Many FTSE 100 stocks could see further challenges in the coming months.
The global economy faces many threats throughout the remainder of 2020. Risks, such as a second wave of coronavirus, trade wars and recessions, may all hold back stocks in the second half of the year.
This suggests that many FTSE 100 firm may continue to struggle in the short term. However, there’s at least one FTSE 100 stock that is thriving in the current environment.
As such, investing in this stock today for the long term could be a shrewd move.
FTSE 100 stock on offer
Hikma Pharmaceuticals (LSE: HIK) is one of the few FTSE 100 companies that has produced a positive performance this year. Year-to-date, shares in the organisation have risen by nearly 16%, outperforming the broader index by 30%.
Hikma is one of the world’s largest manufacturers of non-branded generic and in-licensed pharmaceutical products. It produces nearly 700 different treatments that are sold around the world. These include 10 of the 13 drugs usually given to patients on ventilators recovering from Covid-19.
The company’s modus operandi is to produce lots of drugs at the lowest possible cost. This means it’s well-positioned to profit from the growing demand for healthcare around the world. The FTSE 100 group is also unlikely to face flack from politicians who’ve attacked exorbitant drug prices in the US.
And Hikma is always on the lookout for new ways to improve its product portfolio. For example, for the past few years, the company has been developing a generic version of GlaxoSmithKline’s Advair inhaler.
This is expected to come to the market in the second half of 2020. The launch would take the FTSE 100 firm into a market that’s potentially worth $1bn a year.
By comparison, the group is only expected to report revenues of $2.3bn for 2020. Hikma has also received a boost this year from the ruling that its heart drug, Vascepa, didn’t infringe on a rival’s patents.
Hikma has achieved sales and profit growth of 8% and 12% per annum, respectively, over the past six years. This trend looks set to continue.
The demand for healthcare is only growing around the world, and politicians in Europe and the US are becoming increasingly concerned about rising drug costs. Hikma may be able to take advantage of these concerns by offering more for less.
As such, now could be a great time to buy shares in the FTSE 100 stock for the long term. Despite its growth potential, shares in the pharmaceutical group are only trading at a forward price-to-earnings (P/E) multiple of just 18.5, which looks cheap.
What’s more, the company has an impressive track record of dividend growth, having announced a payout increase averaging 17% for the past six years. It currently offers a dividend yield of 1.5%, at the time of writing.
Therefore, Hikma could offer investment appeal over the long run as a result of its attractive valuation, treatment portfolio, and defensive business model.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.