At The Motley Fool, we like to ‘buy the dip’ whenever we can. That means picking up shares after the stock market has fallen, to gain exposure at a lower valuation than just a few days earlier.

We see it as the same principle as going shopping in the sales for, say, clothes or tech, or whatever. Who doesn’t like bagging a bargain? Yet many newbie investors looking to buy shares don’t view it like that. Some get nervous when the stock market dips, in case it heralds further trouble ahead.

I’d buy the dip after last week’s setback

Sometimes they will be right. The stock market may dip, then dip again. Nobody knows for sure what it will do next. However, I have learned that if I keep hanging on and on for the next dip, I never buy shares.

At some point, I have to take the plunge. Timing the stock market is impossible. But when I buy the dip, I am taking advantage of a move that has already happened, rather than second guessing where it goes next.

Stock markets suffered a minor setback last week. The US S&P 500 ended the week 5.15% lower. The FTSE 100 closed just 1.56% down on the week, with the FTSE 250 slipping 2.05%. That’s not a crash, just a little dip. Yet it has thrown up opportunities.

Some individual stocks have fallen by larger amounts. For example, InterContinental Hotels Group and Dechra Pharmaceuticals fell by 4.67% and 4.47% respectively on Friday. Neither are high on my shopping list, though. I’ll pass on these but others may be tempted.

I also like to take advantage of extended share price dips. For example, BT Group is down 11.49% over the last month. Fund manager Schroders has fallen 10.41%. In both cases, this is just the latest stage in a long-term share price decline. 

The two stocks look cheap, trading at P/Es of 6.95 and 10.56 times earnings, respectively. I am sorely tempted by BT, but would need to take a closer look at Schroders. I would never buy a stock solely because it is cheaper.

Two falling stocks I would happily buy

Insurer Aviva has experienced a much smaller drop of 4.02% over the last month. I would consider that dip worth buying because the FTSE 100 insurer has been on my watch list for some time.

The recent Anglo American dip really tempts me. The mining giant has fallen 7.82% over the last week, as global recession fears grow. Yet its long-term share price trajectory is positive, as it has grown 106.79% over five years.

The stock looks dirt cheap, trading at just 4.5 times earnings and yielding 8.99% a year. I need to do further research, but this looks like the type of dip I could happily buy.

The post I’d buy the dip in share prices as there are bargains to be had right now appeared first on The Twelfth Magpie.

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Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Has Dechra been doing well?

You could say that. Thanks to a combination of manufacturing sites remaining operational during the pandemic and the explosion of pet ownership, this firm has been very busy indeed. As CEO Ian Page said recently, it’s clear “people have been spending more time with their pets and have therefore been more cognitive of their welfare”.

All this has really boosted DPH’s top line. In July, the company said a “stronger than expected trading performance” had continued to the end of June. It now expects group revenue for the full year to come in 21% higher.

Pleasingly, a good amount of this growth was organic. However, the acquisitions of products such as ear infection gel Osurnia and weight gain drug Mirataz have also helped. The latter is already performing “ahead of expectations” following its launch. 

FTSE 100 beater

As one might expect, such robust trading has done the DPH share price no harm. Having climbed nearly 70% over the last 12 months, the company is currently valued at £5.7bn. In sharp contrast, the FTSE 100 has climbed ‘just’ 19% since August 2020. 

This difference in returns is even starker over the long term. Had I bought the stock five years ago, I would have trebled my money. The FTSE 100 is up a little less than 4% since 2016. In short, Dechra Pharmaceuticals is another example of how investing in a fairly concentrated group of individual stocks has the potential to deliver a far better return than the index.

Sky-high valuation

This is not to say there are no drawbacks to investing here.

The first relates to its valuation. Having done so well, the shares now look seriously expensive to acquire at 46 times earnings. For that price, I want to see a company generating things like sky-high returns on capital. That’s not the case here. Yes, pet ownership shows no signs of decreasing. And yes, the share price could also conceivably rise as FTSE 100-focused funds are forced to buy. However, I’m still not sure I’d be getting great value for money.

