A top pharma stock

Our need for essential pharmaceutical products and consumer healthcare goods remains largely unchanged at all points of the economic cycle. This is what makes Alliance Pharma (LSE: APH) a great cheap UK share for me to buy if stock markets crash. The company makes products such as Kelo-Cote scar treatment gel, Vamousse lice treatment, and Nu-Seals blood clot prevention tablets, which it sells worldwide.

Alliance Pharma also specialises in acquiring products that have strong brand power and a leading position in the areas in which they trade. This provides an extra layer of protection.

However, I am keeping in mind that an M&A-led growth strategy like this can throw up a world of problems, from disappointing revenues to the buyer being forced to overpay for an asset amid a scarcity of other acquisition opportunities.

A premier UK share to buy

We also need to keep ourselves fed, even during the onset of economic, social, and political crises. This is why I’m thinking of snapping up Premier Foods (LSE: PFD). This food manufacturer makes cakes, custards, cooking sauces and gravies among ranges of other edible products. And its labels such as Mr Kipling, Oxo, and Homepride are ones that shoppers will stretch their shopping budgets to buy.

The food manufacturing industry is packed with competition, of course. And Premier Foods isn’t immune to pressure from other heavyweight brands, or generic supermarket labels. I get confidence from company data showing that its products can be found in 96% of British homes.

I’d also buy Premier Foods despite the threat of rising cost inflation. I think it should be able to effectively pass higher input costs on to its customers.

An unloved nearly-penny stock to buy

The personal goods sector is another which tends to perform robustly when economic conditions worsen. This is why I’m thinking of buying Revolution Beauty Group (LSE: REVB) today. Indeed, I’d buy it following its recent drop to record lows. Revolution’s share price has dipped 23% since its IPO in July.

I believe this almost-penny stock has a bright future as consumers become more conscientious about the environmental impact of their products.

Revolution Beauty is PETA-certified beauty product producer — none of its cosmetics (or product ingredients) are tested on animals. It is also taking steps to aggressively reduce the amount of plastic it uses, while it is bulking up its range of vegan products to latch onto this fast-growing segment.

Of course, the beauty market is highly competitive and Revolution will have to push mighty hard to make an impact. But as a long-term investor, I like its strong green credentials, and think they could deliver great shareholder returns in the years ahead.

That does not mean that it will stay there. Similarly, a strong stock market debut does not ensure continued share price increases. But to get a sense of which way the tide may turn, I looked for answers to three questions. 

#1. What is Revolution Beauty’s unique selling point (USP)?

Revolution Beauty is a mass market cosmetics producer, but to me its USP is its branding as ‘cruelty free’. This means that there is no animal testing for its products. Further, they are also vegan and often use sustainable packaging. All of this can be a positive in a time of growing emphasis on ethical investing. 

The company was founded only in 2014 and has the vibe of a present day beauty company. It relies on social media influencers for its marketing and heavily encourages inclusion. It has both online and offline partnerships with leading brands. Brick-and-mortar retail partners in the UK include Boots and Superdrug. And for online sales, it has tied up with the likes of Amazon and ASOS. 

#2. How do its financials and its outlook appear?

These partnerships appear to have been the right move for the company. Since its launch, its revenues have almost doubled every year up to 2019. Further, it has also reported underlying profits, though whether this will translate into reported earnings is unknown. 

#3. What is the outlook for Revolution Beauty’s shares?

I think this bodes well for the company, which to my mind is not valued at unsustainable levels. For want of more clarity on earnings, I looked at its price-to-sales (P/S) figures, which are around 3.2 times based on my calculations. This compares well with another cosmetics company, Warpaint London, which has the same P/S as per Financial Times numbers. 

This means that there is room for the company’s share price to rise. Further, keeping in mind that in the foreseeable future, consumer spending is expected to rise as the economy starts growing (relatively) fast, it could encourage further growth in Revolution Beauty’s business. 

Would I buy these shares?

However, for now, I am not going to rush in to buy its shares. I am interested in waiting for at least one update from the company to get a better understanding of where it is at. 

Specifically, I want a clearer picture of its bottom line. If it is unprofitable on a net basis, it would be good to know why. High growth companies have a tendency to focus on market share instead of profits, but I do not know if that is the case with this company. And I certainly do not want to fill in any blanks based on my own conjecture. I will wait for now.