Can RSA Insurance Group plc, Hikma Pharmaceuticals Plc & Meggitt plc Defy Current Fears And Keep Chugging Higher?

Royston Wild runs the rule over FTSE big-hitters RSA Insurance Group plc (LON: RSA), Hikma Pharmaceuticals Plc (LON: HIK) and Meggitt plc (LON: MGGT).

| 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.

Today I am looking at the share price prospects of three recent big-cap risers.

RSA Insurance Group

Financial services goliath RSA Insurance (LSE: RSA) has electrified the FTSE 100 in recent weeks, with shares having galloped 6% higher since the corresponding date in June. News of a potential takeover by rival Zurich powered prices during the period, although shares have since backtracked as concerns over RSA’s asking price have whacked the likelihood of any deal materialising.

And the stock has melted further in Monday business as fears surrounding a Chinese ‘hard landing’ have intensified. Still, I believe RSA is still a great bet for those seeking long-term returns — the London firm advised in early August that pre-tax profit surged to £288m in January-June, rising from £69m in the same 2014 period.

This resplendent result is thanks to the massive transformation plan undertaken during the past 18 months, moves that have seen RSA sharpen its focus on core markets across the British Isles, Scandinavia and Canada, as well as the hot emerging regions of Latin America.

With cost reductions also running ahead of schedule the City expects the firm to swing to earnings of 30.3p per share in 2015 from losses of 14.4p the previous year, before recording a 10% advance in 2016 to 33.5p. Consequently RSA deals on very decent P/E ratios of 16.4 times and 15.1 times for 2015 and 2016 respectively.

Hikma Pharmaceuticals

Like RSA Insurance, Hikma Pharmaceuticals (LSE: HIK) has endured a torrid start to the week and was last 6.5% lower from Friday’s close. During the past four weeks the pharma play has gained more than 4%, even taking into account today’s massive downswing, and although another advance may be far-fetched given current stock market troubles I still believe the firm is a great stock selection.

Hikma announced last week that although organic revenues slipped 4% during January-June — thanks to weakness at its Generics division — that it expects sales for the full-year to edge 2% higher during the full year. The company’s Branded and Injectables operations continue to deliver the goods, with the latter area supercharged by last year’s purchase of Bedford Laboratories, giving Hikma access to 80 more marketed products and a potential pipeline of a further 20 drugs.

And the Jordanian giant is not stopping there, with Hikma having acquired Roxane Laboratories in late July, making it the sixth largest generics producer in the US. With healthcare demand growing steadily across the planet, Hikma is expected to recover from a 9% earnings drop in 2015 with a 12% rise in 2016, pushing a P/E multiple of 26.5 times for this year to a much-improved 22.6 times.

Meggitt

Prior to today’s stock market washout, aerospace leviathan Meggitt (LSE: MGGT) had registered a healthy 4% share price advance during the past four weeks. But today’s 5% slide has totally wiped out these gains, the investment community giving short shrift to fresh contract news on Monday — the Dorset firm secured a three-year, $25m support contract to provide in-service support to the Canadian Armed Forces.

But with defence spending in the West ticking comfortably higher again — helped in no small part by the wide range of conflicts currently raging across the globe — and sales at the firm’s Civil Aerospace division ticking higher as a buoyant airline industry splashes the cash on new hardware, I believe earnings at Meggitt should accelerate in the years ahead.

Indeed, Meggitt is expected to print a 5% earnings improvement in 2015, leaving the business dealing on an ultra-attractive P/E multiple of 13.5 times — any reading below 15 times is widely considered great value. And this figure moves to 12.3 times for next year amid expectations of an 8% bottom-line leap.

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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

£2k in savings? Consider putting it here for maximum passive income

Where’s the best place to park a £2k lump sum for maximum passive income? This Fool knows exactly where his…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

Where will the ITV share price go in 2025? Here’s what the experts say

The ITV share price has been heading up and down as the TV producer and broadcaster has been making the…

Read more »

Investing Articles

3 rules I followed to start investing

Christopher Ruane shares a trio of considerations he used to start investing in the stock market -- and continues to…

Read more »

Investing Articles

UK investors are obsessed with Nvidia stock! Here’s why

This writer considers a few reasons why Nvidia stock has gone up so dramatically in recent years and whether he'd…

Read more »

Investing Articles

Cheap FTSE 100 shares to consider buying after the Black Friday sales

Whatever bargains retailers are offering for Black Friday, stock brokers aren't joining in. I reckon I see enough cheap shares…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

P/E ratio of 6! Is the Centrica share price a bargain?

This writer reckons the current Centrica share price could be a real bargain. But as a former shareholder, will he…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

What sort of British companies has Warren Buffett invested in – and why?

Warren Buffett has fished on both sides of the pond over the decades in a hunt for bargain shares. Our…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

Here’s how I’m investing in dividend shares to aim for long-term wealth

Our writer plans to turn investments in dividend shares into a retirement pot by implementing a structured, long-term approach.

Read more »