In the last month, Alliance Pharma (LSE: APH) has outperformed the FTSE 100 by over 6%. This index-beating performance could continue, with the company today releasing an upbeat set of results that show it’s on track to deliver improved profitability over the medium-to-long term.

Key to this is the integration of the Sinclair Healthcare Products acquisition, which is progressing well. This has contributed to a near-doubling of the business, with Alliance Pharma having extended its reach from 40 countries to over 100 and increased its portfolio to over 90 products. And with the company’s bottom line rising by 8% on an adjusted basis, it has enabled an increase in dividends per share of 10%. With dividends being covered 3.3 times by profit, further rises in shareholder payouts are on the cards and could positively catalyse investor sentiment in Alliance Pharma.

With the company’s shares trading on a price-to-earnings-growth (PEG) ratio of just 1.6, they seem to offer significant upside. And with Alliance Pharma being in a highly transformative period, now could be an opportune moment to buy for the long term.

Defensive stock

Also beating the FTSE 100 in the last month has been GlaxoSmithKline (LSE: GSK). Its shares have risen by 7% during the period versus a flat performance from the FTSE 100, with further outperformance on the cards.

A key reason for this is the potential for improving investor sentiment in response to GlaxoSmithKline’s new strategy. It’s seeking to cut costs and is forecast to increase its bottom line by 13% in the current year and by a further 6% next year. Beyond the next two years, strong growth appears likely since GlaxoSmithKline continues to have a highly diversified product pipeline. And its consumer goods interests provide a degree of stability during what could prove to be an uncertain period for the global economy.

And with GlaxoSmithKline currently yielding 5.4% and being viewed as a defensive stock, its popularity among growth and income-seeking investors looks set to remain high and allow it to continue beating the wider index.

Sound buy

Meanwhile, Smith & Nephew (LSE: SN) remains a relatively consistent stock that could gain favour if recent market volatility continues. In fact, the wound care and surgical devices specialist has delivered rising earnings in each of the last five years and looking ahead to next year, it’s forecast to post a rise in net profit of 12%. This has the potential to positively catalyse investor sentiment in the stock and with Smith & Nephew trading on a PEG ratio of 1.4, there seems to be significant upside potential.

There’s also scope for a rapid rise in dividends in the long run, since Smith & Nephew currently pays out just 37% of profit as a dividend. It has a yield of only 1.9%, but with dividends likely to rise and its earnings on the up, it could prove to be a sound buy.

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Peter Stephens owns shares of Alliance Pharma and 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.