17% Annual Growth For The Next 7 Years?

Sadly, few quoted companies ever issue specific sales guidance…

| 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.

I don’t know about you, but I always like to back companies with the strong prospect of rising sales.
My theory is simple. Rising sales should translate into rising profits, and rising profits should translate into rising dividends…
All of which should then combine into a rising share price!

Sadly, few quoted companies ever issue specific sales guidance

Too often, the best we get is being told about current-year sales being “in line with expectations“.

But there are a few companies that are bold enough to predict something like “sales growth in the low-to-mid single digits” for the current year.
Still, official guidance about sales beyond the current year is almost non-existent.
You see, public companies rarely commit to anything so ‘long term’ in public for fear of getting it all wrong…
Unless the business operates in the pharmaceutical sector perhaps…

Sales could jump from $26bn to $45bn within 10 years

For me, there was one particular highlight from the recent attempt by Pfizer to buy AstraZeneca (LSE: AZN) (NYSE: AZN.US).
Forget all the soundbites about job losses, UK science and tax ruses…
…it was the TEN-year sales prediction made by AstraZeneca boss Pascal Soriot that caught my attention.
To help fend off the bid, “create significant value to shareholders” and no doubt keep himself in a job…
…Mr Soriot evaluated the group’s product pipeline projections and claimed his firm’s annual sales would top $45bn by 2023.
Which I have to say looked an assertive target given sales last year fell 6% to $26bn.
(And that $45bn target is even more assertive when you consider Mr Soriot’s projections include Astra’s sales flat-lining between now and 2017.)
Nonetheless, turning $26bn into $45bn over ten years equates to an increase of almost 6% per annum.
And while biased beyond 2017, 6% compound annual revenue growth during the next decade does not seem too wildly optimistic to me.

Demand could grow by 10% per annum for the next 10 years 

Mr Soriot’s projections got me thinking about GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US). 

I mean, if one large-cap pharma group can predict upbeat sales guidance for the next ten years, surely its major sector rival might enjoy rising revenues for some time to come, too.
Sadly, there have been no precise projections from Glaxo boss Sir Andrew Witty.
But going somewhat unnoticed during the AstraZeneca/Pfizer face-off was a substantial 3-part deal between Glaxo and Swiss pharma firm Novartis.
The deal involved Glaxo creating a new joint venture consumer healthcare business and selling its oncology portfolio for up to $16bn.

But the interesting bit for me concerned Glaxo acquiring the Vaccines business of Novartis for just over $7bn.
You see, buried in the announcement was this sentence:
Demand for vaccination remains significant with the global vaccine market projected to grow approximately 10% per annum over the next 10 years.
So, not exactly a sales projection, but a pretty good guide as to what the Glaxo’s Vaccines division — the largest in the world — could be expected to achieve during the next decade.
What’s more, within the accompanying presentation to City institutions, Glaxo referred to its respiratory products, HIV treatments and consumer healthcare brands growing at between 4% and 8% per annum.
Given that confidence, I’d like to think Glaxo could at least achieve the 6% per annum top-line growth being touted by Astra right now,

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.

The Motley Fool has recommended shares in GlaxoSmithKline.

More on Company Comment

Hand of person putting wood cube block with word VALUE on wooden table
Company Comment

Value has been building behind the Diageo share price

Despite the business growing, the Diageo share price first reached its current level just over 19 months ago and hasn't…

Read more »

Older couple walking in park
Investing Articles

5 stocks to buy for high and rising dividend income

I can see a host of shares to buy on the FTSE 100 offering me exceptional levels of income. Here…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I don’t care if FTSE 100 shares fall further, I’m buying them today

I'm happy to go shopping for FTSE 100 shares today, even though I accept that they could have further to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Rolls-Royce shares are down 18% in a month and I’m finally going to buy them

Investors who bought Rolls-Royce shares have been repeatedly disappointed, but I'm willing to take a chance on them before they…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

How I’d invest £10k in a Stocks and Shares ISA today

Now looks like a good time to buy cheap FTSE 100 shares inside a Stocks and Shares ISA. These are…

Read more »

Black father holding daughter in a field of cows
Investing Articles

Today’s financial crisis is the perfect moment to buy cheap shares

I'm building a portfolio of FTSE 100 stocks by purchasing cheap shares whenever I see an opportunity. There's a good…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

I’d buy Tesco shares in October to bag their 5.4% yield 

Tesco shares have fallen lately but I think this makes them attractively valued for a dividend stock I would aim…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I would do anything to hold Diageo in my portfolio (but I won’t do that)

Diageo is one of my favourite stocks on the entire FTSE 100 and I'd love to hold it, but one…

Read more »