The business is expected to endure a 20% earnings slide in the year to September 2017. But I believe Hollywood Bowl’s leading position in this niche leisure sector (controlling around a quarter of the country’s bowling lanes) should deliver rewards for patient investors.

It announced in last week’s market update that it “has traded well through the first half of the financial year,” with revenues leaping 7.8% year-on-year, or 1.2% on a like-for-like basis. This was despite Easter falling in the second half of the current fiscal period, unlike last year.

Strike lucky

Hollywood Bowl’s perky half-time numbers underline the success of its site refreshment and expansion programme, moves designed to transform its centres into one-stop shops for amusement lovers.

The company advised that refurbishments at its recently-acquired Bowlplex centres “are continuing to trade ahead of our original expectations,” as are changes across the company’s other brands.

And Hollywood Bowl’s site expansion programme also offers plenty of earnings potential. The business expects to open three new sites in the current fiscal year in Derby, Southampton and Dagenham, and has six new centres in total in its pipeline up until 2020.

It is true that the economic implications of Brexit are likely to hang over the retail and leisure sectors for some time. But Hollywood Bowl’s position as one of the better value-for-money operators in the market should allow it to effectively hurdle these near-term troubles, while ongoing work to its estate should underpin splendid returns further out.

My enthusiasm is shared by the City, which expects Hollywood Bowl to recover from this year’s anticipated earnings drop with a 13% bounce in the next fiscal year.

And I reckon a P/E ratio of 15.2 times for 2017 is a decent level at which to hitch onto Hollywood Bowl’s exciting growth strategy.

Breathe easy

Like Hollywood Bowl, medicines creator Vectura (LSE: VEC) is also expected to suffer its share of earnings turbulence in the near term. In this case, a 4% decline is anticipated by City brokers.

But in my opinion, any bottom-line trouble should prove short-lived as the merger between itself and Skyepharma in 2016 creates a leader in the fast-growing respiratory care segment.

Not only are sales of Vectura’s Flutiform and Ultibro treatments steadily catching fire — sales of the former jumped 29% during March-December — but new products like a generic rival to Advair also provide plenty of earnings opportunity. And the huge wads of cash thrown up by Skyepharma’s operations should provide the key to Vectura opening the vast potential of its drugs pipeline.

The Square Mile certainly believes so and predicts that Vectura will rebound from this year’s predicted earnings dip with a 49% bottom-line surge in 2018. While expensive on paper, I reckon a P/E ratio of 21.4 times for the current period is warranted given the firm’s increasingly-rosy revenues outlook.

The post Forget short-term pain: 2 growth stocks for long-term gain! appeared first on The Twelfth Magpie.

More reading

• 3 quality FTSE 250 stocks to consider with dividend yields above 4.5%
• How are these FTSE 250 growth and dividend stocks so cheap?
• Analysts think this growth share could rally a further 26% in the next year

Royston Wild 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.

However, Glaxo is faced with losing US market exclusivity on its best-selling asthma drug Advair this year, along with the additional patent on the Diskus inhaler used to deliver the drug, which has so far kept competitors at bay. Two years ago sales of this drug were responsible for almost a fifth of Glaxo’s sales but last year Advair sales as a percentage of overall group sales declined 13%.

The loss of patent protection on Advair could be described as Glaxo’s Achilles heel but the average investor can negotiate around this structural shift in the company’s business model by diversifying.

And one of the best companies to buy alongside Glaxo in a portfolio is SkyePharma (LSE: SKP).

A profitable merger

Skye has recently agreed to merge with peer Vectura, to create a new UK champion in respiratory medicines. Vectura is also developing its own generic version of Advair in partnership with Roxane Labs, a US manufacturer being acquired by UK-listed Hikma. Skye and Vectura both specialise in the formulation and delivery of inhalable respiratory drugs, working in partnership with bigger groups including Glaxo and Novartis.

