I mostly invest in dividend shares, but every now and then I like to take a punt on a growth stock. It’s one way to liven up an old investor’s life, I guess.
Today I’m examining Indivior (LSE: INDV), whose share price has just picked up a couple of percent on the back of Q3 results. Indivior shares are up around 40% over the past 12 months.
It’s down to a continuing strong recovery that’s been going on since early 2020. Indivior shares had previously been hammered since their peak in 2018. And they’re still down 30% since June that year. Since 2015, the ups and downs of the share price make for a scary white-knuckle ride.
Drug development
Before I look at the latest update, what does the company do? It’s a drug manufacturer, which specialises in prescription drugs for the treatment of opioid dependence. That might not mean a lot to UK investors, but opioid addiction has become a massive problem in the US in recent years due to over-prescription of painkillers.
Indivior’s profits have been erratic. And it even swung to a reported loss in 2020. But analysts expect to see earnings growth over the next couple of years. We’re looking at a forecast price-to-earnings (P/E) multiple of around 19 for the current year.
Attractive growth value
That’s above the FTSE average. But for a growth share, if its prospects come good, it could prove to be a low valuation. And forecasts suggest growth will drop the P/E to around 12 in 2023.
Reported figures for the third quarter are mixed. But on an adjusted basis, earnings per share (EPS) grew by 61% compared to the same quarter of 2021. And nine-month EPS shows a 19% increase.
So, the earnings trend appears to be improving nicely. And Indivior has raised its full-year guidance. The company will present its “roadmap for delivering long-term shareholder value” at its planned Capital Markets Day on 7 December.
Downside
This all sounds good, but I think I need to be cautious. We’ve seen a couple of false starts in recent years. Booms and busts do often come with the territory for growth investors, particularly those investing in any kind of technology stocks in their early phases. But I’m also concerned Indivior might turn out to be a bit of a one-hit wonder.
It’s all about this opioid dependence thing. Yes, it’s a big problem. But for how long? There’s a concerning thing about a treatment for something like this. If it’s successful, won’t it eliminate the reason for its own existence?
I just have no idea what the long-term demand for these medications will be like. But it may be lower if the US gets over its opioid crisis.
Verdict
That’s where Indivior’s long-term roadmap comes into it. And I wouldn’t invest until I see what that has to say. If it looks promising though, Indivior might well become my next growth stock buy, especially if the valuation remains attractive for another couple of months.