Despite being a regular dividend-hiker, DPH also wouldn’t be my first choice if I were looking to produce income from my investments. Based on a potential 41.1p per share return in the current financial year, the stock yields just 0.7%. That’s a lot less than that offered by some stocks in the top tier. Even the FTSE 100 index as a whole yields 3.4%.

I’d buy the (inevitable?) dip

As someone who’s hugely positive about companies operating in the petcare space, I’m not surprised by Dechra’s almost certain promotion to the FTSE 100. Then again, I can’t help but think that an awful lot of good news is priced in. So, this business stays on my watchlist for now. Should markets take a turn for the worse and good stocks fall alongside bad ones, I’ll be more likely to pull the trigger. 

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Meggitt and Morrisons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The two I’m looking at here have risen strongly in recent years and, if it continues, could help you build up your wealth at a decent pace. Stocks like these could help you achieve financial independence, even starting from scratch at age 40.

Dechra Pharmaceuticals

Dechra Pharmaceuticals (LSE: DPA) is a blockbuster growth stock. Its share price has risen a whopping 265% in the past five years. The momentum continues, with growth of almost 27% in the past 12 months. I tipped the stock to beat the market last year, and that’s exactly what it did.

Today, the Dechra share price has fallen more than 6%, as supply problems in the first quarter of the year continue to drag on performance. The market knew that already, though. Management said “significant progress” has now been made, and those supply issues have largely been mitigated. However, markets remain a little sceptical.

That’s fine by me – I like to buy stocks for what they might do in the next five to 10 years, rather than the next five to 10 days. Dechra also reported a 7% rise in group net revenue and 13% growth in its European pharmaceuticals operation. A 2% drop in North America is a bit worrisome, but that is measured against a strong comparative year.

The £2.94bn FTSE 250-listed company needs to convince markets that all is well, because it trades at a pricey valuation of 31.8 times earnings, meaning any sign of slippage is punished. However, with earnings forecast to rise 6% in 2020 and 17% in 2021, I’m hoping there is more growth to come.

AstraZeneca

FTSE 100-listed pharmaceutical giant AstraZeneca (LSE:AZN) is on a different scale, with a massive market cap of £101bn. Companies of this size can struggle to grow their share price, but that hasn’t been a problem for AstraZeneca. CEO Pascal Soriot has overseen a 41% rise in the share price over the last 12 months, and a 70% rise over three years.

I’m impressed, because he faced a major challenge in replenishing the company’s dwindling drugs pipeline as key treatments went off-patent and generics piled in. Soriot has said the real benefits will be coming through from around 2024, but investors have been buying into his vision early.

The group could be in for a great decade, as its heavy R&D spend pays off and new treatments secure regulatory approval around the world.

Earnings growth forecasts look mighty impressive – 3% in 2019, 18% in 2020, and 24% in 2021. I haven’t seen many that positive in the FTSE 100 lately, as analysts fret about a global slowdown.

AstraZeneca is a little pricey, trading at 23.7 times earnings, while the forecast yield at just 2.8% is below the FTSE 100 average of around 4.34%. But those are quibbles. The future looks bright, and this looks like a great long-term buy and hold, providing both growth and income to boost your pension in retirement, no matter how old you are today.

The post No savings at 40? I’d buy these 2 fast-growing FTSE 100 stocks to top up the State Pension appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Bovis Homes Group

At the start of the year, I noted that many housebuilders were trading at rock bottom valuations while offering outsized yields. One was Bovis Homes Group (LSE: BVS), which was just starting to recover as sector sentiment picked up.

I wrote at the time that this was due to the “general feeling that the likelihood of a cliff-edge, no-deal Brexit is beginning to fade”. I was a bit presumptuous there, the Brexit cliff edge looked perilously close in October, before Boris Johnson surprised everyone by striking his revised deal with the EU.

What happens to the Bovis share price now very much depends on next week’s general election result. The housebuilding sector is particularly exposed to Brexit uncertainty, as we saw when it collapsed in June 2016.

It would be nice to sort out Brexit one way or another, so we focus on the fundamentals of companies like Bovis, because they look pretty solid, with low interest rates and the property shortage driving demand. September’s interims saw profits before tax up 20% to a record £72.4m, net cash climbed to £102.4m and the interim dividend rose 8% to 20.5p a share.