All in all, this deal will generate some impressive returns for investors. Vectura predicts the deal would be earnings-enhancing in its first year, with projected annual pre-tax synergies of £10m by 2018. It’s Vectura that’s leading the deal here. Under the terms of the deal, Skye’s shareholders are set to receive 2.7977 new Vectura shares for each Skye share, valuing the latter at 449.89p each – a small premium to today’s price.

Current outlook 

Current City figures are calling for Vectura to report earnings per share of 5.1p for the year ending 31 March 2016, which means that the group’s shares are trading at a forward PE of 28.9. However, analysts have pencilled in total earnings per share growth of more than 100% for the next two years to 10.8p per share, and these forecasts could be revised significantly higher if the deal with Skye goes to plan and integration is successful. Shares in Skye trade at a forward P/E of 22.2.

Skye and Vectura are an excellent hedge against Glaxo’s patented expiry but both companies are relatively expensive and neither offer a dividend for investors. Meanwhile, Glaxo’s shares support a dividend yield of 5.9% and trade at a forward P/E of 16.2. Management has made a commitment to maintain the payout at 80p per share for the next few years.

The bottom line 

So overall, Glaxo is an excellent income investment for any portfolio, and the company is set to return to growth over the next two years. Still, some investors are concerned about Glaxo’s patent cliff and the best way to hedge against this risk is to diversify into Skye, a company that is currently in the process of being bought out for a small premium and specialises in the market where Glaxo is set to lose market share.

The post How GlaxoSmithKline plc & SkyePharma PLC Can Turbocharge Your Returns 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?

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

Look at SkyePharma (LSE: SKP). Its shares have climbed by 78% from their 52-week low in August 2015, to 457p — and if that’s not enough for you, over the past five years they’ve soared by a massive 990%! But, can it keep going?

I’d say there’s a very good possibility that it can. SkyePharma, once a lossmaking blue-sky possibility, has crossed the line into profitability and earnings per share (EPS) have been swelling nicely. In fact, though there’s a fall in EPS forecast for this year, the subsequent growth pencilled-in for 2017 would put the shares on a P/E of a little over 15 — and I reckon that’s very attractive for a growth candidate.

What’s more, SkyePharma’s speciality is in developing drug delivery technology rather than the drugs themselves — things like oral, topical, inhalable and injectable delivery systems. And to me that makes the firm look like a lower risk “picks and shovels” candidate, whose products are used by big-name drug developers including GlaxoSmithKline, Novartis, Roche and others.

Oil strength

The rising price of oil, which is oscillating around the $40 level, has helped boost Cairn Energy (LSE: CNE) shares by 63% to 208p since their low of 20 January. Full-year results released on 15 March contributed too. Chief executive Simon Thomson said of the firm’s offshore Senegal prospects that the results have confirmed “the scale and extent of the significant resource base in this world class asset“.

A risk with Cairn Energy is that it’s still at the cash-burn stage and there are no profits within the forecast horizon yet. But at 31 December there was a tidy $603m net cash on the books, and the company still has undrawn lending facilities and letters of credit that should add around another $500m to its available cash. Cairn, then, isn’t going to be hit by the kind of debt squeeze in the near future that some of its rivals will face.

With some impressive assets under development and a positive brokers’ stance, Cairn looks promising to me.

Mining resurgence

India-focused Vedanta Resources (LSE: VED) has seen its shares drop 41% over the past 12 months as the commodities slump has continued to bite, but since a low on 18 January there has been a 56% climb to 320.5p. With the firm’s main products being copper, zinc, aluminium, lead, iron ore and petroleum, the recent recoveries in minerals and oil prices have both given the shares a leg up.

Vedanta, like the rest of the sector, isn’t out of the woods yet. With earnings having plummeted over the past few years, the company has three years of losses forecast — and its dividend, set to yield 4.5% for the year to March 2016, is surely not going to be maintained.

But the losses should be relatively small, and the long-term future is surely solid, even if analysts currently have Vedanta as a sell.

The post Can SkyePharma PLC (+78%), Cairn Energy PLC (+63%) And Vedanta Resources plc (+56%) Keep On Climbing? 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 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.

