It can be hard plucking up the courage to invest in a stock that has already multi-bagged, but sometimes they just keep going up.
Shares in Clinigen Group (LSE: CLIN) have more than four-bagged over the past five years, as earnings have been growing in double-digits every year. The year to June 2017 brought in a 25% rise, and analysts are predicting 13% this year followed by 19% next.
I was happy to read the company’s first-half trading update on Wednesday, which told us that the first half has been “in line with the board’s expectations.” Revenues are up by around 28%, with gross profit up by about 10% — the latter is, apparently, the board’s preferred measure of top-line growth.
So I was surprised to see the share price down by 3% at the time of writing, to 1,003p. But I guess that’s part of the fickleness of a high-flying growth stock, which can falter when figures fail to beat expectations.
The highlight was the company’s Commercial Medicines division, which apparently accounts for 49% of gross profit, and which “delivered excellent growth, with all products across the portfolio performing strongly.“
Unlicensed Medicines, representing 41% of gross profit, seems to have had a mixed time, but “a significant number of new programmes now starting” are expected to boost performance in the second half.
The Clinical Trial Services business, with 10% of gross profit, saw its performance fall back from last year’s, and that might also have contributed to the morning’s sell-off. But Clinigen says it should do better in the second half.
On current growth forecasts we’re looking at a forward P/E of 21 for June 2018, dropping to 18 on 2019 expectations. Dividends are currently yielding only around 0.5%, but they’re very well covered and strongly progressive.
And even though the share price has already climbed, I’m still seeing an attractive long-term valuation here.
Shares in JD Sports Fashion (LSE: JD) have done even better, 10-bagging in five years. And even after that, with the shares at 390p, we’re still only looking at forward P/E multiples of 13 to 15, which is around the FTSE 100‘s long-term average.
Admittedly there’s not much in the way of dividend cash right now, with yields similar to Clinigen’s 0.5% level. But we’re looking at cover of around 14 times by earnings, and I can see the company morphing into a solid cash cow in future years.
Tuesday’s update which covered the Christmas trading period impressed me, especially when so many other retailers have been feeling the high-street pinch. And instead of falling earnings that some are now predicting, JD has upped its full-year pre-tax profit guidance to £300m, ahead of the market’s £270m-£295m prior consensus.
Online business is expanding too, and I’m becoming more and more convinced that the retail future will belong to companies that combine internet sales with physical stores — the demand for the ability to collect and/or return goods in-store is growing.
Though I don’t pay much attention to share price charts, I am drawn to the fact that JD shares are still significantly below their May 2017 peak of over 450p — I thought the shares were fair value then, and now I reckon I’m seeing a bargain. The year ends 31 January, with results due 17 April.