It’s been a rollercoaster year for holders of BT (LSE: BT-A) stock. The price has fluctuated between 156p and 200p with plenty of ups and downs. Currently sitting at 157p, the shares are down 9% year to date and an equally disappointing 8% over the past 12 months. With inflation and interest rates still on the rise, the macroeconomic situation looks pretty bleak. These factors have crushed the BT share price over the past six months and it’s fallen almost 20%. However, I’m using this opportunity to buy some beaten-down bargain stocks – and BT is one of them.

Why the shares are down

There are a few reasons why BT shares have struggled lately. First, the group released its Q1 FY23 results at the end of last month. Revenues rose a meagre 1%, but profits fell by over 10% compared to the year before. Some 7% of this drop came from the group’s enterprise division, which has been hammered by rising costs. CEO Philip Jansen highlighted the “ongoing challenges” of the current market as the primary reason for the drop in profits.

Aside from the company, the macro economy is doing BT no favours. Inflation has been skyrocketing, surpassing 10% in the UK in July. Central Bank economists are predicting these numbers to keep rising throughout the remainder of 2022. Higher inflation is being coupled with interest rate hikes, which most recently brought the UK central bank rate to 1.75%. Rising rates can deter investors from speculative assets like stocks as they can achieve a higher risk-free return on ‘safer’ assets. These recent developments are another reason why BT shares have struggled.

Moving forward

At 157p, BT shares trade on a price-to-earnings ratio of 12. On the surface, this looks like okay value to me. However, comparing it to close competitor Vodafone, which trades on a higher P/E ratio of over 20, I see good value. Coupling this with BT’s 4.9% dividend – comfortably above the FTSE 100 average of just under 4 – I’m even more attracted to the stock.

In reality, it may be even cheaper. The value of BT’s assets equates to around 90p per share. Knocking this off the current share price, the shares fall to a theoretical value of 69p. Using this figure, the P/E ratio for the shares would be just 4.8. The value really shines through when considering this. The asset-rich nature of the stock could also help me protect against rising inflation.

Why I’d buy

Overall, I think BT is a good example of a stock that has been beaten down by bearish market sentiment when not much has actually changed within the business. Not only do its pre-existing assets help protect against rising costs, but their value helps highlight the value of the shares. Considering all of this, I’m looking at opening a BT position in my portfolio.

The post BT shares have crashed: here’s why I’m buying appeared first on The Motley Fool UK.

More reading

• The BT share price is on fire in 2026. Is there still time to buy?
• 2 FTSE 100 stocks that are navigating market volatility remarkably well
• These FTSE 100 stocks are tipped to rise 53% (or more) in the next year!
• Up 17% this year, the BT share price looks good. But are these price swings sustainable?
• £20,000 invested in BT shares 2 years ago is today worth…

Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. 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.

BT (LSE: BT-A) shares have proved to be a great investment so far in 2022. They’re up 12% year to date, and 3% over the last 12 months. With markets looking increasingly uncertain, and the threat of recession looming, I think BT could be a great stock market play for me. Let’s take a look at why.

Valuing BT shares

Digging into BT shares’ value, I see a lot of positives. The company is super-asset-rich, which has provided a great hedge against inflation this year. Judging by BT’s most recent report, the value of its assets comes to just under £9bn. There are currently just under 10bn shares outstanding. Dividing these two numbers shows me that the value of BT’s assets adds up to around 90p of the share price. So in one way, I could say that if I buy BT at 193p, I’m buying it for 103p.

Judging the share price at this hypothetical 103p, the BT price-to-earnings (P/E) ratio falls to just 7.9 (almost half the current P/E ratio of 15). Comparing this to competitor Vodafone that currently trades on a P/E ratio of 21, I see huge value. Also, the current dividend yield is 4%, which could add a healthy passive income to my portfolio.

As mentioned above, BT’s abundance of infrastructure has helped it weather the storm of rising inflation. This is because having large amounts of pre-existing infrastructure means that operating cost exposure remains low. BT’s well-established customer base also helps it alter its prices in line with inflation, which can mitigate the risk.