Impressive growth

Commeting on the results Skyepharma’s chief executive , Peter Grant, said,

“2015 has been a year of further substantial progress both operationally and financially.  Our proven expertise in developing innovative inhalation and oral products has given us a track record of growth that reinforces our optimism about the future.”

Over the past five years, Skyepharma’s shares have rocketed by around 1170%, which demonstrates just how lucrative small-cap investments can be when they click. That’s a much better performance on total returns than I can get from big-cap stalwarts such as Vodafone Group (LSE: VOD).

However, in its present form, the Skyepharma growth story could be about to reach the end of the line. The firm revealed today that it has reached agreement on the terms of a recommended merger with mid-cap pharmaceutical company Vectura Group. That will be a satisfactory outcome for long-standing Skyepharma shareholders, but new investors attracted by the growth story will be pinning their hopes on the fortunes of the enlarged group if the merger goes ahead.

Up with events

Although I think that Skyepharma has been a better investment opportunity than Vodafone in recent years, I would let the dust settle after the merger has taken place before investing in either Skyepharma or Vectura Group now.

Meanwhile, Vodafone’s valuation looks well up with events to me. City analysts following the firm expect earnings to grow 23% to march 2017 and by a further 28% to March 2018. The firm has invested a lot of capital to upgrade its networks and that seems to be paying off. However, at a share price of 220p, the firm’s forward price-to-earnings ratio sits at around 28 for 2017/18, a rating that seems to anticipate double-digit growth rates in earnings for years to come. I think such an outcome unlikely as Vodafone is not a small and nimble growth business like Skyepharma.

No solace in the dividend

Perhaps there’s reassurance in Vodafone’s dividend prospects. The firm expects to deliver a dividend yield of 5.3% in 2016/17 followed by 5.4% during 2017/18. That looks attractive but there is no full cover from earnings, just 0.5 times and 0.65 times respectively.

In February, Vittorio Colao, the firm’s chief executive, said, “We continue to face regulatory and competitive challenges in many markets, but we are confident that the business is well positioned for the growth opportunities ahead.”

Vodafone is trading well, but the company’s valuation leaves no margin for error. As such, I see risk to the downside for investors and continue to avoid the shares myself. If the forward growth numbers miss a beat for some reason in the future, it’s easy to imagine Vodafone suffering a downward valuation re-rating that could see the firm trading on a lower P/E ratio.

The post Is Fast-Growing Skyepharma PLC Better than Vodafone Group plc? appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Which will reach £2 first, Lloyds or Vodafone shares?
• 3 value stocks under £3 to consider in June

Kevin Godbold 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.

One stock that offers defensive characteristics is GlaxoSmithKline (LSE: GSK). Part of the reason for this is the fact that its profitability is less positively correlated to the performance of the global economy than is the case for most of its FTSE 100 peers. In other words, GlaxoSmithKline depends less on GDP growth and more on a strong drugs pipeline for its bottom-line growth. As such, even if there’s further volatility in share prices, GlaxoSmithKline could continue to outperform the FTSE 100, as it has done since the turn of the year, by over 5%.

In addition, GlaxoSmithKline also pays a superb dividend. It currently yields 5.8% and although dividends are due to flatline over the next couple of years as the company implements a major restructuring programme, its shareholder payouts remain relatively high and consistent. During a period of uncertainty this is a superb ally for nervous investors.

As well as defensive attributes, GlaxoSmithKline also has a strong pipeline of new drugs that have the potential to rapidly increase its sales and profit over the medium-to-long term. In fact, GlaxoSmithKline’s portfolio is one of the most diversified in the business and it has real potential to generate multiple blockbuster drugs, with its ViiV Health Care subsidiary being of key importance to the company’s long-term growth. And with its bottom line due to be positively impacted by cost cuts, GlaxoSmithKline seems to be an excellent buy for the long term.

What’s the alternative?

Of course, it’s not the only stock in the pharmaceutical sector that could be worth adding to your portfolio. In fact, there are a number of companies that offer tremendous forecast growth rates and yet trade on highly appealing valuations.

