Clinigen Group (LSE: CLIN) is one of the biggest companies with an AIM listing, with a market cap of £1.3bn. Despite the AIM link, it’s a profitable, dividend-paying company with sound finances.

The group provides a range of specialist pharmaceutical products and services. These include sourcing and managing medicines for use in clinical trials, and supplying unlicensed and pre-approval medicines to hospitals for use in urgent cases. The company also has its own portfolio of niche medicines for rare or life-threatening diseases.

Rapid growth

This is a specialist business which needs expert management. But the group’s sales have grown from £35m in 2011 to £339m last year. Profits have also risen rapidly, growing by an average of 25% per year since 2011.

The group’s growth is the result of a mix of organic rises and acquisitions. Today saw the firm announce its latest acquisition. It will buy Quantum Pharma (LSE: QP) in a £150m cash and share deal which values the smaller company at 82p per share.

Quantum operates in a similar area to Clinigen, developing and supplying unlicensed and specialist medicines to UK pharmacies. Management expects to be able to deliver “immediate financial benefits” and says that there is “a sound cultural fit” between the two businesses.

My calculations suggest that Quantum should add around 12% to Clinigen’s earnings per share over the next year, before any cost savings. That puts Clinigen shares on a forecast P/E of 20. I think that’s reasonable, given the group’s track record of growth. I’d remain a buyer at current levels.

Taking the long view on Sirius

Short-term stock traders with good timing were able to double their money on Sirius Minerals (LSE: SXX) between April and June. But the shares have fallen by 24% since peaking in June.

Is this a buying opportunity for long-term investors wanting a stake in one of the UK’s largest ever mining projects? Let’s take a look.

Even by the standards of the mining industry, Sirius is a long-term project. The group doesn’t expect to start any production until late 2021, and isn’t expected to reach its initial production target until 2024.

Figures used by the firm’s management suggest that the mine has a net present value (NPV) of $15.4bn. This figure represents the value today of expected future cash flows from the mine, using current commodity prices over an expected 50-year lifespan. The production level used in these calculations is 20m tonnes per annum, twice the 10Mtpa level targeted for 2024.

In other words, there’s an awful lot of guesswork involved in calculating these figures, which reflect expected earnings over five decades.

At this stage, I don’t think we have any way of knowing how much of a commercial success this business will be. But at 25p per share, Sirius has a market cap of £1.2bn ($1.5bn). In my view, this isn’t cheap enough to reflect the risks facing equity investors.

I suspect there will be better buying opportunities in the future, when the mine is closer to completion, and offers greater visibility of likely earnings. I’d invest elsewhere until then.

The post One bargain growth stock I’d buy ahead of Sirius Minerals plc appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Clinigen. 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.

Incoming chief executive Chris Rigg had launched a major operational review, and a trading update Wednesday showed just how far the company has come — impressing the markets enough for a 6% share price rise to 58.5p on the day.

Non-core activities have been dumped as the firm has been refocusing on its Niche Pharmaceuticals business, which is now described as “a highly profitable division” with an improving development pipeline.

With plans to expand internationally, Quantum is apparently ahead of its strategic plan — and that plan has already resulted in an improved financial performance and higher overall margins.

Net debt was slashed in half by the time the full year was reported in May, thanks to a £15m placing, and the lossmaking NuPharm being closed, though the company did report a pre-tax loss of £10.9m.

From the ruins

In short, the new Quantum Pharmaceuticals looks like a very different entity to its first incarnation from its original flotation in 2014, but I don’t think the markets have yet woken up to the potential of the regenerated company.

Forecasts indicate a return to profit for the year to January 2018, with earnings growth of 32% pencilled in for the following year, sending the P/E down as low as 14 and giving us a PEG of just 0.45. To me, that’s a very attractive valuation for a company with these growth prospects.

Those who bought in the dip after last year’s price crash will have seen their investment rise by close to 70% by now, but I reckon there’s still time to grab a bargain.

A Neil Woodford bargain?

In biotechnology probably more than anywhere, early promises often fail and the risks come home to roost. That much is clear from Circassia Pharmaceuticals (LSE: CIR), a growth prospect that top investor Neil Woodford bought a chunk of.

But the firm’s big promise, a cat allergy vaccine, failed in its phase III trials. That was followed by a dust mite allergy study failing to meet its phase IIb primary endpoint in April this year, bringing to an end the company’s investment in allergy research.

Since the bad news hit, Circassia shares have lost two-thirds of their value, as early growth investors fled. But Neil Woodford didn’t sell, seeing value in what was left of the firm at its new low price — and there’s actually still quite a lot left.

Impressive portfolio

The firm has a range of successful respiratory treatments, and has signed up with AstraZeneca to commercialise two of its COPD products in the US — and its US sales force is ramping up as a result.

