These FTSE 100 stocks rocketed 20% in February. Can they keep going?

Royston Wild runs the rule over two FTSE 100 (INDEXFTSE: UKX) chargers.

| 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.

Medicines mammoth Hikma Pharmaceuticals (LSE: HIK) continued its recovery from a shocking second half of 2016 in February, the stock advancing 18% during the course of the month.

The pharmaceuticals space has been a popular destination for share investors seeking safe havens, the broad global footprint of their operations — allied with the essential nature of their products — providing peace of mind as another year of political and economic uncertainty beckons.

Hikma’s last trading statement in November however, caused a fresh frenzy of selling activity as worse-than-expected volume growth of its Generics products forced it to warn that full-year group sales would come in at the lower end of expectations, at $2bn.

As a consequence, Hikma is expected to record another bottom-line decline in 2016 by City analysts — a 33% drop is currently anticipated.

Having said that, the huge potential of Hikma’s Generics business in the long term remains undimmed, and the firm expects revenues here alone to rise by a third in 2017 from last year’s levels thanks to expected product rollouts. But this is not the only cause for optimism as the massive investment made at its Injectables division is blasting demand higher.

The number crunchers expect these factors to deliver growth of 38% and 29% in 2017 and 2018 respectively. And while Hikma deals on a forward P/E rating of 20 times, sitting above the FTSE 100 average of 15 times, I reckon the healthcare giant’s solid growth outlook — in the near-term and beyond — warrants such a premium.

Plane crazy?

Plane-building powerhouse Rolls-Royce (LSE: RR) also enjoyed a stellar share price charge in February, the stock gaining 19% in value in an often-volatile period.

It saw an eye-watering £4.6bn pre-tax loss in 2016, it announced last month, the biggest in its history. As well as suffering a £4.4bn currency hedge-book hit due to sterling weakness, Rolls-Royce also swallowed a £671m penalty from UK, US and Brazilian regulators in order to draw a line under bribery allegations made in overseas markets.

However, investors breathed a sigh of relief as full-year results were not as bad as many had feared. After-market services revenues in the civil aerospace segment are showing signs of tentative improvement, for example. And Rolls-Royce’s modernisation programme is also moving ahead of schedule — indeed, savings last year of £60m beat the targeted range of £30m-£50m.

After three years of consecutive earnings dips, the City expects Rolls-Royce to get back into gear with a 7% rise in 2017, before returning to double-digit growth with a 17% advance in 2018.

But the engineer is clearly still loaded with risk, with subdued demand for wide-body aircraft hampering sales of Rolls-Royce’s power units, and capex reductions in the oil market still casting shadows over its Marine division. And some would argue Rolls-Royce is therefore unbefitting of an elevated forward P/E ratio of 24.4 times.

I reckon the company may struggle to add to February’s gains.

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

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

As the WH Smith share price falls 4% on annual results, is it still worth considering?

WH Smith took a hit after this morning’s results left shareholders unimpressed. With the share price down 4%, Mark Hartley…

Read more »

Investing Articles

The Aviva share price just jumped 4.5% but still yields 7.02%! Time to buy?

A positive set of results has put fresh life into the Aviva share price. Harvey Jones says it offers bags…

Read more »

Investing Articles

Can a €500m buyback kickstart the Vodafone share price?

The Vodafone share price has been a loser for investors in recent years, and the dividend has been cut. We…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Growth Shares

3 mistakes I now avoid when choosing which growth stocks to buy

Jon Smith runs through some of the lessons he's learnt the hard way over the years about what to look…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Should I follow Warren Buffett and sell my favourite shares?

Billionaire US investor Warren Buffett has been selling tons of Apple shares and other stocks of businesses he thinks are…

Read more »

Investing Articles

As like-for-like sales continue to fall, is the B&M European Value Retail SA (LSE:BME) share price a bargain?

B&M European Value Retail is known for its low prices, but could growing like-for-like sales make the share price the…

Read more »

Illustration of flames over a black background
Investing Articles

After rocketing 232% in a year can this red-hot FTSE 250 stock keep going gangbusters?

Harvey Jones says this FTSE 250 stock's on fire after smashing the index over the last year. It's cheaper than…

Read more »

Investing Articles

The Burberry share price has jumped 15% this morning! Time to pile in?

Harvey Jones was thrilled to wake up this morning and find the Burberry share price flying, but he's still sitting…

Read more »