For example, airways diseases specialist Vectura (LSE: VEC) is forecast to increase its bottom line by 116% in the next financial year following what’s expected to be a profitable year in 2016. And with its shares trading on a price-to-earnings (P/E) ratio of 53, this equates to a price-to-earnings growth (PEG) ratio of only 0.5. This indicates that they could deliver improved performance following their fall of 8% in the last six months.

Similarly, drug delivery specialist SkyePharma (LSE: SKP) is due to post a rise in its bottom line of 51% in 2016. When combined with its P/E ratio of 25.6, this equates to a PEG ratio of only 0.5 and indicates that there’s considerable upside potential. As with Vectura, SkyePharma pays no dividend and isn’t expected to commence shareholder payouts this year. In addition, the two companies are much smaller than GlaxoSmithKline and arguably offer less defensive characteristics or stability, but do have greater growth potential.

As such, a mix of all three stocks seems to be a sound move, although for investors who are only able to buy one of the three companies, GlaxoSmithKline appears to have the perfect mix of growth, income and defensive qualities.

The post Should You Ditch GlaxoSmithKline plc And Buy Vectura Group PLC And SkyePharma 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?

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

Are any of these stocks a buy in today’s market?

Skyepharma

Shares in SkyePharma have climbed another 5% this morning after the firm said that full-year revenues for 2015 are likely to be ahead of expectations.

The main reason for this is that Skyepharma is set to receive a £7.4m sales milestone payment for sales of its flutiform product earlier than expected. This payment won’t generate any extra cash for Skyepharma as the firm’s flutiform licence partner, Mundipharma, will use this money to recoup previous development costs.

However, this news suggests to me that sales of flutiform products may be growing a little faster than expected. Today’s news doesn’t make any mention of profit, but in my view it seems fair to assume that profits are more likely to rise than fall over the next year.

On this basis, Skyepharma’s 2016 forecast P/E of 18 doesn’t seem excessive, especially considering the £35m net cash balance. As a growth buy, Skyepharma could be worth a closer look, in my view.

Shire

Shares in rare disease specialist Shire have fallen by 20% over the last six months. This has left Shire stock looking cheaper than it has done for some time. Is this a buying opportunity?

Shire has been busy splashing the cash over the last year. The firm has spent a total of $11.1bn acquiring Dyax Corp and NPS Pharma in order to build its biotech business. Shire has also just confirmed a $32bn merger with US peer Baxalta International. After an initial bounce, Shire shares slipped 5% lower on the news.

Where does this leave shareholders? Shire appears to be a company on the verge of a major transition. I’m not sure I’d buy into Shire stock until more information on the expected benefits of the Baxalta deal is available — but if it’s successful then the group’s profits could rise steadily.

Anyone considering a fresh purchase needs to remember that this is a growth stock. Shire’s dividend yield is only about 0.5%, so shareholders do have to rely on a rising share price for their returns.

Indivior

Indivior was spun-off from consumer goods group Reckitt Benckiser in 2014. The new firm’s shares promptly doubled in value to a high of 271p, but have since fallen by 33% to their current level of 181p.

Indivior’s problem is that it makes most of its money from an opiate addiction product whose patent protection has expired. We don’t yet know how, or if, Indivior will be able to rebuild this fading profit stream.

Indivior stock may currently look cheap, with a 2015 forecast P/E of 8.6 and yield of 4.2%. The catch is that earnings are expected to have halved in 2015 and to fall by a further 28% in 2016.

Indivior does have some new products under development and has very little debt. This means that the firm is in a position to use cash and fresh debt to make acquisitions, should a suitable opportunity arise.

What we don’t know is how far the firm’s earnings will fall before the picture starts to improve. I don’t know how to call this one.

The post Is Now The Time To Buy Shire PLC, SkyePharma PLC And Indivior 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?

Roland Head 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.

Slide in earnings slowing

AstraZeneca’s focus on controlling costs is combining with progress developing new drugs to arrest the firm’s slide in profits. City analysts following the firm expect earnings to drop 2% this year and 4% next year. That’s good progress compared to the double-digit falls we’ve seen recently.

