively next year and, while both figures are ahead of GlaxoSmithKline, their valuations are less appealing than their larger health care peer.

Valuations

For example, GlaxoSmithKline trades on a rather lowly price to earnings (P/E) ratio of 16.9, while Dechra and Al Noor have P/E ratios of 24.6 and 18 respectively. Certainly, their bottom line growth should be slightly higher than that of GlaxoSmithKline, but neither company offers the diversity, financial strength or income potential of their peer and, as such, it would be of little surprise for GlaxoSmithKline to see its rating moved upwards at a faster rate than Al Noor or Dechra.

Income Prospects

As mentioned, GlaxoSmithKline has better income prospects than Dechra or Al Noor. For example, it has a yield of 6.4% at the present time, versus 1.7% (Dechra) and 1.5% (Al Noor). And, with interest rates unlikely to move significantly higher over the medium term, investor demand for yields could push GlaxoSmithKline’s shares higher – especially since it is one of the best-yielding and historically most reliable income stocks on the FTSE 100.

Looking Ahead

So, while the last three years have been hugely disappointing for GlaxoSmithKline, its future appears to be very bright. That’s not to say that Dechra and Al Noor will not see further share price gains, but if I could only buy one of the three, my money would be on GlaxoSmithKline to be the best performer over the medium to long term.

The post Why I’d Buy GlaxoSmithKline plc Before Dechra Pharmaceuticals plc Or Al Noor Hospitals Group PLC appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.