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GW Pharmaceuticals plc Sinks Over 10%: Is It A Better Buy Than Alliance Pharma plc And Advanced Medical Solutions Group plc?

When it comes to investing in the health care sector, there are a number of stocks with considerable future potential. One such company is GW Pharmaceuticals (LSE: GWP). Its shares have fallen by over 10% today after reporting this week that losses for the first nine months of the year have widened versus last year. In fact, in the first nine months of 2014, GW Pharmaceuticals reported a pretax loss of £15m, while in the same period of the current year the loss was over £32m.

Clearly, the market is concerned regarding the performance of the business, but GW Pharmaceuticals remains a company with a very bright long term future. For example, it has strong momentum, with four phase 3 trials progressing for its key prospect, Epidiolex, as well as the company having a number of other early and late stage clinical programmes which could produce positive results across numerous potential indications.

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Furthermore, GW Pharmaceuticals could benefit from improving investor sentiment as it moves towards its planned new drug application (NDA) in 2016 and, with phase 3 data expected to be reported in the months ahead, it remains a key period for the company and one that offers significant future potential. And, while its share price is down heavily today, it is still up by 50% since the turn of the year, which indicates that investor sentiment is relatively strong.

Despite its bright future prospects, there are a number of health care companies that offer growth potential and yet are also delivering strong profitability at the present time. Two notable examples are Alliance Pharma (LSE: APH) and Advanced Medical Solutions (LSE: AMS), with the former being focused on acquiring the rights to off-patent drugs that still offer strong margins, and the latter concentrating on wound care dressings and adhesives.

Looking ahead, Alliance Pharma is forecast to increase its bottom line by 2% this year and by a further 7% next year. Encouragingly for investors in the stock, it offers a healthy dividend yield of 1.9% and, with dividends per share having increased in each of the last five years, its management team appears to be confident in the future prospects for the business.

Similarly, Advanced Medical Solutions has increased its dividends per share in each of the last five years and, while it yields just 0.5% at the present time, it pays out just 12% of profit as a dividend, thereby indicating that shareholder payouts could rise significantly in the long run. Furthermore, with earnings having risen in each of the last five years and being due to increase by around 5% per annum in each of the next two years, Advanced Medical Solutions appears to be a relatively stable business.

So, while GW Pharmaceuticals does have considerable potential, the likes of Alliance Pharma and Advanced Medical Solutions appear to offer greater stability as well as room for growth, too. As such, they seem to be the more appealing buys at the present time.

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Peter Stephens owns shares of Advanced Medical Solutions and Alliance Pharma. 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.

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