Thursday tips round-up: Ocado, Hikma Pharmaceuticals

13th Mar 2014 10:09

Ocado's share price is riding on a lot of assumptions. So much so that in a rational market its shares should not be where they are and they should not be headed any higher. At the moment it is trading at a price-to-earnings multiple of 200 and even if it meets forecasts that would still leave shares on 20 times' earnings in five years' time, even if it is true that the market in online groceries should grow at about 125 per cent over the next five years. As well, investors are assuming that it will retain its contract with Waitrose. Then there is the small matter of its low margins. Likewise, investors seem to be pricing in an expansion, into other product segments or geographies, but either of those scenarios remains very much to be seen. Then again, 'short-sellers' have gotten burnt in Ocado in the past, writes The Times' Tempus. Jordan-based Hikma Pharmaceuticals got lucky last year as demand in the US for its generic antibiotic doxycycline surged due to a national shortage of the antibiotic, which pushed up prices and production. The result was not hard to anticipate. The company was 'forced' to revise its outlook throughout most of the year as the cash kept coming in. However, while that was not the result of wise strategic choices the company is teeing up its injectables business, which it sees as the engine for future growth. Tellingly, perhaps, 2013 saw a scramble by several suitors to purchase that unit, all of which were duly seen off by the company. The firm is no 'one-trick' pony and investors can expect to see continued growth despite a fall-off in doxycycline sales as the injectables business moves into the frame. The Daily Telegraph's Questor says hold.ABPlease note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.