Since Pfizer’s takeover approach, there seems to be a premium built in to the share price, perhaps due to hopes of another offer appearing. However, the share price eased back around 13% in the months since the spring. Today’s 4112p has the firm trading on a forward price-to-earnings ratio (PER) of just below 16 for 2016, and the forward dividend yield is 4.4%. Forward earnings will likely cover that payout around 1.5 times.

That’s not an obvious bargain. However, if the development pipeline delivers rising profits going forward, such growth could drive the share price higher. The timescale likely for such an outcome is unclear. Meanwhile, AstraZeneca retains its ‘defensive’ characteristics, which combines with that growth potential. I’m happy to watch from the sidelines.

A focus on addictions

Profits are falling at Indivior due to generic competition. City analysts following the firm expect earnings to plunge 48% this year and 27% next year. The company focuses on producing treatments for addictions, which are still generating enough earnings to cover the dividend payout around twice. At today’s 217p share price, the forward dividend yield runs at 3.3% for 2016 and Indivior is priced at around 15 times forward earnings.

Reckitt Benckiser (LSE: RB) spun out Indivior at the end of 2014, and the shares are up around 60% since the start of this year. Despite slipping earnings, the firm’s chief executive reckons Indivior’s development pipeline will deliver good growth in the future. Indivior’s current revenues depend on one major product line, a treatment for opioid dependence branded Suboxone and Subutex in its various forms. It’s essential that the up-and-coming pipeline captures the market; otherwise, things could turn sour for the company and its investors.

Indivior is worth watching but carries too much uncertainty to interest me just now.

Growth on track

Skyepharma’s focus on developing oral and inhalation pharmaceutical products produced some stunning growth numbers in recent years. After rising 944% last year, City analysts following the firm expect earnings to ease off by 19% this year followed by another 43% up-spurt next year.

At a share price of 338p, the forward PER sits at almost 16 for 2016 and the firm doesn’t pay a dividend. The shares rose more than 600% since the end of 2013 and Skypharma remains in full-on growth mode, although shareholder gains will likely be slower going forward.

Skypharma strikes me as well worth watching with the aim of investing if further general market weakness knocks the shares back a bit.

The post Is Now The Time To Invest In AstraZeneca plc, Indivior plc And Skyepharma plc? appeared first on The Twelfth Magpie.

More reading

• Down 14% to below £135, here’s where AstraZeneca’s deeply undervalued share price ‘should’ be trading today
• The top 3 FTSE shares for beginner investors to consider buying in 2026
• 2 FTSE shares for beginners starting an ISA
• 3 UK shares to consider holding in a Stocks and Shares ISA for a decade

Kevin Godbold 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.

All three companies have achieved astounding returns for shareholders during the past few years, and all three have rosy outlooks, as they go from strength to strength. 

However, the shares of Hikma, Shire and SkyePharma aren’t cheap. As these companies have gone from strength to strength, investors have been willing to pay a premium to get in on the action. 

Shire is the cheapest of the three. The company trades at a forward P/E of 18.5. SkyePharma trades at a forward P/E of 24 and Hikma trades at a forward P/E of 28.4.

But the big question is, should investors be paying such a hefty? Would long-term investors be better off buying AstraZeneca (LSE: AZN), which currently trades at a forward P/E of 15.2, but is struggling with falling sales. 

Trouble brewing 

Over the past two years, Hikma and Shire have drastically outperformed the FTSE 100 by 125% and 90% respectively but this outperformance is unlikely to continue. Indeed, investors as a group are now becoming more cautious about where they invest in the biotech sector, and many are shying away from the companies trading at a premium to the sector as a whole. 

What’s more, these a growing chorus of lawmakers who are calling for price caps on specialist drugs produced by the likes of Shire, and to a lesser extent, Hikma. It’s unclear how regulation of drug prices would affect these companies directly, although it’s clear that price caps would make investors think twice about paying a premium price for the shares of the companies affected.