The forward yield is now a thumping 8.7%, and management is progressive, as we saw in September. The valuation still looks tempting at 11.1 times earnings. City analysts expect earnings to rise 8% next year, and another 9% in 2021.

The Bovis share price is up 22% since I tipped it, so I’ll call that a win (in the interests of honesty, housebuilder Persimmon, which I tipped in the same article, rose a less impressive 6.5%). If we manage to sort out Brexit, things could improve further. Or did I say that in January?

Dechra Pharmaceuticals

At the start of the year, international veterinary pharmaceutical operator Dechra Pharmaceuticals (LSE: DPH) was recovering from a setback, triggered by a management warning that a major US supplier was targeting its patch in the UK and mainland Europe.

The threat of increased competition hammered the share price, even as the £2.82bn company posted 21% earnings growth. I nonetheless backed Dechra to succeed, highlighting its regular double-digit earnings growth and progressive dividend policy, although I expressed concern at its high forecast valuation of 26.3 times earnings.

It is more even more expensive today, trading at 31.5 times forecast earnings. The main reason for that is a lickety-split performance, with the Dechra share price up 18% since I tipped it.

September’s preliminaries were promising, with revenue up 17.5% to £481.8m, underlying operating profit rising 27.3% to £127.4m, and a whacking 23.9% increase in the full-year dividend to 31.6p (although it still only yields 1.2%).

After three years of double-digit earnings growth (51%, 19%, 17%) Dechra seems to be heading for a slowdown, but next year’s forecast of 8% is hardly disastrous. I’m pleased I tipped it in January (I tipped Hikma Pharmaceuticals in the same article, which did even better, growing 21%). But given today’s lofty valuation, Dechra looks more like a hold than a buy today.

The post I tipped these 2 FTSE 250 stocks to outperform in 2019. Next year looks promising too appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Unique business

Dechra is a relatively unique business. It is one of the world’s largest producers of veterinary medicines, a highly specialist but booming market. Over the past six years, the company’s sales have grown at a compound annual rate of 20%, while earnings per share have surged from just 18p in 2014 to an estimated 98p for 2020. The dividend to shareholders has more than doubled over the past six years. 

I think this trend is going to continue. People are willing to spend more and more on their pets, and they’re not willing to accept just any old pharmaceutical products. Vets and consumers want the highest quality products.

What’s more, Dechra’s products are protected by patents, and it is spending £25m every year in research and development to stay ahead of its competitors (R&D has increased in line with sales over the past five years). 

City analysts are expecting earnings growth of 64% in 2020 and 12% for 2021. The stock currently supports a dividend yield of 1.3%.

Explosive growth

JD Sports Fashion (LSE: JD) is another investment I think could help you build a million-pound pension pot. In my opinion, this is one of the best-run businesses on the market.

Sales have increased at a compound annual rate of 31% over the past five years and, during the past 10 years, the stock price has risen from around 10p to 746p at the time of writing, a compound annual return of 54%. 

JD Sports has been particularly successful in attracting young, wealthier consumers, and it’s just starting to expand in the United States. Last year, it bought the Finish Line shoe store chain for £400m in this market and the benefits are already starting to show through.

Net profit is expected to expand at a double-digit rate for the next two years and, considering the company’s growth track record, I reckon it’s highly likely growth won’t stop there. JD Sports seems to have cracked the code when it comes to sports/casualwear retailing. I reckon the firm can repeat the success it has had over the last decade in the next. 

Growing market

My last retirement millionaire-maker is the internet security business Avast (LSE: AVST). According to various sources, the size of the global internet security market is expected to hit around $250bn by the middle of the next decade. Avast is well-positioned to grab a significant share of this market as one of the primary providers of antivirus software for the personal and small business market.

This growth suggests that even if Avast doesn’t grow its market share, sales have the potential to expand at an annual rate of 10-11% for the foreseeable future. Because the company’s operating profit margins are nearly 40%, this growth should drop straight to the bottom line.

The stock might look expensive as it’s currently trading at a forward P/E of 17.8, although considering the market available to the company and the projected growth in demand for internet security software over the next five years, I think this is a price worth paying. 

