Is Hikma Pharmaceuticals the hottest growth stock in the FTSE 250?

FTSE 250 (INDEXFTSE: MCX) growth stock Hikma Pharmaceuticals plc (LON: HIK) is up 120% since March. Are there more gains to come?

| 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.

Shareholders in generic drug specialist Hikma Pharmaceuticals (LSE: HIK) have endured a rollercoaster ride over the last two years. Back in August 2016, Hikma’s share price was over 2,300p and investors, myself included, were excited about the growth story. However, things didn’t exactly go to plan for the group, and after a series of profit warnings caused by drug delays, the stock fell as low as 850p in February this year.

Yet sentiment towards stocks can change quickly. In the last five months, Hikma’s share price has shot up again extremely quickly. Since the start of March, the stock is up over 120% and is now changing hands for 1,925p. So what has caused Hikma to rebound at such a rapid pace… and could there be more gains to come?

Broker upgrades

Hikma’s upward momentum began when the group released final results for FY2017 back on 14 March. Although the numbers weren’t that flash, with core basic earnings per share falling 8% in constant currency, several brokers updated their price targets for the stock and this boosted Hikma’s share price up above 1,100p.

Should you invest £1,000 in Persimmon 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 Persimmon made the list?

See the 6 stocks

Since then, the group’s outlook has continued to improve and the shares have kept climbing higher. A trading update released in mid-May was upbeat, and half-year results released last week were much improved. Group revenue was up 10%, core basic earnings per share lifted 38%, and the group raising its guidance for its injectables and generics businesses. As a result, brokers have continued to upgrade their earnings estimates for the company and lift their price targets. Over the last month, the consensus FY2018 earnings per share figure has risen by $0.13 to $1.06, which is quite a significant upgrade. So are there more gains to come, or is it too late to buy?

I do like the long-term story here. Hikma’s exposure to fast-growing markets and its focus on affordable drugs make it well positioned to capitalise on the world’s ageing population and the demand for healthcare. The forward P/E of 23.2 doesn’t look unreasonable, in my view. Having said that, the stock has had a phenomenal run since March, so I’d be inclined to wait for a pullback before buying.

Another growth star

Another FTSE 250 star that has performed exceptionally well in 2018 is IT specialist Softcat (LSE: SCT). Its shares are up over 60% this year, so can it keep delivering gains to investors?

I last covered Softcat back in May, shortly after Neil Woodford sold his holding in the company. Back then, I said that I didn’t think it was time to sell up just yet as the company appeared to still have considerable momentum. That call looks good now, as the shares have risen another 18% since and, in July, the group advised that full-year 2018 adjusted operating profit will be “materially ahead of prior expectations.”

After a 60% year-to-date share price rise, Softcat shares certainly don’t offer the value they have in the past, when the stock’s P/E ratio has often been in the low 20s. With analysts forecasting earnings per share of 27.4p this year, today the forward P/E is a lofty 30.6. Yet the growth story here still looks intact. As a result, I continue to rate the stock as a hold.

Should you invest £1,000 in Persimmon 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 Persimmon made the list?

See the 6 stocks

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.

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Mature black couple enjoying shopping together in UK high street
Investing Articles

Here’s how a 50-year-old could aim for £1,400-a-month passive income from an ISA

Investing in a Stocks and Shares ISA is one way to target long-term passive income, even for those hitting their…

Read more »

Investing Articles

After hitting a new 52-week low can the Diageo share price ever recover? See what the experts say

Harvey Jones has taken a beating on the Diageo share price, and there's no end to his misery in sight.…

Read more »

Investing Articles

Should I cash in my Rolls-Royce shares?

This investor in Rolls-Royce shares is wondering whether now might be the best time to sell up and move on…

Read more »

Investing Articles

With gold above $3,000, is it time to consider buying this FTSE miner?

Here’s one FTSE 100 stock that should -- in theory -- benefit from the current global uncertainty and a rising…

Read more »

Investing Articles

3 possible ways to generate a £1k monthly second income in the stock market

Our writer outlines a trio of approaches someone could take to try and build a four-figure monthly second income from…

Read more »

Investing Articles

Is the booming BAE Systems share price a deadly trap?

The BAE system share price has been a huge beneficiary of today's geopolitical uncertainty but investors considering the stock should…

Read more »

Investing Articles

Thank you stock market: a rare chance to consider buying Nvidia stock?

Market forces have brought Nvidia stock and many of its peers down as the Nasdaq and S&P 500 reach correction…

Read more »

A couple celebrating moving in to a new home
Investing Articles

Time for a Berkeley Group share price recovery as FY guidance is confirmed?

After slumping in 2024, investors will want to see better from the Berkeley Group Holdings share price. Here's what the…

Read more »