Is Bioquell plc The Perfect Partner For Shire PLC And BTG plc In Your Portfolio?

Should you buy Bioquell plc (LON: BQE) alongside Shire PLC (LON: SHP) and BTG plc (LON: BTG)?

Peter Stephens ❯

Having held various senior management positions in the manufacturing sector, Peter founded his own manufacturing company in 1996. This was subsequently sold in 2007. Meanwhile, his passion for investing (which began during the privatisations of the 1980s) remains strong and he couples this with writing for The Motley Fool as a Contractor. His investment style is value-oriented; focusing on company fundamentals, as well as assessing the strength and presence of a competitive advantage. While above-average growth prospects remain very attractive, a greater focus on dividends has crept in since Peter became a part-time retiree in 2007.

Published 12 March, 2015 2:39 pm GMT

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Shares in decontamination specialist, Bioquell (LSE: BQE), have surged by as much as 36% today after the company announced the sale of its specialist testing subsidiary, TRaC, for £44.5m in cash. The company plans to return almost the entire amount to shareholders following the sale of the unit to Element Materials Technology Group, with Bioquell set to focus solely on biological contamination control moving forward.

The deal appears to be a good one for investors in Bioquell, since it works out at 105p per share. And, when you consider that Bioquell trades at a share price of 110p even after the announcement of the deal, it is clear that it remains a relatively appealing investment at the present time. In fact, that’s even more so since it will now be a simpler business, which should allow it to direct resources to what it feels will be a more rewarding space.

Looking Ahead

Of course, Bioquell was a relatively appealing business before today’s announcement. That’s because it has an excellent track record of profitability, with its bottom line having been in the black in each of the last four years and, looking ahead, it has a very bright future. For example, Bioquell is expected to deliver earnings growth of 45% in the current year, followed by 25% in 2016.

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Despite this, Bioquell continues to trade on a very low rating with, for example, it having a price to earnings (P/E) ratio of just 16.2. This equates to a price to earnings growth (PEG) ratio of just 0.5, which indicates that Bioquell’s share price could have much further to go over the medium to long term.

Sector Peers

Of course, there are a number of other health care stocks that also offer excellent future potential. For example, Shire (LSE: SHP) (NASDAQOTH: SHPG.US) is forecast to double its sales by 2020 which, if met, would be a truly stunning result at a time when many of its pharmaceutical peers are struggling to even tread water. And, with Shire trading on a PEG ratio of 1.1, it still seems to offer excellent value for money.

Meanwhile, BTG (LSE: BTG) also offers excellent growth potential at a very enticing price. Its bottom line is forecast to rise by 27% next year and by a further 51% in the following year which, when combined with a P/E ratio of 36.6, equates to a PEG ratio of only 0.5. As such, it appears to be worth buying at the present time – even though its shares have already risen by 37% in the last year.

Vast Opportunity

So, with Bioquell, Shire and BTG all having excellent growth potential, they appear to be well worth buying at the present time. Certainly, they may be more volatile than many of their UK-listed peers but, for long term investors, they could prove to be very rewarding investments.