Is Indivior PLC The Perfect Partner For AstraZeneca plc In Your Portfolio?

Could now be the right time to add both Indivior PLC (LON: INDV) and AstraZeneca plc (LON: AZN) to your portfolio?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in Reckitt Benckiser spin-off, Indivior (LSE: INDV), were as much as 18% weaker today after the pharmaceutical company released a disappointing set of full-year results. The FTSE 250-listed firm, which has a market capitalisation of £2.3bn, reported a lower pre-tax profit than expected as a result of generic competition in the US and price pressure in the EU, which was at least partly caused by continued government austerity in the region.

In addition, the company’s outlook for 2015 is somewhat challenging, as it has stated in today’s update that it is ‘very uncertain as to the timing, extent and impact of tablet price erosion’. As such, its guidance of net income of $130m to $155m for the current year could be subject to significant change as we move through the year, which is clearly a major negative for investors in the company.

And, even though the company’s key drug, Suboxone Film, has proved somewhat resilient in 2014 and still commands a market share of 58% in the US (down from 67% in 2013), it could see further falls in revenue as cheaper, generic alternatives cause even the most loyal of customers to switch to more economically viable products.

Should you invest £1,000 in AstraZeneca right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if AstraZeneca made the list?

See the 6 stocks

Looking Ahead

Clearly, the present time is highly uncertain for Indivior and the company’s share price is likely to come under further pressure in the short term, until more is known regarding the trading landscape both in the US and in Europe. However, much of this appears to be priced in to the company’s current share price, with it offering a very wide margin of safety at the present time.

For example, assuming a pretax profit of around $143m in 2015 (the midpoint of the company’s guided range of $130m to $155m) means that Indivior trades on a price to earnings (P/E) ratio of 16.4 which, for a major pharmaceutical company, appears to equate to relatively good value for money.

In fact, sector peer, AstraZeneca (LSE: AZN) (NYSE: AZN.US) also trades on a P/E ratio of 16.4 despite still experiencing the effects of a patent cliff, where its top and bottom lines are continuing to experience severe pressure from generic alternatives. As such, AstraZeneca is not expected to begin growing its bottom line until 2017 at the earliest and, as a result, the medium term outlook for the company remains highly uncertain, which is a similar position to that which Indivior currently faces.

Therefore, while today’s results are disappointing and Indivior’s prospects are highly uncertain, now could be a good time to buy a slice of it. Not only does it seem to offer a considerable margin of safety for a major pharmaceutical stock, it also trades on the same rating as AstraZeneca. Certainly, the next couple of years will be somewhat volatile for investors in both companies but, in the long run, they could deliver superb gains and, as such, seem to make a sound combination play.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

With a 9.5% yield, could this FTSE 250 share be a dividend gold mine?

Christopher Ruane is eyeing a FTSE 250 with a dividend yield approaching double digits. Here's what he likes about it…

Read more »

Investing Articles

2 key reasons Nvidia stock could still soar from here

Even after the chipmaker's stunning performance in recent years, this writer sees reasons that could potentially help propel its share…

Read more »

Investing Articles

Here’s how £10k could set a stock market beginner on the path to riches in 2025!

Christopher Ruane sets out how taking a considered approach could mean even a stock market novice with £10k to invest…

Read more »

Investing Articles

The BAE share price struggles despite strong earnings and a 10% dividend increase. Is it still a buy to consider?

The BAE share price dipped 3% in early morning trading after posting its full-year 2024 results. Our writer considers if…

Read more »

Investing Articles

Could this Nvidia-backed growth stock be a millionaire-maker at $10?

This little-known artificial intelligence growth stock is backed by chipmaker Nvidia and recently jumped nearly 24% in a single day!

Read more »

US Stock

£10,000 invested in the S&P 500 the day before the presidential election is now worth…

Jon Smith explains how the S&P 500 has performed since last November and identifies a key winner in the months…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Should I consider buying Glencore as its share price slumps to multi-year lows?

FTSE 100 stock Glencore continues to see its share price slump. Now at its cheapest since September 2021, should I…

Read more »

Investing Articles

£5,000 invested in Lloyds shares 3 months ago is now worth…

Lloyds shares have done well over the past three months but all of the bank's FTSE 100 peers have done…

Read more »