2 monster stocks in the making I’d buy today

These two shares could post high total returns.

| 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.

The healthcare sector continues to offer a compelling investment opportunity. The world’s population is still growing and it is also ageing. This could mean that demand for healthcare services rises, and this may provide a tailwind for companies operating across the sector.

In addition, healthcare stocks may provide defensive attributes that could become useful should the current bull market come to an end. With this in mind, here are two healthcare companies which could perform well in the long run.

Improving performance

Reporting on Tuesday was UK independent hospital group Spire Healthcare (LSE: SPI). It released a trading update for the 2017 financial year which showed that it is making progress with its strategy. It expects to report revenue for the 2017 financial year of between £929m and £932m, with underlying EBITDA (earnings before interest, tax, depreciation and amortisation) of between £149m and £151m. Its net debt is expected to be around £465m as at the end of December 2016.

These results would be in line with previous expectations and could cause investors to become more upbeat about the company’s prospects. After all, Spire Healthcare currently trades at what seems to be a discount to its intrinsic value. It is forecast to post a rise in earnings of 5% this year and 12% next year, yet it has a price-to-earnings growth (PEG) ratio of just 1.2. This suggests that it could provide sustainable share price growth in the long run.

With a network of UK private hospitals, the company offers a degree of stability which may become more valuable as Brexit talks progress. Therefore, its share price performance could be strong over the long run.

Buying opportunity

Also offering upside potential within the healthcare sector is opioid addiction specialist Indivior (LSE: INDV). The company has endured a hugely volatile period, with threats to its key brands from generic competition. While this volatility could continue, there could be a buying opportunity for the long run. The company has significant financial strength which may help it to fend off threats to its key drugs, while also providing the opportunity for it to invest in its product offering.

Investor sentiment now seems to have returned to previous highs after a challenging period in 2017. The stock now trades on a price-to-earnings (P/E) ratio of around 14, but with its bottom line expected to have risen by 10% in 2017 it could be worthy of a higher rating within what may become an increasingly popular sector.

With the market for opioid addition being vast and having the potential to grow in the coming years, Indivior could enjoy a tailwind over the long run. While less defensive and stable than many of its sector peers, the potential rewards on offer could be significant. As such, now could be the perfect time to buy it.

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.

Peter Stephens 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

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

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

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

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 »