International specialist veterinary drugs business Dechra Pharmaceuticals (LSE: DPH) seems to be going from strength to strength with each passing year, with no end to the share price rally that began way back in 2003. Since then, the shares have soared from just 43.06p to today’s levels of 1,549p, as profits from keeping our pets well continue to grow at a remarkable rate. Can this incredible success continue, and if so, is it too late to buy the shares?
Shrewd acquisitions
In its most recent trading update for the six months to the end of December 2016, the Northwich-based pharmaceuticals business reported significant growth in the first half of its 2017 financial year, helped by several acquisitions. Group revenue for the period increased by 34% on a constant currency basis, and by an even more impressive 56% at actual exchange rates.
But it wasn’t all down to shrewd acquisitions. Core revenue growth, excluding the benefit of acquisitions, came in at 7% on a constant currency basis, and 22% at actual currency rates. The group’s North American business delivered the best performance, with total revenues, including acquisitions, up 112% on a constant currency basis, and by a mammoth 152% at actual exchange rates. The European business lagged behind, with revenues up by 12% on a constant currency basis, equating to 29% at actual exchange rates.
US approval
Dechra’s acquisitions are certainly pulling their weight, not only in their significant contributions to the company’s revenues, but also in increasing the group’s pipeline of new drugs. In September the company gained regulatory approval in the US for Amoxi-Clav, a ‘companion animal’ generic antibiotic. This was the first major product to come out of the pipeline of the acquired Putney business.
The City continues to be optimistic about Dechra’s prospects, with analysts talking about a 29% rise in earnings for the current year to June, followed by a further 23% improvement the following year. But after a 54% share price gain over the past 12 months, the shares look fully valued, and I would wait to buy on weakness for a better entry point.
Shares rocket
Another FTSE 250 firm that’s been doing rather well is market newcomer Ascential (LSE: ASCL). Shares in the international business-to-business media group have rocketed since their London launch exactly a year ago, gaining an incredible 53%. The group announced recently that it had begun preparations to sell 13 of its heritage business-to-business publishing and events brands, as it looks to focus on its largest brands and those with the highest growth potential.
Full-year results for 2016 aren’t due to be released until later this month, but consensus estimates suggest that the media group will report a massive leap in pre-tax profits to £74.5m, from £8.4m in 2015, with higher revenues of £344m compared to £319m the year before. Despite the group’s impressive performance to date, at 17 times forward earnings I feel the shares are no longer undervalued.
