Is this FTSE pharma stock a no-brainer buy?

Our writer takes a closer look at this FTSE pharmaceutical business and decides whether or not it could be a shrewd buy.

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I’m trying to capitalise on market volatility and pick up FTSE stocks now that could flourish once any market recovery begins. I want to take a closer look at Hikma Pharmaceuticals (LSE: HIK).

International pharma business

Hikma is an international pharma business operating via three main segments. These are generic, branded, and injectable pharmaceuticals. It operates primarily in the US, Middle East, North Africa, and Europe.

The Hikma share price has been on a bit of a roller-coaster ride in recent years, like many FTSE stocks. However, it has been on a great run in recent months.

As I write, Hikma shares are trading for 1,994p. At this time last year, they were trading for 1,191p, which is a 67% increase over a 12-month period. It’s worth noting that the shares aren’t yet close to pandemic heights of over 2,600p.

To buy or not to buy?

I’m buoyed by Hikma’s business model as well as its geographical footprint. It doesn’t have all its eggs in one basket with its three separate segments. Plus, its primary market, the US, is a lucrative one. Furthermore, expansion into North African and Middle Eastern markets is a shrewd move as pharma uptake in these regions is rising. Hikma could find it is able to grow performance and boost investor returns.

Next, Hikma’s half-year report released in August was positive. The business said revenue and operating profit increased by 18% and 3% compared to the same period last year. It increased the interim dividend by 32% and also reported all three segments experienced growth.

Finally, Hikma shares offer a dividend yield of 2.6% at present. Although it’s lower than the FTSE 100 average of 3.8%, based on how the business has been performing recently, there is a good chance this could grow. I’m conscious that dividends are never guaranteed, of course.

To the bear case then. Hikma’s shares do look a bit expensive right now on a price-to-earnings ratio of 37. If it were to experience any issues, the share price could fall.

Another concern for Hikma is its growth plans. North Africa and the Middle East are at the mercy of geopolitical tensions that can hinder performance and growth. A prime example of this is issues in Sudan, which forced management to cease operations recently. This caused a $92m impairment charge that impacted Hikma’s balance sheet.

A FTSE stock I’d buy

Reviewing the pros and cons, I like the look of Hikma shares. I’m tempted to buy some shares for my holdings when I next have some spare cash. If they were cheaper than they are today, I’d be snapping them up.

I think Hikma is one of a number of FTSE stocks that should flourish even further when macroeconomic issues and geopolitical factors begin to ease. It possesses some defensive traits as medicine and pharmaceuticals are everyday requirements for most people. I think it’s a no-brainer decision to own shares in at least one pharma business as part of a diverse portfolio of holdings and this is what I’m planning on doing.

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.

Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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