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Latest trading details released this week illustrated this perfectly as revenues at the FTSE 250 firm powered 19.2% higher to £231.4m between July and January.

Through a combination of acquisitions and rising research and development spending — it hiked total spend here by more than four-tenths in that aforementioned six-month period — Dechra is setting itself up to deliver stunning sales growth now and in the future. City analysts agree and are consequently forecasting profits growth of 13% and 14% in the years ending June 2019 and 2020 respectively.

Flying high

SSP Group (LSE: SSPG) is another share from the UK’s second-tier share index carrying a high valuation — in this case a prospective P/E multiple of 24.3 times — because of its brilliant growth credentials.

Earnings at the business, which offers retail and catering services to travellers at hundreds of airports and rail stations the world over, have long boomed by double-digit percentages and the number crunchers are expecting this enviable trend to keep rolling with rises of 11% and 10% touted for the years concluding September 2019 and 2020 respectively.

And forecasts are fully entitled to be so bullish right now. Thanks to a 3.8% rise in net contract gains in the first fiscal quarter, a result that was driven by strong contract wins in North America in particular, revenues shot 7.6% higher year-on-year at constant currencies. And with SSP describing its pipeline of new contracts as “encouraging”, the investment community can be forgiven for expecting more strong progress on the sales front in the near term and thereafter.

Yummy stuff

Greggs (LSE: GRG) is another FTSE 250 company whose great growth pedigree commands a weighty premium, in this example a forward P/E ratio of 22.3 times. It’s a share whose price continues to go from rise strongly, over 42% in the past three months alone, and I’m expecting it to continue going from strength to strength.

The bakery chain’s attractively priced fare is enabling it to sidestep worsening conditions for the British retail sector, as illustrated by the fact that like-for-like sales in company-managed stores leapt 9.6% in the seven weeks to February 15. Jam doughnuts and cups of tea are staples of the domestic diet and by offering them at affordable prices, Greggs is able to keep growing sales.

This is not the only reason to fall in love with the business, though. New product ranges like its much-publicised vegan sausage rolls are going down a storm too, and so it’s no shock that City brokers are forecasting more solid earnings growth, with rises of 13% in 2019 and 7% next year currently pencilled in. It’s a share which, like SSP and Dechra, could make you much richer in the years to come, I believe.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The business of developing medicines for livestock and companion animals is becoming an ever-more lucrative one, and Dechra’s latest set of financials underlined the exceptional profits potential here. Net revenues leapt 18% between July and December at constant currencies, the FTSE 250 firm advised, the strength of its drugs pipeline helping sales to grow beyond the broader market, too.

What’s more, Dechra continues to build its pipeline (as well as its global footprint) to keep the top line roaring higher through shrewd M&A action. In December, it snapped up Brazilian pharmaceuticals giant Venco, a major player in the country’s gigantic food animal product market.

It’s not surprising, then, that City analysts expect earnings to rattle 13% higher in the year to June 2019, and by an extra 15% the following year. In my opinion, the company’s exceptional growth record and market-leading product stable makes it worthy of a high forward P/E ratio of 26.7 times.

Ring the bells

A more attractive pick for cash-strapped investors may be Bellway (LSE: BWY), though, the house-builder dealing on a bargain-basement prospective P/E multiple of just 6.7 times.

Don’t, however, take this low valuation as a sign of weakness. Sure, the stratospheric property price growth may be behind us, something which brokers believe will slow profits expansion at the builder to 2% in the years to July 2019 and 2020.

But the robustness of the UK housing market, supported by increasingly-generous mortgage packages and an inadequate number of new homesteads entering the market, means that Bellway should keep its long-running growth record motoring along nicely. Just this week, Lloyds unveiled its 100% mortgage product, for example, requiring no deposit at all from borrowers in the latest leg of the ongoing ‘mortgage deal wars’.

Continental colossus

B&M European Value Retail (LSE: BME) is another great growth share that I’m tipping to thrive over the next decade.

The cut-price retailers may not have had the best of it in November as sales slowed, but this proved to be a temporary problem, B&M advising this month that it enjoyed a “pleasing finish” in the three months to December. This doesn’t shock me in the slightest as you’d expect its value products to fly off the shelves in tough times for shoppers such as these.

