The opportunity 

Bioventix (LSE:BVXP) is a biotechnology company that specialises in manufacturing antibodies for blood testing machines. Hospitals around the world use its products to help diagnose heart disease, thyroid problems, fertility issues, cancer, and a plethora of infectious diseases.

Unlike other antibody creation labs, Bioventix uses a proprietary sheep monoclonal antibody (SMA) technology that far out-performs the competition.

The business has two revenue streams.

The first is the manufacture and distribution of its SMAs to in vitro diagnostics (IVD) companies around the world – such as Roche Diagnostics, Siemens Healthineers, and Abbott Diagnostics.

Currently, the company sells around 10–20 grams of the purified antibodies each year. Needless to say, it’s an expensive material.

The second source of revenue is from royalties. Whenever a client sells a diagnostic product that uses SMAs to their downstream customers, Bioventix receives a modest royalty. As it stands, these agreements generate approximately 70% of the company’s annual revenue.

This unique approach to business results in an ongoing source of money from its clients, after the sale of the product.

It also partakes in contract antibody creation programmes. Other companies pay Bioventix to develop a new antibody for exclusive use. The process typically takes one year. Once completed, the firm once again continues to receive royalties from each sale.

The financials 

The latest results from June 2020 revealed continued revenue growth of 11%. At first glance, this appears to be a slow-down from previous years. However, Covid-19 did cause disruptions to the routine of the global IVD market that resulted in a 15%–20% reduction in activity.

A diverse portfolio of antibodies drives the royalty revenue. Although, it is worth noting that the royalty agreement for NT-proBNP, which currently represents 13% of annual revenue, is set to expire in July 2021.

There are plenty of other products generating royalties ready to replace it. However, the loss of income may have a notable impact on 2022 annual revenue.

One of the best shares to buy now?

The highly regulated pharmaceutical industry is both a blessing and a curse. Regulators have already approved the SMAs, but not the products of its clients. Seeking approval is a very lengthy process that can take up to a decade of tests and trials.

This delays the royalties Bioventix is set to receive from its contract antibody creation programmes. To put this into perspective, the projects being developed today likely won’t yield royalty revenue until 2025–2035.

On the plus side, the long and expensive path to approval grants a significant competitive advantage. The process creates a large barrier to entry for competitors as they would have to pursue regulatory approval themselves. 

In my opinion, this form of competitive edge is a rare to come by. Whether they are the best shares to buy now is a personal decision, but Bioventix is definitely on my list as a possible addition to my portfolio.

The post Looking for shares to buy now? 1 biotech stock I’d buy today appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Bioventix. The Motley Fool UK has recommended Bioventix. 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.

For investors looking for growth and income from smaller companies, I reckon the Acorn Income Fund (LSE: AIF) deserves a closer look. The fund is a standout performer in the UK small-cap space, boasting some of the best figures across the board.

An investor who had bought shares in the investment trust five years ago would have earned a total return of 176%, a significantly better performance than the FTSE SmallCap (excluding investment companies) benchmark’s total return of 112%.

The Acorn Income Fund invests 70-80% of its overall portfolio in UK-listed smaller companies, with the remainder in fixed interest securities. Equity fund managers Simon Moon and Fraser Mackersie use a bottom-up investing approach, picking companies with experienced and well motivated management, good cash generation, and growing dividends.

Top holdings in the smaller companies portion of the portfolio include Convivality (4.2%), Acal (3.7%), Clipper Logistics Group (3.7%), FDM (3.1%) and Somero Enterprises (3.0%).

Reduce capital risk

The inclusion of bonds in the fund helps to add income and reduce downside risk in an otherwise risky basket of small-cap stocks. Paul Smith, who manages the income portion of the portfolio, invests mainly in short-to-medium duration securities, which reflects his concerns on tightening monetary policy. He also hedges against potentially rising rates by holding short positions in government bond futures to reduce the average duration of the portfolio.

The Acorn Income Fund is attractively valued on its current discount of 6% on net asset value, which means investors can effectively purchase shares for less than the sum of its parts. Additionally, with its yield of 4.1%, the fund is also one of the most attractive from an income standpoint.

Biotech stocks

Biotech stocks have been one of the hottest investment areas in recent years as promising new drug developments and robust earnings growth lure investors to the sector. With this in mind, the International Biotechnology Trust (LSE: IBT) is a solid pick for investors expecting further significant gains.

