Wouldn’t we all like an extra £50 in our pockets every day from a second income? Just keep investing in top UK stocks, and compound our way to the £18,300 per year that needs, right? And that could even cover leap years, paying £1,525 per month on average.

Historically, the FTSE 100 has delivered long-term average annual returns of around 4.9% above inflation. Right now, things look a bit messed up on that front — with stock markets unusually energetic, and inflation causing quite some pain.

But if we think about the long term — and that’s all we can really do — it hints at needing a pot of around £373,500. Draw down the 4.9%, and leave the rest to keep up with inflation — that would be the idea.

Cautious investors might prefer to take out less, while others might want to spend more and reserve less. It’s entirely up to each individual.

How can you get there?

“Someone’s sitting in the shade today because someone planted a tree a long time ago”

— Warren Buffett

Like a nice old tree, it’s going to take some time to build up a pot like that.

How long depends on two things — how much money is stashed away each month, and how much is earned every year. So let’s pick a couple of examples — the average annual 6.9% from the FTSE 100 over 20 years, and a more aggressive (but riskier) 10%.

The following table shows how it might go with two different monthly investment amounts — both aiming for that £373,500 target.

Long-term income stock

Aviva (LSE: AV.) is one of my favourite FTSE 100 dividend stocks. It has a forecast 6.2% dividend yield, and that could contribute nicely to an investor’s second income.

The share price has climbed 55% over five years, though I expect that to be something of a one-off. Aviva has gone through a dramatic restructure, and I expect future share price gains to be lower. Still, it wouldn’t take much to match the index average 6.9% per year in total.

Billionaire investor Warren Buffett also famously suggested: “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.“

That’s especially true with an insurer, I think, because they tend to be hurt by any stock market pressure. There could be volatility ahead.

How about that 10?

Right now, Greencoat UK Wind has a forecast dividend of 10.2%. And the company reckons it should be able to keep it going. Beware, though, that the big yield comes partly from a five-year share price fall of 23% — wind energy is so out of favour these days. And any failure to meet the expected dividends could hurt.

I reckon investors looking for a second income could to well to consider both of these stocks, in a diversified ISA.

The post How much do you need in an ISA for a £1,525 monthly second income? appeared first on The Twelfth Magpie.

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Alan Oscroft has positions in Aviva Plc. The Motley Fool UK has recommended Greencoat Uk Wind Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Rolls-Royce Holdings (LSE: RR.) shares have brought riches to a good few UK investors. The share price acceleration since the company pulled itself up from the depths of the 2020 stock market crash has been simply stunning. And it’s given many an investor a cracking multi-bagger.

But why am I looking at a specific £8,580 invested in the company in May 2025? That’s because it would now be worth a staggering £100,000. And just £858 would have grown into a cool 10 grand. At least, that’s based on the 1,186p share price at the time of writing. It might be a bit different by the time you read this.

And here’s an interesting snippet. Rolls-Royce is forecast to pay a dividend of 10p per share this year. That would mean a yield of only 0.84% on the current share price. But an investor who bought five years ago would see a 9.8% yield on the price they paid back then!

Pausing for breath?

Now, it might be verging on madness to expect the same kind of returns over the next five years. I mean, it would need another 1,046%. And that kind of thing tends not to happen too many times in a row.

Rolls-Royce shares have backed off a bit from their 2026 high too. And we’re looking at a 19.8% fall since 26 February. Just think, if the price hadn’t fallen back, that initial £8,580 could now be worth £119,750!

Does that mean the cracking growth surge of the past few years has reached its climax, and it’s all yawning boredom from now on? A couple of things suggest Rolls-Royce shares might only be taking a bit of a breather.

The dip coincides with the Middle East turmoil. Flights cancelled, fuel prices through the roof… that’s not a good combination. But I’d say the fall has been quite modest. And there’ll surely be hopes of a defence sector boost from it all.

Stunning forecasts

Then we come to analyst forecasts. Between 2026 and 2028, they predict:

• Earnings per share rising 36%
• Price-to-earnings (P/E) falling from 32 to 23
• Net cash growing 83% to £5.4bn

That doesn’t really sound to be like a company running out of steam, does it?

Oh, and the most optimistic of them sees Rolls-Royce shares climbing a further 47% — and broker targets tend to be on the short-term side too. Admittedly they’re not all as optimistic as that — there’s one sourpuss who sees the shares dropping 7%. But even the average target would mean a 19% share price rise from today.

Done and dusted?

Despite analyst enthusiasm, I put Rolls-Royce shares among the FTSE 100‘s riskiest at the moment. The main uncertainty I see is how long it might take to reach profits from small modular reactors (SMRs) — Rolls estimates not before 2030. And what will happen to profits in the few years before then?

Rolls-Royce shares are not for me, with my low-risk preference. But long-term growth investors could do well to consider Rolls if we have any further dips in 2026.