Sales of asthma management product NIOX are growing too, up to £23m in 2016, and chief executive Steve Harris reckoned Circassia is heading to become a “world-class, self-sustaining specialty pharmaceutical business.“

All of this promise will count for nought if we never see any profits, and there are none on the analysts’ radar for this year or next. But Mr Woodford has said that he sees the firm as being “very well-financed” and thinks he sees “long-term value in the shares.“

For me that cements Circassia as a buy.

The post 2 recovering growth stocks to help you achieve financial independence appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft 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.

Impressive update

Reporting on Monday was service-led niche pharmaceutical developer, Quantum Pharma (LSE: QP). The company announced the disposal of Total Medication Management Services, which is a homecare dispensary and delivery business which trades as Biodose Services. The disposal is another significant step in the transition of the business as it seeks to focus on its core Specials and Niche Pharmaceuticals divisions. The initial cash consideration on disposal will be £1.75m, with a maximum additional contingent consideration of £0.2m.

The sale of the division improves Quantum Pharma’s EBITDA (earnings before interest, tax, depreciation and amortisation) margin by eliminating low-margin turnover. In addition, the company’s remaining divisions have traded ahead of expectations in the early months of the year. The company expects this to offset the majority of the disposed contribution from Biodose Services in the current year.

Looking ahead, Quantum Pharma is expected to report a rise in its bottom line of 31% in the next financial year. Even after today’s 3%+ rise in its share price, this leaves the business trading on a price-to-earnings growth (PEG) ratio of just 0.4. This suggests its capital growth potential is high, which means it may be worth buying for the long term.

Growth potential

Also offering a wide margin of safety at the present time is sector peer Vectura (LSE: VEC). The therapeutic products and drug delivery systems specialist has a strong track record of growth. For example, in the last three years it has been able to increase its bottom line at an annualised rate of around 70%. This shows that its strategy has been working well.

Its future growth rate is also highly impressive. The company is forecast to report a rise in its bottom line of 54% next year, which could help to improve investor sentiment after a share price decline of 25% in the last year. One consequence of a disappointing year for its share price is that Vectura now trades on a PEG ratio of 0.3. This indicates that it could offer significant capital growth potential, with a margin of safety present in case there are downgrades to its forecasts.

Clearly, Vectura is a small company which may offer relatively high risks. However, with a substantial discount to its intrinsic valuation it could prove to be a sound long-term buy for less risk-averse investors.

The post These growth stocks are trading at major discounts appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens owns shares of Vectura Group. 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.

A company under transition

I reckon Quantum Pharma (LSE: QP) is poised to behave in the way I describe above as the firm transitions to a more focused and simplified business strategy led by a new board of directors.

The company develops and manufactures niche pharmaceutical products for the retail, wholesale, hospital and home care markets, and full-year results out today show revenue up 28% compared to a year ago, suggesting that the firm continues to gain market share.

City analysts following the firm expect pre-tax profit to shoot up 15% for the year to January 2018 and 17% the year after that, an impressive rate of growth. Yet at the current share price around 44p, Quantum Pharma trades on a forward price-to-earnings (P/E) ratio of just over 10 for year to January 2018.

I think that rating undervalues the firm, given its potential, and a re-rating upwards to a higher P/E ratio could materialise if the directors’ transition plan works out as anticipated.

A clean sweep

It arrived on the FTSE AIM market during December 2014, but during 2016 recruited a new chief executive, finance director, non-executive chairman and several non-executive directors in a move that swept away the old board and ushered in a new strategy.

A placing during October raised £15m before expenses and bolstered the strength of the balance sheet, and the new directors closed a lossmaking division at the end of the year, which has since gone into administration. The new chief executive, Chris Rigg, explains in in today’s report that the firm has achieved a “step change in the profitability of the Niche pharmaceuticals division in the second half by focusing on launching and commercialising products where we have a competitive advantage.”

On top of that, the company says it renewed exclusive contracts with three of the four main wholesale and pharmacy chains in the UK and reduced operating costs. Meanwhile, net debt at the year-end came in lower than the directors expected at £13m, which looks manageable at around half the level of gross profit.

With improved profitability and a narrower focus on a simplified array of niche product lines, the outlook for future growth is good. A rejuvenated Quantum Pharma looks poised to rise phoenix-like from the ashes of the old.

Why are the shares cheap?

The company has been through a complicated transformation process during 2016 and events could have muddied the water making it hard to see what’s going on in the business. The placing raised the share count, so there is a decline forecast for earnings per share for the year to January 2018.

It’s only by looking at forecast figures for pre-tax profits that we can see the underlying progress that City analysts think the firm will make. I think the emerging growth we are seeing with Quantum Pharma is worth more than the forward P/E of 10 or so that the market assigns to the company because next year’s forecast for growth in earnings per share is around 14%.

The post This emerging growth business looks too cheap appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Kevin Godbold 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.