The fund has been run by lead manager Carl Harald Janson since September 2013, who has 13 years’ experience in healthcare investing and a further seven years’ experience within the pharmaceuticals industry. Janson reckons there are still good opportunities from mega-cap firms due to their lower-than-market p/e valuations and robust top-line growth. What’s more, he also looks for smaller companies that are potential takeover targets, as he reckons the market is still ripe for M&A.

As expected, US large-caps dominate its portfolio, including Gilead (7.8%), Celgene (7.7%), Regeneron (6.5%), Biogen (5.9%), and Vertex (4.5%) – its five biggest positions. North American stocks account for roughly 85% of its portfolio, while European- and UK-listed firms account for the remainder. Its two biggest European positions are Shire (3.2%) and Denmark’s Genmab (3.0%).

Performance figures for the past five years show the trust earning a total return of 190%, beating its larger rival The Biotech Growth Trust, which gained 180% over the same period. And in contrast to its rival, which doesn’t pay any dividends, the International Biotechnology Trust has a dividend yield of 3.8%.

The post 2 top-performing investment trusts for growth and income appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares 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.

But you know what? A fall that small is completely lost within its usual day-to-day volatility, and the UK’s top index hasn’t even given up the gain it made in the week leading up to the vote.

On top of that, some shares are soaring.

Here are three that could be among the year’s big winners:

Pharma boost

Speciality pharmaceuticals developer Indivior (LSE: INDV) enjoyed a boost in early June, when a patents case in the District Court of Delaware went in its favour and confirmed the validity of the firm’s Suboxone patent. On the day, Indivior shares climbed by 36%, and since this year’s low point on 9 February they’re up 71% to 224p.

The downside is that Indivior is expected to see earnings per share dropping both this year and next, which would put the shares on a P/E based on 2017 forecasts of 15.3 — which is only a little behind GlaxoSmithKline‘s multiple of 16.2 for the same year (with EPS growth and a 5.8% dividend on the cards).

In its first full year as a public company after demerger from parent Reckitt Benckiser, chief executive Shaun Thaxter told us “We significantly outperformed our financial plan for the year“. Indivior’s focus on opioid misuse coupled with its pipeline for developing “potentially transformational treatments for addiction” could well see it ending the year on a high.

Services recovering

Services firm Serco (LSE: SRP), which manages labs, education services, leisure centres and prisons, has not done well in recent years, with its shares losing 80% since their high point in July 2013. But we’ve had a 33% recovery since February’s low, to 102p.

Full year results in February provided a boost, with underlying trading profit coming in ahead of guidance at £96m, and although cashflow was negative, an outflow of £16m was better than expected. A rights issue during the year enabled the company to almost wipe out its debts with a reduction of £605m to just £78m, and Serco saw its pipeline of larger opportunities growing by £1.5bn to £6.5bn.

The shares are on a big forward P/E of over 50, but this looks like a company that is genuinely into recovery — an update in May said performance in the first four months of the year had been “stronger than we anticipated” and that profit for the year should be ahead of previous expectations.

Oily riches

Are smaller oil explorers finally coming to the fore? Indus Gas (LSE: INDI) has suffered badly though the oil price crash, with its shares down 80% since December 2012, but again we’ve been seeing a powerful comeback in 2016 — from a February low, the price has more than doubled to 215p. Strengthening oil prices have help for sure, although the price of a barrel has dipped below $50 again.

In September last year I found it hard to understand the low valuation of Indus Gas shares when they were trading at around half their current price, so I’m pleased with the movement since then. There hasn’t been a great deal of news, so I think the recovery has largely been due to a change in sentiment towards what are actually very thinly-traded shares.

If we see further oil price gains over the next 12 months and more, Indus’s resources in Rajasthan could look very attractive.

The post Will Indivior plc (+71%), Serco Group plc (+33%) & Indus Gas Limited (+105%) be among 2016’s big winners? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Both of these approaches work, but they can be extremely time-consuming, and trading commissions can eat away at your returns over the long-term. 

Another strategy you can use to beat the market is to follow Warren Buffett’s approach of buying quality companies at cheap prices and holding the shares forever. But if you do decide to use this method, you have to be extremely careful in picking companies for your portfolio. 

For example, you can’t really consider cyclical businesses for a long-term buy-and-forget portfolio. Defensive companies with a clear competitive advantage, however, are extremely attractive. 

Two attractive plays 

GlaxoSmithKline (LSE: GSK) and Shire (LSE: SHP) are two such companies. Shire is a world-leading producer of rare disease treatments, and the company is unlikely to be displaced from this position anytime soon. The group’s existing distribution network combined with its experience in the rare disease field are two intangible assets that would be almost impossible for any newcomer to the market to replace.