The Q4 2022 results gave me confidence. The telecoms giant delivered on all of its strategic priorities with its 5G network now covering over 50% of the UK, and its Openreach ultrafast broadband now being installed in over 7m homes. This highlights to me the firm’s dominance in the sector.

A risky investment?

It’s not all perfect, of course. The biggest risk I see for BT is that it has over £20bn in debt on its balance sheet. Interest rates have been rising in order to keep inflation under control, and these rising rates could magnify BT’s debts. That being said, the firm announced that it expects free cash flow to rise by over £200m in 2023. This should help mitigate the risk of rising debt repayments.

The cost-of-living crisis could also place big pressure on BT shares. If it increases its prices too quickly, then it could force customers to turn to cheaper alternatives. It operates with a low 7% profit margin, so a substantial loss of customers would place big pressure on the firm’s profitability.

The verdict

Overall, I think BT stock offers me good value at the current share price. The healthy dividend and encouraging results reaffirm the strong investment case. Personally, I think that these positives outweigh the current risks, and hence I’m looking at adding a BT position to my portfolio in the near future.

The post BT shares are up 12%: is now the time to buy? appeared first on The Motley Fool UK.

More reading

• The BT share price is on fire in 2026. Is there still time to buy?
• 2 FTSE 100 stocks that are navigating market volatility remarkably well
• These FTSE 100 stocks are tipped to rise 53% (or more) in the next year!
• Up 17% this year, the BT share price looks good. But are these price swings sustainable?
• £20,000 invested in BT shares 2 years ago is today worth…

Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. 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.

AstraZeneca shares have, in fact, put on 90% over the past five years, though with expected earnings growth still not here yet, that’s pushed forecast P/E multiples to over 20. 

And while I think that’s probably a fair valuation based on the company’s long-term potential, I’m seeing BTG (LSE: BTG) as a similarly attractive proposition but at a significantly lower valuation.

Share price spike

BTG shares jumped by more than 6% Thursday morning after the firm upgraded its full-year growth guidance ahead of first-half results due on 13 November. 

The company’s “better than expected performance” has led it to raise its product sales growth expectations for its Oncology and Vascular portfolios to 15-17%. Overall sales for the full year are expected to be pretty much flat at constant exchange rates, and analysts have a modest 1% EPS growth prediction for the year to March 2019.

Part of BTG’s recent success has been down to the acquisition of Novate Medical, with one result being a wider portfolio of treatments, which should help reduce risk.

For the year ending 31 March, we saw net operating cash flow of £120.7m, leaving the company with £210m in cash and equivalents at year end. The company also said it did “not currently require significant levels of debt financing to operate its business,” which suggests there aren’t going to be any liquidity problems.

Bullishness returning

Despite early rises, investors do seem to have lost their appetite for BTG this year, and we’re looking at a 22% share price fall since the start of 2018. But since mid-July, a 21% price recovery suggests confidence has been returning, and we’re now looking at a five-year gain of 55%.

That looks impressive, but it’s been a volatile period, and BTG has yet to reach the stage of paying dividends. That should start this year, though forecast yields for this year and next are very low at 0.1% to 0.2%.

But on P//E ratios of 16.5 to 17, I see the shares as good value for their long-term growth potential, though I could see more volatility before steady earnings growth sets in.

Dividend growth?

Meanwhile, back at AstraZeneca, we’re looking at a company that was once a big attraction to dividend investors. But since the firm’s loss of key patent protections and its focus on building up its development pipeline (which is very much a long-term process when you’re talking about getting drugs developed, tested and approved), those investors have seen their annual payments remaining flat while inflation has been chipping away at their value. And there’s really no change expected this year or next. 

But then, yields of 3.6% aren’t too bad, especially when that really could represent a bottoming out of the yield. EPS is expected to dip by around 20% this year, but the 11% recovery indicated for 2019 really could be the start of a new period of earnings growth. And that should mean a return to progressive dividends.

The post Can this FTSE 250 pharma winner crush the AstraZeneca share price in 2019? appeared first on The Motley Fool UK.