Sales from recent product launches now look like they won’t be as healthy as anticipated, moving new chief executive Chris Rigg to say that “performance will be materially below market expectations“. This comes after the firm “instigated and completed a review of a number of key areas of the business” just after Mr Rigg’s appointment in August. It’s not uncommon for a new boss’s arrival to be seen as a good opportunity to get the bad news out and let the blame fall on the previous management.

First-half revenue actually rose, by 25% to £42.8m, though adjusted pre-tax profit dropped by 42% to £2.6m, and the firm’s debt stood largely unchanged at £23.8m. The year was always likely to be weighted towards the second half, but forecasts for a modest 8% fall in EPS (to be followed by a 17% rise the following year) have now vanished in a puff of smoke.

Start again?

Quantum is to close its lossmaking NuPharm business, and it reckons the remaining divisions are looking good — the speciality pharmaceuticals maker says its resulting “simplified business … offers the best opportunity for value creation“.

The difficulty for investors now is that the company’s next couple of years are unquantifiable, and there’s really no way to put a measure on the worth of the shares — we might know more when forecasts are reworked. On the other hand, crisis-led share price slumps often lead to overselling, so Quantum might be a worthwhile (if risky) punt now.

Balance the risk

Looking further afield, our big FTSE 100 pharmaceuticals companies are a lot safer than a high-risk small-cap, and I like the look of Shire (LSE: SHP) as a low-risk alternative. Shire, specialising in rare illnesses and perhaps best known for the attention deficit disorder treatment Vyvanse, has had a few years of ups and downs in its earnings.

But forecasts of an 82% rise in EPS this year, followed by a further 19% next, put the shares on a forward P/E multiple of 15.5, dropping to 13 — and give us PEG ratios for the two years of 0.2 and 0.7 respectively, which is a strong growth indicator.

The downside is very low dividends, yielding only around 0.5%, but with the firm having taken on extra borrowings to fund the acquisition of Baxalta, which was completed in the first half, it’s understandable if handing out cash isn’t a big priority right now — net debt stood at $23.7bn at 30 June.

Shire’s shares are up 150% over five years, but could the modest 10% over the past 12 months be giving us a buying opportunity? The City’s analysts are putting out a very strong buy consensus, and I think they’re on the money. In fact, I think a pairing of Shire and Quantum shares could turn into a nice long-term investment.

The post What next for Quantum Pharma plc after today’s 50% crash? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

ASOS has suffered from the global slowdown, from unfavourable global pricing, and from supply problems, but at the interim stage we heard that a record Christmas had helped — but we still saw a 14% rise in revenues translating to a 10% drop in pre-tax profit. Still, the third quarter brought a 20% rise in sales, and the full year is forecast to see only a modest EPS fall of 2%.

The results are due on Tuesday, 20 October, but on a P/E of 69 based on current forecasts, ASOS shares are still too expensive for me.

Pharma opportunity?

On the same day we’re due first-half results from Quantum Pharma (LSE: QP), which only floated on AIM in December 2014 but which as already given its shareholders a hair-raising ride. By mid-June the price had soared by 76% to 174p, but since then we’ve seen a 27% fall back to 125p — the overall gain so far stands at 28%.

Quantum describes itself as “the UK’s leading manufacturer and supplier of unlicensed medicines and hard-to-source products“, and supplies wholesalers, pharmacy chains, hospitals etc. EPS is expected to fall 24% this year, but a 56% rebound forecast for the year to January 2017 would put the shares on a P/E of only 11, so we could be looking at a nice growth possibility here.

Speaking of growth stocks, ARM Holdings (LSE: ARM) will be bringing us a Q3 update on Wednesday, 21 October, in a year that’s seen a fluctuating share price. It climbed to a peak of 1,233p in March, before falling back to today’s 972p price, despite forecast earnings growth of nearly 70% for the year to December and despite the company’s ongoing share buyback programme.

The shares are on a forward P/E of 32 this year, dropping to 28 next. And while that’s high compared to the FTSE’s average of around 14, it’s the lowest we’ve seen for ARM for some years. Does that make the shares a bargain now? Well, with growth in demand for ARM’s mobile computing chips continuing year on year, I see the shares as undervalued at today’s price.

Telly profits

Wednesday will also bring a first-quarter update from satellite telly firm SKY (LSE: SKY), and we should hopefully see early indications of a return to earnings growth this year — the past two years have brought small declines in adjusted EPS, but the City is expecting a 12% gain by June 2016. And the dividend has kept on growing, by 3% last year, which is nicely ahead of inflation.

Investors seem optimistic, with the current 1,071p share price bringing a 26% gain in the past 12 months, and it looks like there’s going to be an additional 3.3% to add to that from those dividends.

The post 4 Shares For The Week Ahead: ASOS plc, ARM Holdings plc, Quantum Pharma PLC And SKY PLC appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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