What’s more, Shire has been able to succeed in the rare disease field because, while selling rare disease treatments may be extremely lucrative, developing the treatments is a costly, time-consuming process, which puts many competitors off. 

Thanks to its market-leading position, Shire’s earnings per share have roughly tripled over the past six years. And the company currently trades at a forward P/E of 14.1, which looks exceptionally cheap considering its historic growth. 

Income champion 

While Shire has grown rapidly over the past few years, Glaxo has struggled to grow as the company has lost the exclusive manufacturing rights to some of its key treatments. Still, management expects the group to return to growth this year and based on first-quarter numbers, it’s still on target to grow earnings per share between 10% and 12% for 2016. 

Glaxo may not be the fastest-growing company around, but when it comes to income, the group offers a level of income to shareholders few others can match. 

Indeed, because of its defensive business model Glaxo is an income champion. The company’s shares currently support a dividend yield of 5.6% and if you combine this income with a company like Shire, which is primed for long-term growth, you can create the perfect mix of income and growth in a portfolio. 

The bottom line 

So overall, the best strategy to outperform the market could be to buy and hold a portfolio of defensive equities. Shire and Glaxo look to be two perfect candidates for this long-term defensive portfolio. 

Shares in Shire only offer a yield of 0.5%, but the company’s explosive growth is worth a premium valuation. Meanwhile Glaxo’s hefty dividend yield more than makes up for the company’s sluggish growth. And over the long term, it’s highly likely these two defensive pharma giants will continue to churn out results for investors.

The post You could beat the market with GlaxoSmithKline plc and Shire plc appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool UK owns shares of and 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.

Up until yesterday, shares in Aminex (LSE: AEX) were down 28% over 12 months, echoing the slump among smaller oil and gas explorers. But a morning spike today of 18% has lifted the shares to 1.45p, after the company reported first gas from its Kiliwani North field in Tanzania.

Production from the field, in which Aminex should have a 51.75% stake after a recent partial disposal, is expected to reach a production level of around 4,000 to 5,000 barrels of oil equivalent per day gross over the next 90 to 100 days — and Aminex expects to receive $10m to $15m per year from the Tanzania Petroleum Development Corporation for it.

Cheap assets

I’d hoped I was close to the bottom when I bought Premier Oil (LSE: PMO) shares at 99p back in September, but the subsequent fall to just 19p reinforced the lesson that no matter how far a share has fallen, there’s still another possible 100% to go. But since then, Premier pulled off what I think was a bit of a coup in snapping up E.ON’s North Sea assets for $120m — it should be cash generative, and will surely be seen as a bargain price in a few years’ time.

Premier shares have more than double since that 19p low, to 44p today (I’m only 55% down, whoopee!) and I see it as a risky but good prospect. The big downer is the company’s net debt, which stood at more than $2.2bn at 31 December. But unlike some others, Premier does not seem to be facing any prospect of its lenders pulling the plug — in fact, they have agreed to loosen Premier’s fianancial covenants until mid-2017, while the company is focusing on debt reduction.

My timing stank, but I’m happy to hold.

Pharma prospects

Oxford Biomedica (LSE: OXB) shareholders won’t be too chuffed when they look back on the 57% price drop they’ve suffered over the past 12 months, but they can perhaps take a little heart today from seeing a 5.7% rise to 5.55p — perhaps in anticipation of full-year results due on 28 April.

The company specializes in gene therapy and cell-based medicine, which is surely the future for many of today’s health problems and is likely to be a field which generates lots of tasty profits. But the problem, as with any other new technology still in the startup “blue sky” days (and I’m minded of fuel cell research, which has been touted for years but is still in its infancy) is that we really don’t know when the big commercial breakthroughs will come and who will profit from them.

Oxford Biomedica is still in the cash-burn phase, has no forecasts for profits yet, and launched a new share placing to generate needed working capital as recently as February — and we really don’t know how much further dilution there’ll be before we see those first profits. There are definite possibilities here, but it’s unquantifiable right now and is not one for me.

The post Are Aminex plc, Premier Oil PLC And Oxford BioMedica plc Set For Strong Recoveries? appeared first on The Twelfth Magpie.