That said, as the rampant influence of Aldi and Lidl on the global stage has already shown, consumers, both in the UK and beyond, have become increasingly accustomed to squeezing every last ounce of value out of their shopping trips. And by expanding across its home territory, as well as in Germany, B&M is positioning itself to exploit this phenomenon across the continent.

City analysts expect the firm to follow a predicted 3% earnings rise in the year ending March, with an even-better 15% increase in fiscal 2020. A forward P/E ratio of 16.5 times is, in my opinion, an attractive valuation, given the prospect of brilliant earnings growth at B&M in the medium term and most probably well into the 2020s.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of B&M European Value. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Funny pharm

Although FTSE 250-listed Dechra Pharmaceuticals (LSE: DPH) is trading 213% higher than five years ago, it crashed last summer and still trades almost 25% lower than it did six months back. As Kevin Godbold reported at the time, the plunge came even as the company posted 14% revenue growth and 21% earnings growth.

The collapse was triggered by a management warning that a major US supplier is moving onto its patch in the UK and mainland Europe, upping competition. Today, the international veterinary pharmaceutical operator issued an update for the six months to 31 December, which said trading “was strong and in line with management expectations,” with reported group net revenue up 18%. Europe and North America are both doing well, helped by the temporary market absence of a competitor product Zycorta in the US.

High synergy

The £2.37bn company has also completed its Brazilian acquisition Venco, while two other recent acquisitions are performing strongly, creating material synergies, and Brexit contingency preparations are “progressing well.” There was no mention of US competition, which may explain why the shares are down 0.7% today, despite many positives, in line with FTSE 250 slippage.

Dechra has regularly posted double-digit earnings growth in recent years and City analysts expect it to grow 14% this financial year and next. However, trading at a forecast valuation of 26.3 times earnings, you pay a price for success.

Dividend policy is progressive. Last year, payouts were hiked 19%, although it yields just 1.2%, with cover of 3.3. We may hear more about the US challenge when full-year results are published on 25 February. Right now, though, Dechra looks tempting.

Road to recovery

Generic drug specialist Hikma Pharmaceuticals (LSE: HIK) has also struggled after suffering three successive annual drops in earnings (2015, 2016 and 2017), but now seems to be on the way back.

The FTSE 250 stock is up 56% in the last 12 months. City analysts calculate that earnings jumped 23% in 2018 and will rise 3% and 8% over the next couple of years. As Ed Sheldon sets out here, the group was forced to issue a series of profit warnings but has recovered strongly thanks to positive broker reports, upbeat trading updates, and increased guidance for its injectables and generics businesses.

Going anti-viral

Sadly, you’ve missed the best of the recovery (unless you listened to Ed), so what’s the outlook today? Hikma still only trades at 15.3 times forecast earnings, so doesn’t look overpriced. Again, this is a growth rather than dividend stock, although the yield of 1.9% has cover of 3.4.

Hikma is also winning new contracts, signing in January an exclusive licence to distribute one of Beijing Sciecure Pharmaceutical’s niche injectable anti-viral medicines across the US for a minimum eight years, with a two-year option to extend. Last month, its US subsidiary launched a generic equivalent to seizure treatment Lundbeck’s Onfi. This £3.83bn company is in fine form and worth considering, if you wish to inject a bit of growth into your portfolio.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Take Dechra Pharmaceuticals (LSE: DPH), for example. It’s fallen seriously out of favour in recent weeks amid concerns of rising competition in the animal healthcare segment, the company reporting in early September that “the veterinary market is seeing faster change than at any time in its history.”

Medicines demand for comfort and agricultural animals is heading through the roof, as underlined by Dechra reporting another double-digit-percentage revenues rise (at constant currencies) last month.

And I think that you can rely on the healthcare mammoth (which has spent a fortune to boost its geographical handprint and bolster its drugs pipeline through shrewd acquisitions) to keep impressing, despite the increased competition thanks to its fizzy M&A programme. Indeed, earlier this month, Dechra shelled out £37.8m on Laboratorios Vencofarma do Brasil, a specialist in developing products for livestock care in the fast-growing regions of South America.