The post £8,580 invested in Rolls-Royce shares shares 5 years ago is now worth… appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Stocks and Shares ISA investors have a lot of attractive options, even with the FTSE 100 above 10,000 points these days. But there’s one, whose share price has slumped from its highs of a few years ago, that I think could be set for a storming comeback.

I’m talking about Diageo (LSE: DGE), one of the world’s champion booze sellers. And how can booze go out of fashion? Well, it’s all about soaring inflation and the pressure that’s putting on disposable incomes. We’ve seen such times before. But this time it’s hitting globally, and Diageo’s market is international.

So why am I upbeat about the prospects for the company behind such world-beating favourites as Johnnie Walker, Guinness, and Smirnoff?

The outlook

The way the Diageo share price has gone, analysts must surely be expecting a few shocking years of company performance right now. And that’s the kind of thing that could take it firmly off my list of Stocks and Shares ISA candidates. Here’s what the City forecasters see happening between 2025 and 2028:

• Earnings per share growth of 61%
• Price-to-earnings (P/E) falling from 23 to 12
• Net debt dropping from $21.5bn to $15.6bn

Now, hang on… that doesn’t sound like a sell-and-go-away stock to me.

But there are other issues, of course. With February’s interim results, the company reported a 4% decline in net sales — with operating profit down 1.2%. For the full year, management lowered its guidance to suggest a 2%-3% fall in organic net sales.

It’s all down to a decline in volumes and a lower price mix — mainly from markets in North America and China. The pains of international trade tariffs can’t be helping.

The plan

Part of the remedial work involves cutting the dividend in half. We should be looking at an unexciting 2.8% to 3% yield for the full year, depending on which forecaster we ask. That’s not brilliant. But it’s not a disaster either.

The share price crunched down on the day of the announcement. And at the time of writing, it’s fallen 22% since market close on the eve of the results. But quite a few commentators believe the sell-off was overdone — and I’m one of them.

Debt forecasts are looking better now. But net debt had been growing uncomfortably over the past few years. And seeing a company paying high dividends while that’s happening always makes me a bit nervous.

The biggest positive sign I see of a turnaround for Diageo is in the form of a person. It’s Sir Dave Lewis, previously the force behind Tesco‘s impressive turnaround — and now brought in to try to do the same here.

Competitive strategy

Sir Dave revealed three immediate priorities. In his words, they are:

• “Build competitive category strategies, winning with relevant brands“
• “Customer, customer, customer“
• “Redesign of the Diageo operating framework to drive sustainable returns“

There are difficult days ahead, for sure. And I could see further Diageo share price weakness before things get better. But Stocks and Shares ISA investors are in it for the long term. And I definitely rate Diageo as one to consider.

The post Could this FTSE 100 company, down 54% in 5 years, be a perfect Stocks and Shares ISA buy? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo Plc and Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Want to retire with a healthy passive income to supplement the State Pension? Many UK investors are aiming for exactly that, using a Stocks and Shares ISA or SIPP — or a combination of both.

Why £2,091 per month? It’s twice the UK State Pension. And trebling the state retirement income seems like an inspiring target.

And the beauty of an ISA is that all returns from it are free of tax. Dividends, capital gains… not a penny to pay.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

ISAs and SIPPs offer different tax advantages. So each investor needs to weigh up both in order to choose the best combination for their individual circumstances. But let’s use historic ISA returns to get an idea of the possibilities.

Stocks and Shares ISA gains

Historically, Stocks and Shares ISAs have done well. And over the past 10 years, we’ve seen an average annual return of 9.6%. It’s been an erratic decade, though, with some big ups and downs.

In 2019/20 ISA year, hammered by Covid, Stocks and Shares ISAs lost 13.3% on average. But the next year saw an average total return of 13.5%. That’s an impressive rebound in such a short time.

To earn £2,091 per month passive income, we’d need a pot of almost exactly £240,000. That does depend on a few things, though:

• The average annual 10.6% return continues
• We reinvest all our dividend income
• We diversify intelligently and minimise risk

Nothing is guaranteed. But on this example, an investor could hit the target and earn their monthly £2,091 by investing £500 per month for 16 years.

In reality, it has to be better to plan to invest for a bit longer than that, and set an annual return target a bit lower. How much to invest depends on each individual investor’s circumstances too… But going for the maximum you can comfortably manage will surely increase your chances of hitting your goals.

Dividends or growth?

These past returns are from a mix of share price growth and reinvested dividends. Rolls-Royce Holdings is a cracking example of the former, up more than 1,000% over five years. And the past five years have been good to bank stocks too, like Lloyds Banking Group.

And there are some tasty potential dividends around right now too. The Greencoat UK Wind (LSE: UKW) share price has suffered a poor decade, as the chart shows — as oil has regained popularity.

But it offers a huge 10.7% forecast dividend yield. And, Greencoat just lifted its annual dividend at least in line with inflation for the twelfth consecutive year — and plans to keep on doing so.