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

GW Pharmaceuticals (LSE: GWP) shares shot up 70% in March, to end the month at 421p. The company specializes in developing “novel therapeutics from its proprietary cannabinoid product platform“, and got some good news from a phase 3 trial of its Epidiolex (cannabidiol) treatment for Dravet syndrome on 14 March.

Dravet syndrome is a rare and severe form of epilepsy that affects children, and as yet there are no FDA-approved treatments — and so a breakthrough there could be nicely profitable. The trial results found that the drug reduces seizures, with “high statistical significance” when compared to a placebo control. As a result, the share price more than doubled on the day, though it’s fallen back a bit since.

Epidiolex notwithstanding, the shares are down 40% since their peak in June 2015, and the company still looks to be some years away from turning a profit. There was $324m in cash on the books at 31 December, although GW did make an operational loss of $86.6m in its last full year. The next step for Epidiolex is a regulatory submission, but though the drug does seem promising, this still looks like a risky investment to me.

Partnership

A takeover approach is one event that can make a share price jump, and we heard on 23 March that Premier Foods (LSE: PFD) had kicked out an offer by McCormick & Company saying it “significantly undervalues Premier’s growth prospects and represents an insufficient premium to Premier’s enterprise value“. The announcement was accompanied by news of a cooperation agreement with Nissin Foods, the inventor of instant  noodles.

The McCormick offer, revised from an earlier 52p bid, valued Premier shares at 60p, and on the day we saw a 70% share price rise. Since then, McCormick has upped its offer to 65p per share, and the shares ended the month trading at 57p for an 88% rise during March. The Premier board still believes that’s too cheap, but it’s going to have talks and hopes for an even better offer to emerge, and if that comes off then there’d be a profit to be made.

Even after the month’s rise, Premier shares are still valued on a P/E multiple of under seven based on 2016 forecasts, so it looks like there’s room for negotiation.

Rising oil

Results on 17 March gave oil explorer and producer EnQuest (LSE: ENQ) a 31% share price boost, and since then the price has kept on going for a 71% rise over the month. We’ve now seen a 118% gain since 20 January’s low point, buoyed by the price of oil which seems to be steadying at around $40 per barrel.

EnQuest reported a 31% rise in production for the year to December 2015 to 36,567 barrels of oil equivalent per day, which was above the upper end of the company’s guidance. The price of extracting the stuff dropped dramatically, due to continuing savings in operating costs, from $42.10 per barrel in 2014 to just $27.70 per barrel.

Net debt rose to $1.55bn at year-end, but the firm reckons it’s “well within its net debt to EBITDA covenant of five times“. EnQuest isn’t expected to get back to profit this year and next, so it’s tricky to value — but I reckon there could be more to come.

The post 3 Shares You Should Have Bought In March: GW Pharmaceuticals (+70%), Premier Foods (+88%), EnQuest (+71%) appeared first on The Twelfth Magpie.

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

But the shares took a tumble today, dropping 18% by the time of writing, to 4.05p, caused by a 27% fall in revenue for the six months to December 2015. That was, we were told, due to the deferment of some orders combined with increasing project lead time. The deferments were known in October, so might the price fall be a bit of an over-reaction?

Well, there was an increased net loss, of A$1.3m, and the firm reported cash reserves of just A$0.9m — although a new patent licence agreed after the end of the period should bring CAP-XX an up-front payment of at least A$2.4m. There are no forecasts for profits yet — in fact, there are no forecasts at all —  so it’s hard to quantify. A big risk or a company with great potential? Possibly both.

Pretty skin

We also had interim results from Sinclair Pharma (LSE: SPH) today. They were greeted with a little more enthusiasm and the share price gained 3.4% to 34.6p as a result. Sinclair, which specialises in aesthetic dermatology (skin lifiting, collagen stimulation, and things like that), reported a loss of £14.1m for the period, up from £10.7m, with a 2.8p loss per share compared to 2.1p a year previously.

That came from an expected fall in sales to £7.7m, from £10.5m, attributed to “planned distributor de-stocking“. But the third quarter is expected to bring revenue in excess of £8m, and along with an amendment to the payment terms for Sinclair’s acquisition of AQTIS Medical BV, that pleased the markets. The disposal of Sinclair’s non-aesthetics brought in £132m, enabling it to clear all debt and leaving net cash of £75.4m at 31 December.

With losses expected to continue for at least the next two years, making any valuation of the company pretty difficult, it’s a big risk — but it could be one worth taking.