More reading

• These are 2 of the hottest FTSE 100 stocks to buy right now, say the experts!
• How to try and double the State Pension with just £30 a week
• £20,000 invested in AstraZeneca shares 5 years ago is now worth…
• What’s going on with the AstraZeneca share price now?
• 2 FTSE 100 blue-chips to consider for a new £20k Stocks and Shares ISA

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca and BTG. 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.

CroFab is the company’s second best-selling product. But next year it loses patent protection and BTG faces the prospect of a revenue cliff when competitors enter the market.

To offset the possible impact of CroFab’s decline, management is hoping to bring new products to the market with the aim of doubling annual revenues to $1.5bn within five years. In June, City analysts remained sceptical that the company would be able to hit this goal, and I had my doubts as well. But it looks as if BTG is making progress. 

At the end of June, BTG announced a tie-up with the PERT Consortium to advance the science of Pulmonary Embolism treatment and today, the firm has announced the acquisition of US medical device maker Novate Medical, bolstering its portfolio of vascular therapies.

BTG is paying $20m upfront for the company, with a further $130m pending, depending on the device hitting certain sales-related milestones. 

The device called the Sentry can be used as an implant to prevent blood clots in leg veins from travelling to the lungs. It recently received approval for sale from regulators in the US. BTG plans to launch it in the next few months.

Revisiting expectations 

This one acquisition won’t solve all of BTG’s issues, but it does show that the firm is moving in the right direction. 

Efforts by the company are certainly convincing analysts that it can overcome next year’s patent cliff. Since May, analysts have increased their growth forecasts for the enterprise in 2019 by around 10%. Earnings per share (EPS) are now projected to jump from 29.7p for fiscal 2018, to 34.1p for 2020. 

With a further $210m of cash available for acquisitions, BTG still has plenty of growth potential. As market sentiment towards the company improves, I believe it could generate impressive returns for investors.

The one problem with BTG’s shares is that they only offer a token dividend yield of 0.1%. So, if you’re looking for better divided returns, FTSE 100 champion Royal Mail (LSE: RMG) shouldn’t be overlooked.

A better income buy 

Compared to BTG, I think Royal Mail’s growth potential is relatively limited. The company is expanding overseas, which is helping to offset some of the revenue declines in its home market, but analysts are cautious on growth over the next two years.

Still, as an income play, Royal Mail is highly attractive. The firm has been selling some of its lucrative property assets to pay down debt and strengthen the balance sheet, so it’s now almost debt free. What’s more, even though the company’s growth is expected to be limited over the next few years, the dividend per share is still covered 1.5 times by EPS.

These metrics are highly appealing, and they indicate to me that the group’s 5.4% dividend yield is entirely sustainable. Today, the shares are changing hands for just 12 times forward earnings, which seems about right for a company with a mixed growth outlook, but a sustainable market-beating dividend yield.

The post Why this FTSE 250 stock plus 5%-yielder Royal Mail could help you retire early appeared first on The Motley Fool UK.

More reading

• Don’t miss this once-in-a-decade opportunity to profit from the stock market’s AI hype
• £10,000 invested in easyJet shares on 1 April is now worth…
• Down 29%, should I buy Palantir for my Stocks and Shares ISA?
• Selling for £1, are Lloyds shares still a bargain?
• How much could spending just £5 a day on UK shares earn in passive income?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended BTG. 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.

Even in the FTSE 250 there are plenty of stocks that could end up costing you money. Here are two such businesses I’m avoiding at all costs. 

Boardroom battles

Boardroom bust-ups rarely end well for investors because management infighting usually leaves the company floating without direction. 

It’s for this reason I’m avoiding the ower of Southend airport, Stobart Group (LSE: STOB). 

Today Stobart has announced the sacking of former CEO Andrew Tinkler and accused him of “subverting the company in his own interests” while demonstrating a “flagrant disregard for fiduciary duties“. Tinkler, who retired as CEO last year but went on to serve on the board, has been trying to oust chairman Iain Ferguson and replace him with billionaire Philip Day. Neil Woodford, who owns nearly a fifth Stobart, had thrown his support behind Tinkler. Together, Woodford and Tinkler own 27% of Stobart. 

