On Tuesday, Hikma Pharmaceuticals (OTC:HKMPY) Plc (LSE:HIK) (OTC:HKMPF) stock received an upgrade in its rating from Hold to Buy, along with an increase in its price target from GBP21.00 to GBP24.00. Berenberg, the firm behind the upgrade, cites increased confidence in the company's growth outlook, particularly in its U.S. Generics business, as a key reason for the positive shift.
The upgrade follows significant changes in Hikma's leadership, including the appointment of a new permanent CEO and new heads of the Injectables and U.S. Generics divisions. The new CEO's familiarity with Hikma's operations is expected to be beneficial for the company's future.
Berenberg's confidence is further bolstered by Hikma's strong financial position, highlighted by a robust balance sheet with leverage at 1.3 times and USD1.5 billion available for mergers and acquisitions, as evidenced by the recent acquisition of Xellia Pharmaceuticals.
The firm points out that Hikma's return on invested capital (ROIC) has averaged an impressive 16% over the past three years. This, combined with a valuation of 11.8 times price-to-earnings (P/E), is seen as an attractive proposition for investors. The analyst's comments underscore a belief that the stock's current valuation is not demanding, given the company's performance and outlook.
Hikma's commitment to expanding its business and maintaining financial discipline has been recognized as a strong indicator of its potential for growth in the coming year. The company's strategic moves and leadership stability are key factors contributing to the analyst's positive outlook. The revised price target of GBP24.00 reflects this optimism and the expectation of continued success for Hikma Pharmaceuticals.
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