While GlaxoSmithKline and AstraZeneca may be the first port of call for many investors looking to get a foothold in the pharmaceuticals sector, they are by no means the only hot stocks expected to deliver blockbuster earnings expansion in the years ahead.
Indeed, there are a broad range of medicine producers tipped to produce brilliant returns this year and beyond. And in this article I am looking at two of these pharma fizzers: BTG (LSE: BTG) and Dechra Pharmaceuticals (LSE: DPH).
The right treatment
BTG’s latest trading statement this month reinforced my optimistic take further, the company noting that “there is good momentum across the business with significant progress achieved during the [half-year] period.”
The business saw product sales at constant currencies rise by double-digit percentages during April-September, meaning that full-year sales targets remain in sight. Revenues at its Specialty Pharmaceuticals division are expected to swell by low-to-mid single digits at stable exchange rates, BTG advised, while sales at Interventional Medicine should rise in the mid-to-high teens.
This was not the only positive news BTG furnished the market with last week. Indeed, the company announced that its aggressive M&A drive has seen it acquire US-based Roxwood Medical — which provides cardiovascular speciality catheters for use in patients with heart trouble — for a fee which could eventually rise to $80m. Revenues at Roxwood should balloon in the years ahead and provide synergetic benefits to BTG’s existing operations in this area.
BTG has seen earnings rattle steadily higher in recent years, and City brokers are expecting meaty growth of 27% in the year ending March 2018. An additional 14% advance is pencilled in for fiscal 2019 too.
And these projections make the FTSE 250 star excellent value too. Sure, a forward P/E ratio of 24.1 times may sit well outside the widely-considered value watermark of 15 times. However, a corresponding PEG reading of 0.9 suggests BTG is actually brilliantly priced relative to its growth potential.
Animal spirits
Animalcare specialist Dechra Pharmaceuticals (LSE: DPH) is another pharma share expected to deliver stonking profits growth in the nearterm and beyond.
Like BTG, the Cheshire-based entity has a long history of annual earnings rises behind it. And City analysts are not expecting this impressive run to end just yet, a chunky 13% rise being forecast for the 12 months ending June 2018.
Dechra has also been hot on the M&A trail in recent years to bolster its already impressive product pipeline and expand its geographical footprint, a strategy which keeps blasting revenues skywards (at constant currencies sales increased 28.3% during the 12 months to June, to £359.3m).
Rampant share picker demand has seen Dechra’s share price head for the clouds in recent months, the business gaining 60% in value since the turn of 2017. While this also leaves the business dealing on a conventionally-high forward P/E ratio of 29.4 times, I believe this is fair value given that medicines demand for domestic and agricultural animals should continue climbing at a stratospheric rate.