Stobart is accusing Tinkler of abusing his power, running up excessive expenses and trying to enrich himself at the expense of the company. Meanwhile, Tinkler is now accusing his former employer of “attempts to defame him.” 

Both sides have hired lawyers to take the fight to the next stage. Stobart has filed a £4m lawsuit against Tinkler over historical-related party transactions, while Tinkler has issued proceedings claiming defamation. 

As these two sides fight it out, it’s clear there’s only going to be one real winner, and that’s the law firms representing each party. In my view, until the battle is over and dust has settled at Stobart, it might be best for investors to avoid the company. 

Revenue diversification 

Another stock I’m avoiding today is speciality pharmaceutical group BTG (LSE: BTG). 

Shares in BTG have been marked down today after the company announced that the US Food & Drug Administration panel has voted against the approval of its Elevair Endobronchial Coil System for the treatment of people with severe emphysema. This is a set back for BTG as City analysts were expecting Elevair to be a significant contributor to growth in the years ahead. 

According to BTG, the FDA panel voted in favour of recognising the safety of Elevair, but against its effectiveness. The benefits of using the product do not outweigh the risks, the panel concluded. 

While the company is planning to work with the FDA to find a solution to its concerns, this isn’t the only headwind BTG faces. Analysts have also warned that the risks around BTG’s CroFab snake antivenom have been “underestimated” by investors as new competition hits the market next year. CroFab is BTG’s second-best selling product, and management is relying on new products to more than double annual revenues to $1.5bn within five years. 

Unfortunately, the Elevair setback is a step in the wrong direction for the group. And with risks to growth escalating, I believe it’s best to avoid the shares at this time. 

The post 2 Footsie 250 stocks I’m avoiding at all costs appeared first on The Motley Fool UK.

More reading

• Don’t miss this once-in-a-decade opportunity to profit from the stock market’s AI hype
• £10,000 invested in easyJet shares on 1 April is now worth…
• Down 29%, should I buy Palantir for my Stocks and Shares ISA?
• Selling for £1, are Lloyds shares still a bargain?
• How much could spending just £5 a day on UK shares earn in passive income?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended BTG. 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.

A disappointing outcome

Earnings growth stuttered along over the past four years but annual double-digit percentage increases just haven’t been a consistent feature, and the market has compressed the firm’s valuation. The share-price chart looks like the stock moved sideways. But in January 2015 the share price stood at 812p and today’s trading update sent it down more than 17% to stand around 548p as I write – a disappointing outcome for investors who have been faithful to the BTG story.

Today’s news is that the trading year to March 2018 produced revenue “in line with expectations.”  However, to many, the big hope is that the firm’s varicose vein treatment Varithena will take off in a big way in the US to produce more of those double-digit earnings gains that we all hanker for. Getting the stuff moving over there has been a frustrating experience for the firm and today we learned that “growth in Varithena sales was offset by lower sales of the PneumRx Coils.” So even as Varithena starts to gain traction, its impact on the firm’s results is being neutralised by weakness in other products. After such a long wait and such high expectations, I’m not surprised the market has reacted badly.

BTG is taking an impairment charge of £150m as it marks down the fair value of PneumRx Coils and said “renewed physician interest” means it hopes to have “a better understanding of physician ordering and reordering patterns” for Varithena by the end of 2018 – yet more patience required from long-suffering shareholders.

Grinding on

City analysts predict earnings will lift 10% for the current year to March 2019 and 15% the year after that. Meanwhile, the forward price-to-earnings (P/E) ratio stands at about 15, which looks fair. But I’ve lost my enthusiasm for the stock.

To me, paper-based paper products provider and FTSE 100 constituent Smurfit Kappa Group (LSE: SKG) looks like a better bet. The company is the larger of the two operations and is attractive for its modest valuation, investor dividends and the defensive nature of its business. Today’s share price around 3,034p throws up a forward P/E rating just under 14 for 2019 and the forward dividend yield sits just over 2.8%. Anticipated forward earnings should cover the payment a healthy looking two-and-a-half times.

