GlaxoSmithKline
Investor sentiment in GlaxoSmithKline (LSE: GSK) has stabilised in recent months, with shares in the company beating the FTSE 100‘s performance by 2% over the last three months. Certainly, challenges regarding top line growth remain, with the company struggling to match the loss of patents on blockbuster drugs that are now facing generic competition.
However, with it having an excellent pipeline of drugs, GlaxoSmithKline continues to offer superb long-term potential. And, with a dividend yield of 5.8%, a price to earnings (P/E) ratio of 15.3, and appealing defensive qualities, it could prove to be a sound buy for 2015.
AstraZeneca
While a bid from a US peer looks less likely now that the ‘tax inversion’ loophole is in the process of being closed, AstraZeneca (LSE: AZN) is still likely to be of interest to major pharmaceutical companies. That’s because under its new management team it has restructured, substantially beefed up its pipeline, and is delivering better profitability than previously forecast as a result.
As such, investor sentiment remains relatively strong even though AstraZeneca’s bottom line is still falling due to the effects of generic competition. However, with the financial firepower to engage in further acquisition activity, it would be of little surprise for positive growth to return and for the effect of this to be an increase in sentiment (and the share price) of AstraZeneca over the medium term.
Shire
Another pharma stock that was the subject of M&A activity last year was Shire (LSE: SHP). However, its potential suitor, AbbVie, pulled out after deciding that without the tax advantages it was not such a worthy proposition.
However, Shire remains a company with huge potential. For example, it is expecting to double sales between now and 2020 and, if met, this could push its share price substantially higher. And, looking a little nearer term, its bottom line growth forecasts of 9% for this year and 12% for next year highlight that it remains a relatively attractive pharma play at a time when many of its peers are struggling to deliver meaningful profitability growth.
BTG
Of course, when it comes to profit growth, sector peer BTG (LSE: BTG) is very tough to beat. Certainly, it may trade on an exceptionally high P/E ratio of 52.5 but, with its earnings forecast to rise by a whopping 38% in the next financial year, followed by 53% the year after that, it’s clear to see why investors are willing to pay such a premium for a slice of the company.
In fact, when BTG’s P/E ratio and growth forecasts are combined, they equate to a price to earnings growth (PEG) ratio of just 0.5. This indicates that growth is on offer at a very reasonable price and, as a result, BTG could prove to be a top performer this year.
Hikma
Despite having risen by a whopping 77% over the last year, shares in Hikma (LSE: HIK) could perform well in 2015. That’s because, as well as enjoying strong investor sentiment, the company still appears to be reasonably priced. For example, it has a PEG ratio of just 1.4 and, for a stock that has seen profits rise threefold in the last three years, this seems to be highly appealing.
Furthermore, with there being vast long term potential in the generic injectables space (in which Hikma has a firm foothold and is seeking to expand), its performance beyond the current year could prove to be impressive, too. As a result, Hikma could be a stock worth buying at the present time.
