- Economic uncertainty means growth targets could be revised
- Volatile markets could set-up bargains
Hikma Pharmaceuticals (HIK) tops the UK large cap growth at a reasonable price (GARP) screen, although no company passes 9/9 tests. The manufacturer of out-of-patent drugs has the best reason for failing one test, however: its five-year trailing earnings growth rate is narrowly above 20 per cent. The upper limit is a safety rope in our past earnings growth range (7.5 to 20 per cent) test. On both our custom price-to-earnings growth (PEG) test and a simple three-year forward PEG, the company looks fairly valued rather than cheap.
In our mid cap screen, one company that’s shares have enjoyed a good run but that still looks reasonably priced is Drax Group (DRX), the renewable energy and biofuels specialist. The shares are up 36 per cent in three months but the enterprise value (EV) is just 6.8 times earnings before interest, tax, depreciation and amortisation (Ebitda). Both the PEG ratios we use are showing it is cheap relative to analysts’ growth expectations, too. As ever, the caveat is screens are a starting point for research and the two tests Drax fails (two halves of year-on-year eps growth and trailing five-year eps growth rate), offer a hint as to questions would-be investors should ask next.
Smaller companies (we now screen small caps listed on the main market and Aim together) only have eight tests to pass in our revamped methodology. The only company to meet the full criteria is GEM Diamonds (GEMD), owner of the Letseng mine in Lesotho. The company recently commenced a programme to buy back some of its own shares.
Our US shares screen this month is topped by FleetCor Technologies (US:FLT), which provides fuel cards and workforce payment products and services and Fortune Brands Home & Security (US:FBHS), which makes home fittings and security solutions.
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