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2 value stocks to consider in an expensive market: Indivior plc and Impellam Group plc

Shares in pharmaceutical company Indivior (LSE: INDV) soared more than 16% at one point on Thursday after management upped its outlook for revenue and earnings for the full year.

Due to unexpectedly strong market conditions and market share resilience of its Suboxone film product, net revenue for the 2017 full year is now expected to be in a range of $1.09bn to $1.12bn, a target which tops its previous guidance of $1.05bn to $1.08bn. Additionally, adjusted net income is now forecast to rise to $265m to $285m, well above its previous guidance of $200m to $220m, because of expected lower legal and R&D costs.

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Meanwhile, the company is making significant progress with its development pipeline. It is set to launch new trials and is moving closer to bringing new treatments to market. This should help to underpin additional growth in future years, while reduced costs could lift margins. 

Indivior, which focuses on specialist anti-addiction medicines, was spun-off from consumer goods group Reckitt Benckiser back in 2014. And ever since its demerger, the share price has been plagued by concerns about patent issues and litigation costs. Following today’s guidance however, I reckon these risks may have been overstated.

It remains attractively valued as it trades on a price-to-earnings ratio of 10.3 — and this suggests shares in the company could have considerable upside potential as investor sentiment looks set to improve.

Impellam

Also reporting today was recruitment and staffing solutions specialist Impellam (LSE: IPEL). Shares in the company fell by as much as 8% today, as investors contrasted its fortunes with those of its rivals.

Although first-half revenues grew in line with peers, with an increase of 2.4% to £1.08bn in the six months to 30 June, operating profits fell 30% to £15.4m. This was on the back of challenging trading conditions, the impact of off-payroll working legislation (IR35) in the UK Doctors and Nursing market, and increased investment.

It’s never good to see profits fall, but I remain somewhat upbeat about the group’s long-term prospects. Certainly, the company is some way off its best and it is likely to take years rather than months before it returns to being so, but Impellam’s problems have mainly been isolated to its UK healthcare business. Trading elsewhere, particularly outside of the UK, has been much more favourable, and the group has a strong pipeline of client implementations ahead.

Reassuringly, its cash generation also remains good. Net debt fell from £95.3m to £92.1m, while cash generation dropped by less than 5% to £21.9m. And despite its near-term earnings weakness, management stuck to its stated policy of keeping dividend cover at between four to five times adjusted earnings per share, and kept its interim dividend at 7p per share.

And since Impellam trades on a price-to-earnings ratio of just eight, it seems to offer excellent value for money. What’s more, its yield of 3% marks it out as a tempting income play.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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