The firm grinds on making steady progress and City analysts expect earnings to grow 30% this year and 3% in 2019.

In today’s news, the firm announced that it is installing at its Interwell plant in Austria a “revolutionary new industrial-scale HP PageWide C500 digital press for corrugated printing.” The press will be installed in April to support Smurfit Kappa’s “extensive customer base” in the fast-moving consumer goods (FMCG) sector. I think the firm’s operations are embedded in an attractive sector and the stock looks interesting.

The post Why I’d buy FTSE 100 stock Smurfit Kappa Group plc before BTG plc today appeared first on The Motley Fool UK.

More reading

• Don’t miss this once-in-a-decade opportunity to profit from the stock market’s AI hype
• £10,000 invested in easyJet shares on 1 April is now worth…
• Down 29%, should I buy Palantir for my Stocks and Shares ISA?
• Selling for £1, are Lloyds shares still a bargain?
• How much could spending just £5 a day on UK shares earn in passive income?

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended BTG. 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.

While there are a variety of companies operating within the industry, here are two stocks which appear to offer strong growth prospects. Although potentially risky, their return prospects seem to be high.

Long-term potential

Reporting on Friday was biopharmaceutical company Mereo (LSE: MPH). It focuses on the acquisition, development and commercialisation of innovative therapies that are aimed at patients who have rare and speciality diseases. Its performance in 2017 was relatively encouraging, and saw it releasing various pieces of positive top-line data.

In fact, alongside the positive BGS-649 data which was released last week, the company has now successfully completed two substantial Phase 2 studies on its speciality pharma product candidates. It has also initiated a Phase 2b study, while highlighting the long-term potential of its business model through the in-licensing of AZD-9668 from AstraZeneca.

Looking ahead, Mereo is seeking to diversify its portfolio alongside potentially initiating additional clinical studies in 2018. It seems to have a positive future and could deliver improving share price performance. As such, and while at the riskier end of the investment spectrum due in part to its lack of profitability, the company could offer high returns in the long term.

Consistent performance

Offering a more balanced risk/reward ratio at the present time is BTG (LSE: BTG). The interventional medicine specialist has been able to generate a relatively consistent growth rate in recent years. Its bottom line has risen at an annualised rate of 15% during the last five years, which suggests it has a relatively strong business model.

Looking ahead, the company is expected to post a rise in its bottom line of 26% this year, followed by growth of between 10% and 15% in the next two financial years. These figures suggest that the stock could offer upside potential – especially since it trades on a price-to-earnings growth (PEG) ratio of just 1.2.

With the outlook for the wider stock market being relatively uncertain at the present time, stocks which offer lower positive correlation to the wider economy could prove popular. Such companies could include healthcare stocks such as BTG, since it seems to have at least some degree of defensive characteristics.

While the company lacks a dividend and is not expected to pay one over the medium term, it appears to have a good alternative use of capital in terms of reinvestment for future growth. As such, now could be the right time to buy it while it has a wide margin of safety.

The post Two growth stocks I’d buy for my ISA today appeared first on The Motley Fool UK.

More reading

• Don’t miss this once-in-a-decade opportunity to profit from the stock market’s AI hype
• £10,000 invested in easyJet shares on 1 April is now worth…
• Down 29%, should I buy Palantir for my Stocks and Shares ISA?
• Selling for £1, are Lloyds shares still a bargain?
• How much could spending just £5 a day on UK shares earn in passive income?

Peter Stephens owns shares of AstraZeneca. The Motley Fool UK has recommended AstraZeneca and BTG. 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.

That’s a fair bit of cash to trust to a company that’s had huge problems, after a switch from using self-employed agents to full-time employees went badly and led to a profit warning.

The shares crashed, and at just 690p today, there’s been no sign of recovery yet. But I think that’s a mistake, and I see an oversold, if perhaps a bit risky, bargain here.

Some investors were understandably disappointed after the firm indicated that losses incurred by its Home Credit business are going to be at the top end of earlier guidance, to the tune of £120m.

