I’ve been hunting for profitable, growing companies to buy that are still small enough to deliver attractive returns. I reckon I’ve found two UK shares in the healthcare sector that could tick all the right boxes for me.
A bargain buy?
My first pick is pharmaceutical services firm Clinigen Group (LSE: CLIN). This business supplies unlicenced treatments and hard-to-find medicines. It also supports clinical trials. The group operates in most major markets worldwide and generated sales of over £500m last year.
Clinigen’s share price has risen by 250% since its flotation in 2012. Profits have risen from £4.3m to £13.7m over the same period. The dividend has been increased every year since 2013. Growth has come through a mix of acquisitions, partnerships, and internal expansion.
For example, the company recently inked a deal to supply Erwinase in the UK. This is a leukaemia treatment that’s produced by specialist Porton Biopharma. Clinigen will market, package, label, store and distribute Erwinase in the UK, providing a service that smaller pharma firms like Porton can’t easily match.
The main concern I have about buying Clinigen today is the company’s recent warning that sales of some cancer treatments have been lower than expected, due to Covid-19. Management expect demand to return to normal over time, but profits for the current year will now be lower than previously forecast.
However, Clinigen’s warning caused the stock to tumble and this UK share now trades on just 10 times forecast earnings. In my view, this should be cheap enough to compensate for this year’s disappointing results.
I think Clinigen looks decent value, given the company’s track record. This is a share I’d be happy to buy today for my long-term portfolio.
A UK healthtech share
One UK share I’ve been buying recently is healthcare IT group EMIS Group (LSE: EMIS). It provides software for many GP surgeries and pharmacies around the UK. One popular product is Patient Access, which is used to book appointments and request repeat prescriptions.
The company has also played a key role in providing IT support for the NHS during the pandemic. One system, Outcomes4Health, is being used to support England’s vaccination programme.
Although EMIS faces some competition in the UK, management is hoping that new products will deepen the company’s relationship with the NHS. One example is EMIS-X Analytics, a system NHS Trusts can use to plan healthcare in local populations.
One downside is that this UK share isn’t generally cheap. EMIS currently trades on 22 times 2021 forecast earnings, which doesn’t leave much room for disappointment.
However, profit margins are high and the company has no debt. Even at the current valuation, the shares still support a useful 2.9% dividend yield.
Overall, I like the EMIS combination of repeat customers, ‘sticky’ embedded systems and steady growth. Profits have doubled over the last 10 years and the latest broker forecasts suggest earnings will return to growth this year.
I expect this UK share to be a long-term holding in my portfolio and plan to buy more over the coming months.
