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Why I think GlaxoSmithKline and this company are two of the best shares to buy now

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Exactly one year ago, I thought pharmaceutical giant GlaxoSmithKline (LSE: GSK) and Beximco Pharmaceuticals (LSE: BXP) were attractive stocks. Today, I still reckon they’re two of the best shares to buy now.

The pharmaceutical sector is a rich hunting ground for defensive, cash-producing and recession-resistant businesses. And I’m a big fan of steady dividend income and growth potential. Meanwhile, over the past year, these two stocks haven’t been standing still.

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Why I think they are two of the best shares to buy now

With its share price near 1,475p, GlaxoSmithKline is just over 14% below the level of a year ago. There’s been some disruption to operations because of the pandemic. But the company continued trading, including making a big effort in pursuit of a workable vaccine for Covid-19.

Last spring, the directors declared their intention to maintain shareholder dividend payments at a flat level for the year. And I think that move demonstrates the resilience of the business under stress conditions – exactly what’s needed from my defensive investments.  However, despite steady trading, the shares declined and bottomed at the end of October.

To me, the value looks compelling now. For example, the forward-looking earnings multiple for 2021 is around 12.5. And the anticipated dividend yield is about 5.4%. But those attractive numbers are from a company delivering a return on capital of almost 15% and an operating margin just over 25%. To me, the figures suggest both quality and value, so I’d be happy to buy the stock today.

Meanwhile, at 70p, generic medicines producer Beximco Pharmaceuticals has a stock price changing hands around 65% higher than it was a year ago. And some of the move has arisen because of an upwards valuation re-rating. It appears investors are beginning to appreciate the attractions of the highly-regulated business that’s based in Bangladesh.

The growth story is on track at Beximco

But the valuation remains fair. The forward-looking earnings multiple for the trading year to June 2021 is around 10 and the anticipated dividend yield is a little over 3% — and earnings should cover the payment more than three times. Meanwhile, the business has been delivering an operating margin of just under 22% and a return on capital of 15%.

I think Beximco’s quality and value metrics look similar to GlaxoSmithKline’s. However, Beximco’s market capitalisation at £284m is tiny compared to GlaxoSmithKline’s almost £74bn. But I’m comfortable with that situation because Beximco could have more room to grow its operations.

And today’s full-year results report demonstrates the company’s recent progress introducing new medicines to the Bangladesh home market and abroad. Indeed, there’s been expansion in the US, Europe and the rest of the world. Meanwhile, despite the pandemic, revenue increased by just over 12% year on year, and earnings per share rose by almost 16%.

The directors held the cash dividend flat for the year but declared a stock dividend of 10 new shares for every 100 held by shareholders. I reckon the way the firm is sharing its success with investors speaks volumes about the directors’ confidence in the outlook. I’d be pleased to buy some of the shares today and hold for the long haul.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK 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.

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