FCA investigation

Interim chief executive Malcolm Le May spoke of engagement with the FCA regarding a regulatory investigation into lending by Vanquis Bank and Moneybarn, and some are fearing a penalty of up to £300m. Provident doesn’t have the cash to pay that, and a rights issue is widely expected at the £1bn company.

The question is whether Provident shares are a good risk now, and I’m thinking they are. At a price of 697p, the shares are on a forward P/E of under eight based on forecasts for an earnings rebound in 2018. And it would drop to only 5.5 should 2019 predictions come good.

I see the ability to absorb a fair bit of dilution in that price while still maintaining an attractive valuation, and I think we’re seeing too much pessimism.

Good value growth

My second pick is another Neil Woodford holding, and this time it’s in the healthcare sector, which takes up two of the LF Woodford Equity Income Fund’s top 10 slots. I’m talking about BTG (LSE: BTG), at number 18 in the portfolio. It develops products targeting critical care, cancer, neurological and other disorders.

Mr Woodford has held BTG shares for some time, and their five-year performance has been impressive — a rise of 125% to today’s 740p. But the price has fallen back by 11% since January 2015, and investors have had no dividends to compensate them.

Yet I see too much negativity in the share price, which is often the case after new growth candidates actually turn out to be longer-term prospects than early bandwagon investors think. In BTG’s case, I think January 2015 marked the end of a typical growth spurt — rational growth investors expect them, and just sit tight for the long term.

Great first half

September 2017 interims showed a 26% rise in adjusted operating profit, with adjusted EPS up 51% and free cashflow up 35%.

Chief executive Louise Makin spoke of the company’s “scalable platform, with a portfolio of differentiated products, strong customer relationships and internal capabilities, with multiple drivers of growth in our existing business.” Makin stressed that BTG  has the financial strength to make “targeted new investments.“

Full-year forecasts suggest an EPS hike of 27%. And though the resulting P/E of 25 might seem high to some, two more years of teen-percentage growth would drop it to 20 by March 2020. I see that as an attractive valuation, and I agree with the current Strong Buy consensus.

The post Why I’d buy Neil Woodford favourite Provident Financial plc today appeared first on The Motley Fool UK.

More reading

• Don’t miss this once-in-a-decade opportunity to profit from the stock market’s AI hype
• £10,000 invested in easyJet shares on 1 April is now worth…
• Down 29%, should I buy Palantir for my Stocks and Shares ISA?
• Selling for £1, are Lloyds shares still a bargain?
• How much could spending just £5 a day on UK shares earn in passive income?

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended BTG. 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.

Of course, it just goes to show that even a veteran investor with an enviable long-term record of outperforming the market can go through difficult spells and make some poor stock choices. Today, I’m looking at one Woodford stock I’d buy, and one I’d sell.

Growing business momentum

Specialist healthcare firm BTG (LSE: BTG), which is a member of the mid-cap FTSE 250 index, ranked at number 18 in Woodford’s flagship Equity Income fund at the last reckoning, with a weighting of 1.8%. It was one of his better performers in 2017, rising almost 30% over the course of the year.

Woodford has been an investor in the company for many years and seen it progress via a number of key products across its interventional medicines pipeline. A fund update for April last year noted: “As so often happens with early-stage companies, the development process has taken longer than initially expected, as has the process of market penetration once products have made it to market.” However, BTG provided mounting evidence of growing business momentum through 2017, and the share price responded accordingly.

City analysts are forecasting the company will deliver a 27% rise in earnings to 29.3p a share for its financial year ending 31 March. At a share price of 745p, this gives a price-to-earnings (P/E) ratio of 25.4. While this is a relatively high multiple, factoring in the earnings growth produces a price-to-earnings growth (PEG) ratio of 0.9. This is on the good value side of the PEG fair value marker of one and suggests the stock could be a great buy for the growth on offer. I rate it as such and think it could put in another good performance through 2018.

An accounting game more than a company?

I’m a lot less keen on another of Woodford’s FTSE 250 stocks, namely IP Group (LSE: IPO). IP provides capital and other assistance to a large portfolio of early stage businesses, which are mainly founded on research coming out of its partner universities. It’s the 10th largest holding in Woodford’s Equity Income fund, with a weighting of 2.4%.