A great start

Since flotation in February 2014, shares in Manx Telecom (LSE: MANX) have put on 34% to reach 215p. And on top of that, the company paid out a 5.6% dividend for 2014, and has just announced a 5% rise in its 2015 dividend to 10.4p — yielding 4.8% on today’s elevated share price.

Revenues were pretty flat for the year, but underlying pre-tax profit gained 27.9% with underlying EPS up 19.4%, and the company recorded strong operational cash flow of £25.4m. How does it do so well? Having a monopoly on fixed-line communications in the Isle of Man certainly helps (and the firm has just renewed its government contract for another five years), and it also has about three quarters of the island’s mobile business.

With 4G rollouts continuing (after helping boost mobile revenues by 9.3% in 2015), forecasts suggest more of the same over the next couple of years, with the firm’s progressive dividend policy set to boost the annual cash handout by 5% per year.

The post Should You Buy Cap-XX Limited, Sinclair Pharma PLC And Manx Telecom PLC After Today’s Results? appeared first on The Twelfth Magpie.

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

Shares in Gulf Marine Services (LSE: GMS) dropped 6.6% today despite strong full-year results. With revenue up 12%, the supplier of self-propelled self-elevating support vessels to the offshore oil and gas business reported a 4% rise in adjusted net profit, with adjusted earnings per share (EPS) pretty much flat. The full year dividend was lifted 9% to 1.6p per share, ahead of forecasts.

In a year in which big oil companies have been tightening their belts on support spending, this looks like a pretty decent set of figures to me, and the firm seems to have no financing problems, with a new $620m debt facility in place in the final quarter and improved borrowing margins reported.

Chief executive Duncan Anderson called this a “solid set of results“, but he did say that last year’s turbulence in the markets is expected to “continue throughout 2016” — and that’s probably partly behind the price fall. Forecasts put Gulf Marine shares on a forward P/E for 2016 of only 3.8, dropping as low as 3.2 on 2017 predictions. With EPS growth expected to resume this year, I see that as far too cheap — even if the apparent oil price recovery takes a little longer to become established.

Wafers with that?

It was full-year results time for maker of semiconductor wafer IQE (LSE: IQE) too, although the share price has remained unchanged at 18.75p at the time of writing. After a slump towards the end of 2015, the shares are now down 19% in 12 months, and again we’re looking at a company on a very low P/E valuation — just 6.6 based on forecasts.

Chief executive Drew Nelson described 2015  as bringing in “another strong financial performance“, after adjusted EPS rose 7%. The firm managed to get its net debt down by 26% to £23.2m, and saw operational cash generation rise by 41%. IQE’s intellectual property portfolio is growing, with over 100 patents now in the field of advanced semiconductor design and manufacture.

Mr Nelson also says IQE is “on track to achieve our expectations for the full year“, and as far as I can see his optimism looks to be well placed.  I think we could be looking at another small cap bargain here.

Pills and potions

Finally, biotechnology specialist e-Therapeutics (LSE: ETX), whose shares gained 9% to 13.5p on the release of full-year results. CEO Professor Malcolm Young told us it was a “very productive year for our discovery platform which continues to exceed our expectations by generating high quality, potent compounds“, adding that some have “the potential to be game changers in immuno-oncology, cancer drug-resistance and anti-infection“.

That certainly sounds like a promising prospect, but the big risk I see is that e-Therapeutics still appears to be some years away from profit, with forecasts suggesting  losses continuing at around the current rate for at least two more years. For the year just ended, operating losses came to £11.6m, and I’m a little concerned that the company’s net cash of £24.8m might not last too long at that rate. However, the firm says is is “well funded to advance its programmes“, and top fund manager Neil Woodford bought some last year.

The post Should You Buy Gulf Marine Services PLC, IQE plc And e-Therapeutics plc After Today’s Results? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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

Quarto is an illustrated book publisher and distributor, with a market cap of around £50m, and it’s just released full-year results that beat expectations. With adjusted pre-tax profit up 18%, adjusted earnings per share rose 13%, and the total dividend of 9.5p per share is 6% ahead of last year and yields 3.8% — and it’s covered 3.4 times by earnings. Net debt was cut by 10% too, which is a good sign, with chief executive Marcus Leaver telling us that the firm intends to “steadily reduce net debt further“.

Forecasts suggest two years of EPS growth at 11-12% per year, which would put the shares on a P/E multiple of under seven for 2016, dropping to just six on 2017 forecasts, and would provide PEG ratios of around 0.6. That suggests good growth value to me, and on these fundamentals I’d say Quarto is looking attractive.

