MENU

Why I Would Buy AstraZeneca PLC And Sepura Plc But Sell Vedanta Resources plc

Today I am looking at why I would — or would not — invest in these three FTSE-listed businesses.

AstraZeneca

Another week, another rush to the exits at AstraZeneca (LSE: AZN) (NYSE: AZN.US) as investors fret over yet more bad news on the competition front. Tests on industry rival Merck’s diabetes drug Januvia showed that the drug did not increase the chances of heart failure, unlike AstraZeneca’s own Onglyza treatment which has suffering from enduring fears over potential cardiovascular side-effects.

Shares in the London firm have shed 9% in little over a week, as of course news of competitors’ products gaining an advantage on those of AstraZeneca, not to mention the rolling issue of exclusivity losses on critical labels, remains big news. However, investors should not lose sight of the excellent progress the drugs giant’s rejuvenated pipeline is making — AstraZeneca has received a slew of positive late-stage data since the start of the year — as well exploding revenues growth in emerging markets. Sales to these regions leapt 18% during January-March.

AstraZeneca is not expected to get back into the black just yet, although City forecasts of further earnings slips to the tune of 1% in 2015 and 2016 mark a vast improvement from the dips of recent years. Indeed, I believe that the company’s back-breaking R&D overhaul of recent years should propel earnings markedly higher looking further ahead, making P/E multiples of 16.8 times for 2015 and 17.1 times for 2016 decent value for money.

Sepura

Communications specialist Sepura (LSE: SEPU) has been one of the standout performers in end-of-week business and was recently dealing 9.2% higher on the day. The firm has been buoyed by news that it shelled out €127.5m to acquire Spain’s Teltronic, whose exceptional voice and data communications services gives Sepura terrific exposure to the US and Latin America.

Sepura reported this month that revenues leapt 11% during the year concluding March 2015, to €130m, while its order book has also leapt to record levels. And of course today’s deal boosts its sales prospects in hot growth regions still further, leaving it in great shape to enjoy further double-digit earnings growth in the coming years.

The City expects Sepura to punch bottom line expansion of 16% in fiscal 2016, and to follow this up with a 13% advance the following year. These forecasts drive a P/E multiple of 15.4 times for this year to 13.4 times in 2017 — comfortably below the watermark of 15 times which indicates great value — while a PEG readout of 1 through to the close of next year further underlines Sepura’s ultra-cheap share price.

Vedanta Resources

Like Sepura, Vedanta Resources (LSE: VED) has also enjoyed a bounce in Friday trading and was last changing hands 4.2% higher on the day. But unlike the tech play, I believe that ongoing questions over the state of the natural resources markets makes the digger a particularly-perilous selection for stock hunters.

The mining colossus was forced to swallow a $3.1bn writedown on oil explorer Cairn India, in which Vedanta secured a majority stake in 2011, due to the effect of collapsing crude prices.

And with swathes of new oil production still hitting the market, and other key segments such as iron ore and aluminium also suffering from worsening supply/demand imbalances, I believe that earnings could continue to take a whack — group EBITDA dropped 13% during the 12 months to March 2015.

But regardless of whether you share my take on the firms discussed above, I strongly recommend you check out this brand new and exclusive report that singles out a hatful of big-cap beauties set to jump-start your investment income.

Our "5 Dividend Winners To Retire On" wealth report highlights a selection of incredible stocks with an excellent record of providing juicy shareholder returns. Among our picks are top retail, pharmaceutical and utilities plays that we are convinced should continue to provide red-hot dividends. Click here to download the report -- it's 100% free and comes with no further obligation.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.