2021: February

Hikma Pharmaceuticals PLC was founded in 1978 and is based in London. 

The company develops, manufactures, and markets a range of generic, branded, and in-licensed pharmaceutical products. 

It operates through three segments: Injectables, Generics, and Branded drugs. 

 RATIONALE

From this financial snap shot, HIK may not look quite as undervalued as some of our previous picks. However, pharma stocks tend to trade at a higher premium versus other sectors such as energy, mining or housing. So the fact that HIK's P/E ratio is just below 12, when the industry average is 85.47 - means that this company may be more undervalued than it seems. 

There are a couple of other things that we like about HIK too:
  • The dividend is growing and is easily covered by earnings - with a payout ratio of below 20%, as shown below:

  • The company has managed to increase its revenue, gross profit and earnings per share in 2020, meaning the business has shown it can perform well when other parts of the market have suffered during the ongoing pandemic:

  • The company manufactures a drug which is licensed for the treatment of COVID in the USA, remdesivir, but it also produces many drugs used in surgical procedures - which have been delayed due to the pandemic. We think this puts HIK in a good position to perform well during the pandemic and also in the recovery.
  • We were also impressed by the figures presented in the most recent H1 report, which can be found here - https://www.hikma.com/media/2828/2020-interim-presentation-vfinal.pdf