2 value stocks to consider in an expensive market: Indivior plc and Impellam Group plc

Should you buy Indivior plc (LON:INDV) and Impellam Group plc (LON:IPEL) as value plays following today’s announcements?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in pharmaceutical company Indivior (LSE: INDV) soared more than 16% at one point on Thursday after management upped its outlook for revenue and earnings for the full year.

Due to unexpectedly strong market conditions and market share resilience of its Suboxone film product, net revenue for the 2017 full year is now expected to be in a range of $1.09bn to $1.12bn, a target which tops its previous guidance of $1.05bn to $1.08bn. Additionally, adjusted net income is now forecast to rise to $265m to $285m, well above its previous guidance of $200m to $220m, because of expected lower legal and R&D costs.

Meanwhile, the company is making significant progress with its development pipeline. It is set to launch new trials and is moving closer to bringing new treatments to market. This should help to underpin additional growth in future years, while reduced costs could lift margins. 

Indivior, which focuses on specialist anti-addiction medicines, was spun-off from consumer goods group Reckitt Benckiser back in 2014. And ever since its demerger, the share price has been plagued by concerns about patent issues and litigation costs. Following today’s guidance however, I reckon these risks may have been overstated.

It remains attractively valued as it trades on a price-to-earnings ratio of 10.3 — and this suggests shares in the company could have considerable upside potential as investor sentiment looks set to improve.

Impellam

Also reporting today was recruitment and staffing solutions specialist Impellam (LSE: IPEL). Shares in the company fell by as much as 8% today, as investors contrasted its fortunes with those of its rivals.

Although first-half revenues grew in line with peers, with an increase of 2.4% to £1.08bn in the six months to 30 June, operating profits fell 30% to £15.4m. This was on the back of challenging trading conditions, the impact of off-payroll working legislation (IR35) in the UK Doctors and Nursing market, and increased investment.

It’s never good to see profits fall, but I remain somewhat upbeat about the group’s long-term prospects. Certainly, the company is some way off its best and it is likely to take years rather than months before it returns to being so, but Impellam’s problems have mainly been isolated to its UK healthcare business. Trading elsewhere, particularly outside of the UK, has been much more favourable, and the group has a strong pipeline of client implementations ahead.

Reassuringly, its cash generation also remains good. Net debt fell from £95.3m to £92.1m, while cash generation dropped by less than 5% to £21.9m. And despite its near-term earnings weakness, management stuck to its stated policy of keeping dividend cover at between four to five times adjusted earnings per share, and kept its interim dividend at 7p per share.

And since Impellam trades on a price-to-earnings ratio of just eight, it seems to offer excellent value for money. What’s more, its yield of 3% marks it out as a tempting income play.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jack Tang 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »