And things need to go wrong to push prices down below 100p. For many years, down there is where a lot of investors have looked for recovery bargains.

I’m wondering if Allergy Therapeutics (LSE: AGY) might be one of them. A company that’s down on its luck needs to avoid going bust if it has any chance of making me a profit, of course.

And that’s probably the biggest risk with penny share diving. That appears to have been avoided though, with Allergy shares nearly trebling over the past two years.

The price is now up above 30p, but it’s been down at 7.25p. Is it good value now? A June trading update spoke of operating profit being “strong and expected to be well ahead of market expectations.” It also reports a healthy year-end cash position so, hopefully, there are no liquidity worries.

I’ll need to see the actual figures, and thankfully we should have them on 4 September when Allergy Therapeutics releases full-year results.

The allergy immunotherapy business must surely have great potential. Whether this is the company to achieve it, I don’t know. But we could have a better idea shortly.

Pandemic plus Brexit

Staffline (LSE: STAF) is a very different company, but it’s in a similar situation. The recruitment firm was hit hard by the pandemic, and was soon languishing amid the sub-20p penny stocks. Since then, we’ve seen a similar recovery to Allergy Therapeutics, and the shares are back above 80p.

First-half results are due on 14 September, and a July update suggested they should be positive. The company reckoned its trading had “continued to be strong across the first six months of the year to 30 June 2021,” ahead of expectations.

I think we’ll need to get to the end of the year before we have any meaningful profit comparatives, but I found one thing pleasing.

Staffline shouldered net debt of £36.2m at the halfway stage in 2020, but that’s been converted to £20.9m net cash this time. I think Staffline is a solid long-term business. But in the medium term, the UK is facing a post-Brexit worker shortage, which won’t help. I’ll keep watching.

Cheapest penny stock

We’re not short of options when it comes to penny stocks, and my third possibility is the most lowly priced. It’s Pan African Resources (LSE: PAF), whose shares are down at around 15p. The price has been very erratic over the years mind, dipping to 6.5p as recently as 2018.

The journey back to the current price hasn’t been all positive, with the price having reached above 27p earlier in 2021. So what we’re looking at here is a relatively small gold miner, with a market-cap of £300m.

And it’s a very erratic share price. The gold price weakness of the past few months hasn’t helped, and Pan African shares have largely followed it down.

So what now? First-half results are due on 15 September, and I’ll want to take a close look at those. In particular, I want to see how the firm’s cost of production compares to others in the same business.

The post 3 penny stocks to look out for in September appeared first on The Motley Fool UK.

Allergy Therapeutics — which produces treatments for people with allergies and immunity disorders — said that operating profit was “strong” during the 12 months to April. And as a consequence it reckons that its bottom-line performance will be “well ahead of market expectations.”

The UK healthcare share said that trading had remained strong despite challenging conditions, with sales helped by a favourable euro exchange rate too. As well, Allergy Therapeutics said that expenses for fiscal 2021 would be lower than predicted. This is due to some commercial projects being pushed back into this year and Covid-19 travel restrictions hitting conference attendances.

For the current financial year Allergic Therapeutics expects net sales “to grow at low single digit levels at constant rates”. The company said that it intends to improve the quality of its product portfolio “by streamlining a number of non-differentiated older products and maintaining focus on short course subcutaneous immunotherapy (SCIT) and innovative allergy treatments.” It predicted that the ongoing coronavirus crisis will impact sales this year too.

Finally the UK share advised that expenses “are expected to increase above the historic long-term trend and above current market expectations.” This is due to those commercial projects being delayed into financial 2022, while higher research and development activity will also hit operating margins.

A sinking UK share

The John Wood Group (LSE: WG) share price hasn’t fared nearly as well as that of Allergy Therapeutics on Thursday. Indeed, the oilfield services provider has slumped 9% during the course of Thursday business.

FTSE 250 firm Wood Group has now moved to its cheapest since last November. It has almost lost all gains printed during the past 12 months, too. The UK engineering share said that like-for-like revenues fell to $3.2bn in the first half. This represents a 21% annual fall and was caused by the ongoing Covid-19 crisis. As a consequence adjusted EBITDA is tipped to fall to between $255m and $265m, down around 12% on a like-for-like basis from the first six months of 2020.

In better news Wood Group said that it had witnessed improving activity momentum during the second quarter. It added that its Consulting and Operations divisions had both moved back into growth between April and June. These units are collectively responsible for 60% of group turnover.

These improved performances helped the group’s order book improve to $6.9bn as of the end of May. This was up around 6% from December levels.

Wood Group expects trading activity to remain lower year-on-year over the course of 2020. But it anticipates a “stronger” performance during the second half. The UK share expects to return to growth versus the first half of the year and the final six months of 2020.

The post Here’s what UK shares Wood Group and Allergy Therapeutics reported today! appeared first on The Motley Fool UK.

Allergy Therapeutics (LSE:AGY) is a long-established specialist in the prevention, diagnosis, and treatment of allergies.

The company has a three-part strategy for growth. First, it will continue to develop its European business via investment or opportunistic acquisitions. Then, it has an opportunity to expand its Pollinex Quattro immunotherapy platform in the US market. Finally, it has a pipeline of therapies to develop.

Allergy Therapeutics’ Pollinex is the only subcutaneous immunotherapy (SCIT) pollen product currently registered in the UK. SCIT is the most commonly used and most effective form of allergy immunotherapy. It’s the only treatment available that actually changes the immune system, making it possible to prevent the development of new allergies and asthma.  

Before even considering investing money in the company, let’s see how it has performed recently.

Analysis

Allergy Therapeutics’ European business has expanded in recent years, with particularly strong growth in Austria, the Netherlands, and Spain. In terms of products, Venomil, Acarovac Plus, Pollinex and Pollinex Quattro were the top performers – driving net sales growth of 8% to £73.7m in 2019. The operating margin for the last 12 months is around 12%. That’s lower than GSK (18.5%) but higher than Astrazeneca (10%). Obviously, comparing Allergy Therapeutics to the giants isn’t meaningful; its market cap is 1,000 times lower at just £89m, but it does give us a good comparison for a healthy margin in the pharmaceutical industry.

Management expects this financial year to show further growth in sales, too. Gross margin percentage growth is likely to be similar to the 2019 financial year, though other operating costs are likely to rise reflecting additional cost in technical support needed in preparation for Brexit.

According to a 2018 report published by Credence Research, Inc., the global allergy immunotherapy market was valued at US$1,499m in 2017, and is expected to reach US$3,602m by 2026 – expanding at a compound annual growth rate of 10.1%. Could Allergy Therapeutics capitalise on that potential growth with their products currently in the pipeline? It’s certainly possible.

Key drivers

So, what are the risks, if you’re thinking of investing money in Allergy Therapeutics? Over the next two years, the company will be running several important clinical trials. These have binary outcomes – either success or failure. The company’s long-standing operations will mitigate this risk to some extent. A second wave of the Covid-19 pandemic would also like have a big impact on forecasts.

The company is likely to invest heavily in research and development as it puts new products though each phase of the pharmaceutical pipeline. This is essential to meeting the demand they are expecting for immunotherapeutics in the future. However, success hinges on whether that demand will actually be there when the products become available.

With a small and lesser-known business like this, you should only be investing money that you can afford to lose. That said, Allergy Therapeutics does look like it has a solid plan to make a lot of money in the future.

The post Should you be investing money in pharma stocks? appeared first on The Motley Fool UK.

Specialising in allergy vaccines, the group has gained recognition for its development of biodegradable adjuvants used to enhance the efficiency of allergy treatments.

Biotech stock to watch

It has a market cap of £86m, its price-to-earnings ratio (P/E) is 24 and earnings per share are less than 1p. It has no dividend and a debt ratio of 27%. The group saw 8% revenue growth in 2019 along with a 22% increase in pre-R&D operating profit.

Many patients receiving allergy immunotherapy have an inadequate outcome because their immune system does not respond sufficiently well. Allergy Therapeutics uses adjuvants to boost patient immune responses to the injected allergens. These produce more antibodies and longer-lasting immunity, ultimately improving the efficiency of the vaccine.

An academic paper published this week, acknowledged adjuvants MPL and MCT are each safe and effective. These two are used by the firm in its immunotherapies.

Beating allergies from within

Allergy Therapeutics has developed immunotherapy options as an alternative to antihistamines and prescription steroids. These are used to treat hayfever, house dust mite allergy and allergies to pets. These immunotherapy treatments address the underlying cause of the allergy, rather than just its symptoms.

Some of these, already brought to market, include products for combating pollen-related allergies, particularly to grasses, weeds and trees.

Allergy Therapeutics has also been working on a peanut allergy vaccine for over three years. The successful creation of such a vaccine would save many lives and reduce anxiety for thousands more. Unfortunately, it is unlikely that the group will achieve this soon. Although it has massive potential, it is a very complex process. The first clinical trials of this vaccine are due to begin later this year. Although I imagine the coronavirus lockdown will now cause delays.

The company also hopes to one day use its research and development progress to improve vaccines in areas such as influenza, cancers, and malaria.

Allergy Therapeutics share price fluctuations

I think this is a very interesting company with the potential to create some admirable products. However, as with most companies listed on AIM, it comes with risk. This is because much depends on future outcomes rather than the here and now.

The anticipation of clinical trials understandably brings excitement and positive sentiment. But there is no certainty that a trial will result in a positive outcome. A phase III trial of its birch allergy treatment failed last year. Nevertheless, if it can succeed with some of its ambitious projects, then it would be in a better position to tap into the lucrative US market, thought to be worth in excess of £1.6bn.  

Back in 2017, the Allergy Therapeutics share price reached a high of 38p, only for it to tumble thereafter. At 13p, these look like cheap shares to buy, but its P/E of 24 is high, which means the positive sentiment could already be priced into the share. I think it is a company worth watching and I hope Allergy Therapeutics succeeds in its vaccine developments.

The post Allergy Therapeutics’ share price has risen 67% since March’s stock market crash appeared first on The Motley Fool UK.

It’s James Latham (LSE: LTHM) of which I speak, and the timber and panel products distributor has just announced a 9.4% rise in revenue. That did translate to a less impressive rise in pre-tax profits, from £15.2m a year ago to £15.3m as gross margins have shrunk a little.

Still, in a year in which there’s been pressure on the construction industry, I think that’s a pretty decent result. And after adjustments, earnings per share perked up 6.4% to 61.1p, and the full-year dividend has been lifted by 7.8% to 17.9p per share.

Dividend lesson

There’s a dividend lesson here. Cover by earnings has dropped, but only from an extremely healthy 3.9 times in 2018 to a still very healthy 3.5 times this year. When a company has strong dividend cover, it can even-out its payments over the long term for a stable income.

Admittedly, the yield is only around 2%, but that’s still better than you’d get from a Cash ISA, and in any case, I see it as a bonus from what is effectively a long-term small-cap growth prospect.

The share price went off the boil in late 2017, but the subsequent 12-month drop has now largely recovered, and we’re still looking at shares on a trailing P/E of 14 after the morning’s 3.5% rise.

The company enjoys a net asset position too, so there are no debt worries as there are with so many bigger companies on similar fundamental valuations.

The new year has started well, with sales per working day 4.5 % higher for April and May than last year, and margins are starting to improve.

Biotech

A couple of years ago, I suggested I’d sell Purplebricks shares and buy Allergy Therapeutics (LSE: AGY), a pharmaceutical group specialising in allergy vaccines.

I kind of got it half right, as since then Purplebricks shares have fallen by 73% while Allergy Therapeutics’ have lost 60%. So what’s gone wrong?

There have been a number of issues, but a trading update plus the settlement of a litigation dispute give me some cause for optimism.

Looking at the latter first, on Thursday the company told us that “it has received a $7.6m settlement from Inflamax Research Inc.  in relation to legal proceedings about the previously disclosed inconclusive Phase II Grass MATA MPL trial which took place in the USA in 2015-16.” It added that “Inflamax has also agreed to pay a substantial part of the Group’s legal costs.”

The case was brought by Allergy Therapeutics “against Inflamax in March 2017 for breach of contract and misrepresentation [in relation to that study].”

Trading

A simultaneous trading update is headlined “2019 full-year earnings expected to be ahead of market expectations,” and says that net sales should be in line with expectations and should show good growth “across most of Europe but especially in Spain.”

R&D costs are lower than anticipated, and the legal settlement gives the firm a cash boost, but is it a good buy now? From a low in March this year, Allergy Therapeutics shares are up 69%, and to me that suggests this is a company worth watching. Again.

The post 2 overlooked growth shares I’d consider buying for the next 10 years appeared first on The Motley Fool UK.

But though that’s highly desirable from a marketing perspective, it can be anathema to those trying to find a bargain share. And I feel sure that this very high public profile has drawn far more investors in to buying the shares than we’d otherwise see, and that has pushed prices up to levels that I find scary.

Do you remember online fashion retailer ASOS? Its shares peaked quickly too, but they crashed and they’re still lower today than back in February 2014.

Where’s the profit?

There are no Purplebricks profits expected before 2019, and even then the City is only predicting a modest pre-tax profit of £6.6m — with the shares at 371p today, we’re looking at a forward P/E of 206, two years out. And that’s after the price has fallen back a bit — at August’s peak of 525p, that P/E stood at nearly 300.

Now, I know a huge P/E in the first profitable year can be misleading, but I turn to my second biggest concern — how much of a barrier to entry for an online company is there? With relatively little in the way of material infrastructure needed to set up a similar operation, I don’t actually see a lot — there are no expensive warehouses or distribution chains like ASOS needs (and even there, Boohoo.Com is hot on its heels).

Two more years before any profit, and a whole real estate sector that’s surely looking at the model and planning some moves.

Good company, first-mover, great marketing, too expensive.

Pharma upstart

Allergy Therapeutics (LSE: AGY) is a pharmaceutical group specialising in allergy vaccines, and it released full-year results Thursday. 

Earnings have been a bit erratic of late, to say the least. But there are some core trends that really make me think I’m looking at a company with a focus on the long term and not on grabbing short-term attention — in particular, the firm has achieved a “10% compound annual growth in net sales over 18 years.“

The year to June 2017 resulted in a 32% rise in revenue (15% at constant currency) leading to a 72% hike in operating profit, and a 13% gain in European market share.

Chief executive Manuel Llobet spoke of “continuing growth and progress on our pipeline“, saying he expects “further good progress in the coming year.“

There’s some investor sentiment getting behind Allergy Therapeutics too, with the share price having gained 64% in the past 12 months to today’s 32.75p. Invesco Perpetual, formerly managed by Neil Woodford, owns almost 6% of the stock, and I see that as an important vote of confidence.

The risk?

A possible downside to an investment here is that it would not expose us to the same diversification that is offered by many of the company’s fellows in the pharmaceuticals sector. And with the chance that big investments in narrowly-focused research areas can come to nought being sizeable, I don’t want to underestimate that risk.

But being focused on the specific field of allergy research (which is addressing an increasing problem in the 21st century), the potential rewards could be high.

On balance, I see Allergy Therapeutics as a risk worth taking.

The post Why I’d sell Purplebricks Group plc to buy this growth stock appeared first on The Motley Fool UK.

Allergy Therapeutics’ revenue increased by 19% at constant currency to £51.5m in the year to 30 June. This was aided by a rise in market share to 12% in the company’s main European markets. This was up from 10% in the previous year and shows that Allergy Therapeutics’ strategy is progressing well.

The company’s core business showed an 11% increase in operating profit to £4.4m. This excludes money spent on R&D, which amounted to £16.2m. This was up significantly from the £3.1m which was spent in the prior year, reflecting the investment in PQ registration and pipeline. With Allergy Therapeutics having a strong cash balance of £23.4m at year end, it’s in the position to continue to invest heavily in product development.

Looking ahead, Allergy Therapeutics has significant growth potential. It’s due to remain lossmaking in the next couple of years but due to its strong balance sheet, its financial standing seems to be sound. Therefore, it could deliver upbeat share price performance, although it remains a relatively risky buy at the present time.

Lower risk?

For this reason, buying a lower risk and larger sector peer could be a sound move. Shire is better diversified than Allergy Therapeutics. This reduces its risk profile, while its combination with Baxalta provides scope for significant synergies over the medium term that could boost the company’s bottom line.

In fact, Shire is expected to increase its earnings by 87% in the current year and by a further 19% next year. This is a stunning growth outlook and despite this, Shire trades on a very appealing valuation. It has a price-to-earnings growth (PEG) ratio of just 0.7, which indicates that now is an excellent time to buy it.

One reason for Shire’s low valuation is concern among investors regarding the acquisition of Baxalta. There are fears that the two companies will not prove to be a good fit and that the synergies that are anticipated to be realised from the deal will disappoint. And as with any merger, there are concerns that the integration process will be lengthier than planned. This could cause Shire’s guidance to be downgraded.

However, Shire’s valuation includes a very wide margin of safety. This means that its share price could rise even if its profit growth is slightly lower than expected. And with it having wide geographical exposure as well as a very encouraging pipeline of new treatments, even if the integration process with Baxalta causes some short-term pain, the long-term prospects for the business are bright.

As such, and while Allergy Therapeutics could be worth buying for the long term, Shire has the better investment offering at the present time.

The post Do today’s results make this company a better buy than Shire plc? appeared first on The Motley Fool UK.

However, stocks that offer less positively-correlated financial performance are arguably becoming rarer. That’s because the world continues to become more globalised, with countries now being highly interdependent and the policy decisions made by one major economy having a sudden and direct impact on the rest of the world.

That’s partly why the healthcare sector remains popular among investors. A number of its constituents are more heavily impacted by the patent boom and bust cycle rather than the business cycle. As such, they offer diversification potential and can deliver impressive share price returns even during uncertain times for the wider stock market.

Diversity diva

One notable business within the healthcare sector is GlaxoSmithKline (LSE: GSK). It offers a large amount of diversity through having three segments to its business, with pharmaceuticals, vaccines and consumer goods combining to create a relatively low-risk business that in the long run looks set to deliver strong profit growth.

A key reason for this is GlaxoSmithKline’s cost savings and impressive pipeline of around 40 potential treatments. With the company’s shares having a beta of just 0.9 and trading on a price-to-earnings growth (PEG) ratio of only 1.1, they offer strong growth, appealing value and excellent defensive prospects.

Stability star?

Also having a bottom line less positively-correlated with the wider economy is Consort Medical (LSE: CSRT). The contract development and manufacturing specialist is forecast to post a rise in its earnings of 11% in each of the next two financial years and with it having posted impressive net profit growth in the last three years, it seems to be a relatively consistent performer.

As with GlaxoSmithKline, Consort trades on a relatively appealing PEG ratio of 1.4 and with its shares having a beta of 0.3, they seem to offer a less volatile shareholder experience than the wider market, which could be a useful ally in the coming months.

Rewarding risk

Meanwhile, Allergy Therapeutics (LSE: AGY) has posted a share price rise of 22% in the last year while the FTSE 100 has fallen by 11% during the same time period.

Certainly, Allergy Therapeutics is a relatively high-risk play due in part to the fact that it’s expected to be lossmaking in both the current year and next year. However, with the pharmaceutical company having a cash pile of £33m, reporting a rise in revenue of 12% in its most recent results and having a beta of just 0.2, it may be worth a closer look for less risk-averse investors who are seeking to diversify their portfolios.

The post Why GlaxoSmithKline plc, Allergy Therapeutics plc and Consort Medical plc are a dying breed appeared first on The Motley Fool UK.