Put simply, as the threat of regulation grows, Shire and Hikma’s upside could be limited. 

Waiting for growth

Astra’s shares have fallen 3.2% year to date and investors are clearly apprehensive about the company’s prospects. Astra’s earnings are set to shrink 2% this year, and around 30% of group sales come from three drugs, which Astra is set to lose the exclusive manufacturing rights for by 2017 at the latest.

However, for investors with a long-term outlook Astra could be one of the best bets in the pharma sector. The company is expected to return to growth by 2017, and the group has 119 projects in its clinical development pipeline. And while investors are waiting for Astra to return to growth, the company’s forward dividend yield of 4.4% provides an attractive level of income for investors.

Set for rapid growth

SkyePharma’s growth is only just starting. The company is ploughing cash into R&D, and it already has several new products set to hit the market during the next few years. These include SKP-2075, for chronic obstructive pulmonary disease and Soctec, a concept for a novel, proprietary gastro-retentive drug delivery platform. R&D spending totaled £0.5m during 2013 but has risen twenty-fold. R&D spending is expected to hit £10m during 2015.

According to City forecasts, SkyePharma’s earnings per share are expected to increase 43% next year. Based on this projection the company trades at a 2016 P/E of 15.6.

The post Which Offers The Most Potential Profit For Investors: AstraZeneca plc, SkyePharma PLC, Hikma Pharmaceuticals Plc Or Shire PLC? appeared first on The Twelfth Magpie.

More reading

• Down 14% to below £135, here’s where AstraZeneca’s deeply undervalued share price ‘should’ be trading today
• The top 3 FTSE shares for beginner investors to consider buying in 2026
• 2 FTSE shares for beginners starting an ISA
• 3 UK shares to consider holding in a Stocks and Shares ISA for a decade

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

SABMiller

For those seeking electric near-term earnings growth, brewing giant SABMiller (LSE: SAB) is likely to disappoint as a combination of emerging-market pressures and adverse currency movements weighs. Indeed, the business is expected to record a 6% earnings slide in the 12 months to March 2016, a prediction that would mark a second successive slip and which would result in a slightly-elevated P/E multiple of 19.9 times.

Still, for more patient investors I believe SABMiller provides the recipe for delicious returns. Not only should the company benefit from rising consumer spending power across Africa, Asia and South America, but labels like Pilsner Urquell, Castle and Coors offer brilliant pricing power that few other can match. As a result, the brewer is expected to snap back with an 8% earnings rise in fiscal 2017, resulting in an improved P/E multiple of 18.2 times.

Skyepharma

Medical play Skyepharma (LSE: SKP) has seen its share price gallop 43% higher during the past three weeks alone, and I believe the firm’s stunning drugs pipeline should deliver further share price growth. The business pleased investors in late August when it advised sales had jumped 19% during January-June, to £40.8m, with flagship asthma treatment Flutiform enjoying a revenues bump of 129% from the corresponding 2014 period.

Like SABMiller, Skyepharma is not expected to light up the bottom line any time soon, however, and a 19% slide is currently pencilled in for 2015, resulting in a heady P/E rating of 23.6 times. But this figure collapses to 15.5 times for next year thanks to predictions of a 43% bottom-line surge. With almost two-thirds of total revenues now sourced from products launched since March 2012, I believe the healthcare play is in great shape to enjoy brilliant earnings expansion in the years ahead.

Persimmon

The housing sector has been the London stock market’s star performer so far in 2015 and Persimmon (LSE: PSN) has been one of the leading lights in this area — the stock has gained a mammoth 34% since the turn of the year. And I expect sentiment towards these companies to remain robust — Barratt Developments advised just today that pre-tax profits leapt 45% during January-June, to £565.5m.

Following today’s update, analysts over at Hargreaves Landsown advised that “a combination of low interest rates, a general lack of new housing supply, rising house prices and increased mortgage availability” helped Barratt during the first half. Clearly Persimmon is also set to continue to benefit from these factors, and the City expects the business to see earnings rise 23% and 11% in 2015 and 2016 correspondingly, creating ultra-low P/E ratios of 13.5 times and 12.2 times.

