GlaxoSmithKline
When top and bottom line growth are proving elusive for any company, a period of rationalisation and restructuring often follows. That’s the current situation at GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US), where sales and profit growth have stalled in recent years and, as such, the company is considering a spin-off of its star HIV division, ViiV Healthcare. This could create shareholder value in a similar way to that which has taken place at Reckitt Benckiser and Indivior, with the combined market capitalisations of the two companies now being higher than when they were together.
And, with GlaxoSmithKline seemingly having considerable scope to make significant changes over the medium term, its slow-growth profile may not hold back its share price. As a result, now could be a great time to buy a slice of it.
BTG
Although the pharmaceutical sector is often viewed as relatively defensive, BTG (LSE: BTG) remains a high-risk stock. That’s because its bottom line is relatively volatile, although encouragingly for its investors the next two years are set to see it grow by around 93%, which would clearly be a superb result and help to improve investor sentiment.
In fact, investor sentiment in BTG has been somewhat lacklustre in 2015, with the company’s share price falling by 1% since the turn of the year. This, then, could present an excellent opportunity to buy in before everyone else does and, while BTG has a price to earnings (P/E) ratio of 37, it still seems to offer good value for money when its growth potential is factored in.
Hikma
Surprisingly, shares in Hikma (LSE: HIK) have risen by 10% since the turn of the year. That was unexpected because the company is forecast to post a decline in earnings in the current year of 9%, which should (in theory) cause investor sentiment to weaken rather than improve. However, Hikma’s promotion to the FTSE 100 may have caused a surge in buying by tracker funds, which may explain why its shares have been bid up.
Looking ahead, Hikma is expected to bounce back next year with bottom line growth of 18%. And, when this is combined with its P/E ratio of 23.3, it equates to a price to earnings growth (PEG) ratio of just 1.2, which indicates that Hikma’s share price could move significantly higher over the medium to long term.