It’s no surprise, to me at least, to see City brokers forecasting another hefty earnings rise in the current year, the 12 months to June 2019. A 12% increase is predicted and this leads to expectations that dividends will keep rising at an impressive rate, too — last year’s  payout of 25.5p per share is forecast to rise to 28.2p, resulting in a yield of 1.2%.

This reading, or Dechra’s forward P/E ratio of 26.5 times, may not suit all investors. In my opinion, though, the probability that it will keep delivering strong profits and dividend growth in the years — nay, decades — ahead still makes it a terrific share to stock up on today.

Out of fashion

The investment community has fallen out of love with Superdry (LSE: SDRY) too, on account of less-than-impressive financials last time out.

The fashion brand declared earlier in October that unusually hot weather in Europe and the US has dented demand for its autumn/winter clothing lines and that, as a result, full-year profits would take a hit to the tune of £10m.

Stock pickers have been a little too quick to cast Superdry adrift, though, as its long-term profits outlook remains exceptional. It is investing vast sums in its product lines to increase the range of highly-desirable items that it supplies, while it also continues to spend heavily on expanding its global store network and improving its increasingly-critical online channel.

Like Dechra, Superdry is no stranger to lifting the dividend at a solid pace, and although a 6% profits drop is forecast for the year to April 2019, the annual ordinary payout is predicted to grow to 33p per share from 31.2p last year, resulting in a chunky 4.1% yield. Further special dividends may also be in the offing given the rate at which Superdry is churning out cash.

At current prices Superdry trades on a forward P/E ratio of just 9.2 times, and this makes it too good to miss in my opinion.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Superdry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Trading figures on the mend

GlaxoSmithKline’s trading figures wobbled a bit during the first half of this decade because of the company’s well-reported challenges regarding patent expiry. Some of its best-selling products came out of patent protection, which opened up the market to a flood of cheaper generic alternatives. Cash flow and profits declined, but earnings now seem to be back on track and growing steadily from year to year, and cash inflow has stabilised. Throughout the difficult period of the past few years, the company maintained its dividend and the shares traded in a range between 1,000p and 1,700p.

To me, today’s share price around 1,577p offers good value considering that the trading figures appear to be on the mend. At the end of July, chief executive Emma Walmsley announced a restructuring programme aimed at improving the competitiveness and efficiency of the cost base with savings delivered “primarily through supply chain optimisation and reductions in administrative costs.” Such initiatives and ongoing new product releases from the research and development pipeline look set to drive decent investor returns from here.

However, I’m also keen on international veterinary pharmaceutical business operator Dechra Pharmaceuticals (LSE: DPH), which released its full-year results today. Whichever way I look at them, the figures are good. Constant exchange rate revenue moved up almost 14% compared to last year and underlying diluted earnings per share shot up nearly 21%. Indeed, the directors underlined their confidence in the outlook by pushing up the total dividend for the year by almost 19%.

Facing off the competition

So why has the share price fallen a little over 15% today? I suspect the answer to that question can be found in the report under the heading ‘Market Changes’. According to the firm, the veterinary market “is seeing faster change than at any time in its history.” There’s increasing consolidation of veterinary practices and veterinary distributors into larger entities. These enlarged distribution businesses are selling more of their own products and, on top of that, the leading US supplier has moved onto Dechra’s ‘patch’ in the UK and mainland Europe. In a nutshell, Dechra faces more competition than it has been used to.

However, the firm’s vibrant research and development pipeline should work alongside an active acquisition programme to keep the firm competing in the market. The directors said in today’s report that the company is “well positioned” to serve the needs of the larger veterinary practice firms that are emerging alongside independent practices. Dechra has “the flexibility to respond quickly”to any ongoing changes within the distribution network.

Indeed, today’s figures are encouraging and the new trading year has started well. The directors expect the firm to “continue to outperform.” On balance, I reckon today’s share-price wobble could soon be forgotten as ongoing growth in earnings shines through in the years to come.

The post GlaxoSmithKline isn’t the only pharmaceutical share I’d buy right now appeared first on The Twelfth Magpie.

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Kevin Godbold owns shares in Dechra pharmaceuticals. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.