Solar power

Shares in PV Crystalox Solar (LSE: PVCS) perked up 4% in early trading to 9.7p, after full-year results revealed an increase in revenues from €53.3m to €64.5m. The company makes photovoltaic silicon wafers, used for capturing solar energy, and it’s been suffering from weak pricing. But chief executive Iain Dorrity told us that the price of wafers “has shown some modest recovery during recent months while the price of polysilicon, the key raw material, has fallen to historic lows“, and that wafers can now be sold at more than their cash cost of production.

The company still widened its loss for the year and is extending a strategic review of its business in what are still difficult trading times. Vernalis had net cash of €12.7m on its books at the end of December, albeit down from €24.6m a year previously and possibly close to the limit if it suffers a further loss in 2016. But analysts are expecting just about break-even. It sounds like 2016 could be a pivotal year — and if demand for solar energy is on the rise, we could be at a good (if risky) buying point.

Medical recovery

My third candidate today is pharmaceuticals firm Vernalis (LSE: VER), whose first-half results led to a 12% drop in the share price to 52p. The shares soared to 87p back in September 2015 on the back of hopes for the firm’s Tuzistra XR cold treatment, but since then shareholders have been hit with a 40% fall.

Interim results showed a revenue increase to £6.1m from £5.7m, with Tuzistra XR contributing £0.6m to that — and it represents the direction the firm is going in the “major transformation in our business” described by chief executive Ian Garland, to specialize in cough and cold treatments.

There’s no annual profit forecast yet, but predicted losses per share are tumbling and the four brokers offering an opinion have Vernalis as a ‘strong buy’. It’s another risky one, but if profitability can be achieved by 2018 then we might be on to a winner.

The post 3 Small Caps Set To Soar: Quarto Group Inc, PV Crystalox Solar PLC, Vernalis plc? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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

I reckon the best approach is to look for progressive dividends that have great long-term potential rather than today’s risky highest flyers, and I see one just like that in AstraZeneca (LSE: AZN).

Prudent dividend cover

AstraZeneca has been through a period of falling earnings as the loss of some lucrative patents expired and competition from generic drugs has intensified. But thanks to its prudence in having kept its dividend very well covered in the good times, there has been enough headroom to keep the payments going. The dividend has been kept flat since 2011, but still yielded 4.3% in 2015, and that seems like a solid one to me.

Although there’s a further modest drop in earnings per share forecast for the current year, 2017 should be the pivot year that turns AstraZeneca back into earnings growth, and analysts are expecting the dividend to be held steady for the two years — and it would still be covered around 1.4 times, which seems adequate if not ideal. With the shares at 4,059p, we’d see a yield of 4.8%.

At 2015 results time, the company reaffirmed its commitment to a progressive dividend policy, so we should be seeing a return to dividend rises in the not-too-distant future.

Profit from defence

BAE systems (LSE: BA) might not be everyone’s top pick for dividends, but with a yield of 4.2% it’s easily beating the FTSE 100 average of around 3%, and it’s been keeping pace with inflation in recent years. Earnings have been a bit erratic since the global slowdown has put a cap on defence spending, and the shares are down 9% since last March’s peak, to 502p. But over five years we’ve seen a 55% rise against a pathetic 5% for the FTSE, so BAE is beating the index on that score too.

What’s really important for reliable dividends is that cover by earnings looks comfortable at a close to two times. The firm’s policy is very much in line with the needs of steady income seekers too, after we heard at results time that it “plans to pay dividends in line with its policy of long-term sustainable cover of around two times underlying earnings and to make accelerated returns of capital to shareholders when the balance sheet allows“.

Cash and growth

If you’re looking for a share that can provide strong capital growth in addition to progressive dividends, Imperial Brands (LSE: IMB) might fit the bill. The purveyor of the deadly weed has recently changed its name from Imperial Tobacco, and though that might make its name seem less horrid, there’s no need to disguise its market performance — the share price has put on 48% in just two years, rising  to 3,688p, which is a handy bonus for those buying for income.

Last year’s dividend provided a yield of 4.1%, covered 1.5 times, and with earnings forecast to keep on rising we have dividend yields of 4.2% and 4.6% forecast for this year and next — motoring along well ahead of inflation. And again, Imperial Brands has a progressive dividend policy, speaking at results time of its “commitment to growing shareholder returns“.

The post AstraZeneca plc, BAE Systems plc And Imperial Brands PLC Show Great Dividend Potential appeared first on The Twelfth Magpie.

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