Last month, IP came under attack in an extensive report by US short-seller J Capital Research (JCap). The report, which you can access at JCap’s website, is not without errors and some contentious interpretations, but I believe the broad thesis has substance.

JCap points out that since 2008, IP has invested a total of £346.3m in its portfolio companies but only realised £40.9m from disposals, with other gains being paper-only. It suggests: “IP Group is an accounting game more than a company and has an atrocious track record of delivering bankable returns.”

JCap put a valuation of around 75p on the shares. They’re trading at 134p as I’m writing, and I view the bear case as sufficiently compelling to rate the stock a ‘sell’.

The post One Neil Woodford growth stock I’d buy, and one I’d sell appeared first on The Motley Fool UK.

More reading

• Don’t miss this once-in-a-decade opportunity to profit from the stock market’s AI hype
• £10,000 invested in easyJet shares on 1 April is now worth…
• Down 29%, should I buy Palantir for my Stocks and Shares ISA?
• Selling for £1, are Lloyds shares still a bargain?
• How much could spending just £5 a day on UK shares earn in passive income?

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended BTG. 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.

Indeed, there are a broad range of medicine producers tipped to produce brilliant returns this year and beyond. And in this article I am looking at two of these pharma fizzers: BTG (LSE: BTG) and Dechra Pharmaceuticals (LSE: DPH).

The right treatment

BTG’s latest trading statement this month reinforced my optimistic take further, the company noting that “there is good momentum across the business with significant progress achieved during the [half-year] period.”

The business saw product sales at constant currencies rise by double-digit percentages during April-September, meaning that full-year sales targets remain in sight. Revenues at its Specialty Pharmaceuticals division are expected to swell by low-to-mid single digits at stable exchange rates, BTG advised, while sales at Interventional Medicine should rise in the mid-to-high teens.

This was not the only positive news BTG furnished the market with last week. Indeed, the company announced that its aggressive M&A drive has seen it acquire US-based Roxwood Medical — which provides cardiovascular speciality catheters for use in patients with heart trouble — for a fee which could eventually rise to $80m. Revenues at Roxwood should balloon in the years ahead and provide synergetic benefits to BTG’s existing operations in this area.

BTG has seen earnings rattle steadily higher in recent years, and City brokers are expecting meaty growth of 27% in the year ending March 2018. An additional 14% advance is pencilled in for fiscal 2019 too.

And these projections make the FTSE 250 star excellent value too. Sure, a forward P/E ratio of 24.1 times may sit well outside the widely-considered value watermark of 15 times. However, a corresponding PEG reading of 0.9 suggests BTG is actually brilliantly priced relative to its growth potential.

Animal spirits

Animalcare specialist Dechra Pharmaceuticals (LSE: DPH) is another pharma share expected to deliver stonking profits growth in the nearterm and beyond.

Like BTG, the Cheshire-based entity has a long history of annual earnings rises behind it. And City analysts are not expecting this impressive run to end just yet, a chunky 13% rise being forecast for the 12 months ending June 2018.

Dechra has also been hot on the M&A trail in recent years to bolster its already impressive product pipeline and expand its geographical footprint, a strategy which keeps blasting revenues skywards (at constant currencies sales increased 28.3% during the 12 months to June, to £359.3m).

Rampant share picker demand has seen Dechra’s share price head for the clouds in recent months, the business gaining 60% in value since the turn of 2017. While this also leaves the business dealing on a conventionally-high forward P/E ratio of 29.4 times, I believe this is fair value given that medicines demand for domestic and agricultural animals should continue climbing at a stratospheric rate.

The post 2 pharma stocks that could make you a millionaire appeared first on The Motley Fool UK.

More reading

• Don’t miss this once-in-a-decade opportunity to profit from the stock market’s AI hype
• £10,000 invested in easyJet shares on 1 April is now worth…
• Down 29%, should I buy Palantir for my Stocks and Shares ISA?
• Selling for £1, are Lloyds shares still a bargain?
• How much could spending just £5 a day on UK shares earn in passive income?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca and BTG. 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.