Next

I piled into retailer Next (LSE: NXT) some time ago, thanks to the steadily-improving state of the UK High Street. But I believe the clothes house still offers plenty of upside, as the dual effect of low inflation and recovering wage growth drives shoppers through the doors — Next saw sales rise 3.5% during the six months to July, a result that once again saw the business exceed prior estimates.

The company now expects revenues to advance between 3.5% and 6% for the full year. And with online shopping fuelling growth at its Next Directory division, and international sales also ticking higher, the City forecasts Next to record earnings growth of 6% for the years concluding January 2016 and 2017. These figures leave the retailer dealing on very-reasonable P/E ratings of 17.5 times and 16.4 times for these years.

The post Why SABMiller PLC, Skyepharma PLC, Persimmon plc And Next plc Are Four Of The Hottest Growth Plays In Town! appeared first on The Twelfth Magpie.

More reading

• Down 63% and yielding 6.3%! Is this FTSE 100 share a brilliant bargain?
• This 5.5%-yielding income stock’s at a 13-year low and cheap to-boot! Time to consider buying?
• Down 65% but yielding 6%! Is this FTSE 100 dividend stock an unmissable bargain?
• A 6.7% forecast yield and 53% below ‘fair value’! 1 stunning FTSE income stock for investors to consider today?
• How much do you need in an ISA to target a £2,066 monthly passive income in 2066

Royston Wild owns shares of Next. 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.

The firm said that in-market sales of its flagship new product, flutiform, were up by 129% compared to the same period last year. Sales of flutiform are now expected to be ahead of expectations during the second half of 2015 thanks to a recent increase in manufacturing capacity.

In total, 65% of SkyePharma’s revenue now comes from products launched since March 2012. This highlights the growth potential and long expected life of the firm’s current product range.

First-half earnings of 8.7p per share are exactly 50% of current full-year forecasts for earnings of 15.4p per share. On this basis, any improvement in the second half will see the firm beating current expectations, as promised.

What about the competition?

Investors looking for profitable and established pharma stocks will probably have SkyePharma on their radar. The firm’s shares have fallen by 15% so far this year, despite, evidence of strong operational progress.

Two larger alternatives which both have a focus on growth are Shire (LSE: SHP) and Hikma Pharmaceuticals (LSE: HIK). Could SkyePharma’s smaller size enable it to outperform these peers over the next year or two?

Here’s how the three firms compare at the moment:

SkyePharma’s forecast P/E is expected to fall sharply in 2016. This indicates that earnings per share are expected to rise rapidly next year. Today’s results suggest that momentum is building across the SkyePharma’s product range, so this doesn’t seem an unreasonable expectation, to me.

All three firms boast a strong balance sheet, with low levels of debt or net cash. SkyePharma looks the strongest, with net cash of £20.9m. However, this theoretical advantage is probably outweighed by Shire and Hikma’s’ larger size, which gives them much more affordable and reliable access to debt markets.

Could things change?

Shire’s earnings per share are expected to fall this year after a bumper performance in 2014. However, the FTSE 100 firm is hoping to negotiate a deal to merge with US-listed firm Baxalta Incorporated.

After being rebuffed in private by Baxalta’s management, Shire made the proposal public at the start of August, in the hope that Baxalta’s shareholders would apply pressure to their board to begin negotiations with Shire.

Shire’s initial proposal is for an all-share merger that would create a business Shire believes could generate $20bn of annual sales by 2020. For comparison, Shire is expected to report sales of $6.4bn in 2015.

There’s no certainty of a deal at this point, but for Shire shareholders this is worth keeping an eye on, as it could boost long-term earnings growth.

Today’s best buy?

I wouldn’t rule out continued strong growth from Hikma and Shire, but I believe SkyePharma has the potential to outperform both firms over the next years, and rate the smaller company as a buy.

The post Could SkyePharma PLC Outperform Shire PLC And Hikma Pharmaceuticals 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?

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