Many healthcare firms have been under the weather this year, as investors have rotated out of tried and tested defensive brands into exciting new weight-loss drug developers Eli Lilly and Company (fwd PE 46x) and Novo Nordisk (30x).
Indeed this frenzy in all things "GLP-1"-related has been painful for those stocks left behind (e.g. Pfizer -47% YTD and Bristol Myers Squibb -28% YTD ). Although as patient investors know - when there’s indiscriminate selling, there’s often opportunity too.
For instance, despite posting "resilient and in line" results this year, the over-the-counter (OTC) healthcare products sector has similarly been discarded. With OTC giants Haleon and Kenvue both falling -3% and -11% respectively, alongside AIM stocks Venture Life Group (-8%, £42m mrkcap) and Alliance Pharmaceuticals (-25%, £214m mrkcap).
In particular, these latter two smallcaps presently trade on 2024 PERs of <6x, offer 10%-15% cashflow yields and are delivering sales growth of 10% for VLG and 7% at APH. Sure both are deleveraging their balance sheets (est Dec'23 net debt / EBITDA 1.3x for VLG vs 2.0x APH) after completing acquisitions in 2022.
Yet equally this is occurring at a rapid clip, which I suspect could provide a catalyst for a major re-rating in 2024.
How much is everyone’s guess. Cavendish have a 68p/share price target on VLG, with consensus correspondingly sitting at >80p for APH
Stocking fillers anyone?