Long-term cash cow

Clearly, there’s a risk from focus moving away from renewable energy in today’s political climate. I’m convinced it has to come back eventually — but it might take a while. Still, since the Iran conflict, we’ve seen the Greencoat share price ticking up. Anything connected with geopolitics, however, always comes with danger.

But I do think investors should consider Greencoat UK Wind as part of a long-term ISA targeting passive income to beat the State Pension.

The post How much is needed in an ISA to target a £2,091 monthly passive income? appeared first on The Twelfth Magpie.

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Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Greencoat Uk Wind Plc, Lloyds Banking Group Plc, and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

No investor who owns Endeavour Mining (LSE: EDV) shares can possibly have missed the soaring gold price over the past few years. The precious metal might have fallen back from March’s highs of over $5,000 per ounce. But at $4,635 at the time of writing, it still brings a shine to Endeavour’s first-quarter results, which include….

• Record adjusted EBITDA of $880m.
• Record free cash flow of $613m.
• Net cash up to $405m.

This certainly looks like a cash cow right now. But with Endeavour shares up 72% over the past five years, the question has to be asked: how long can it last?

Surging cash returns

The huge amounts of cash enriching the Endeavour balance sheet bode well for the company’s Assafou development project. And the company says it should help boost shareholder returns.

We’ve seen $1.6bn returned over the past five years. And management now expects total returns to exceed $2bn between 2026 and 2028. Share buybacks have helped top that up, with $30m in the first quarter — and $54m year to date, at the time of the results.

All this, however, is based on a short four-word proviso, but one that seems critical — “at prevailing gold prices“.

So is an investment in Endeavour simply a bet on the price of gold? Looking at how things have gone in the past few years, I find it hard to see it any other way. In fact, Endeavour Mining shares have climbed 119% in the past 12 months, with gold actually up just 38%. It looks to me like there’s a few more years of gold valuation already built into the share price.

Worth the premium?

Even with the shares so far ahead of the metal over 12 months, buying a gold miner might still be a good move. If some of the recent gains are used to significantly grow mining capacity — as seems to be the plan here — a buy now might secure higher longer-term returns, even if the gold price falls back.

And on the production outlook, CEO Ian Cockerill told us:

At Assafou, the recently announced [Definitive Feasibility Study] confirmed the scale and quality of this potential cornerstone project that underpins our organic growth to 1.5 million ounces by 2030.

That’s a lot of gold. And using current profits to secure the supply could turn out to be a smart long-term move.

So what’s the verdict?

I’ve never invested in gold mining shares. And I think to do it successfully requires the ability to work out how to hedge current profits and expenditure against potential long-term prices. Most investors in my experience, however, tend to just jump in as a play on the gold price — which might still work out well.

Once global fears subside, will gold prices decline? I strongly suspect so. And I see a decent chance Endeavour shares — along with other gold miners — could go South too. I reckon most investors should consider seeking lower risk elsewhere.

The post As Endeavour Mining shares jump 7% on Q1 results, is this a way into the gold rush? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Standard Chartered (LSE: STAN) shares spiked 4% Thursday morning (30 April) on the back of a record first quarter, at a time when other banks have been generating less enthusiasm over results.

Only the day before, Lloyds Banking Group posted better-than-expected results. But the shares ended the day down 1.5%. So what’s so different about Standard Chartered? It has to be the lack of reliance on high street retail banking, with the heightened risks from inflation and interest rates that come with it.

In the words of CEO Bill Winters:

We delivered a record first quarter performance in 2026, with double digit growth in Wealth Solutions and Global Banking. Despite ongoing geopolitical tensions and global economic uncertainty, our advantaged market presence and disciplined risk management give us confidence in our ability to perform.

Full-year outlook

Despite the fallout from the Middle East conflict, the bank still kept its 2026 full-year guidance unchanged. We should expect to see operating income hit around the bottom end of a 5%–7% growth range, year on year.

Near the top end would be nicer, but even 5% against this year’s economic backdrop seems more than acceptable to me. Net interest income, however, is likely to be “broadly flat” at constant currency. So that’s something we need to keep an eye on, with a year of uncertain interest rates ahead of us.

Record quarter

Within this set of results, a few highlights caught my eye:

• Operating profit of $5.9bn, up 9%.
• Profit before tax up 17% to $2.5bn.
• Return on tangible equity (RoTE) up to 17.4%.

This record quarter comes even as Standard Chartered faced $296m in impairment charges — with $190m of that related to Middle East fallout. But compared to the profit levels we’re seeing here, I’d say those are comfortable levels.

The resilience of Standard Chartered shares shows in the above comparison with Lloyds, which is firmly at the other end of the domestic/international banking scale.

But it does come with what might be a full valuation — as forecasts suggest a price-to-earnings (P/E) ratio of 11. Does that allow enough safety room for the risks that come with so much exposure to emerging markets? I’m really not sure. And we only have fairly modest dividends to look forward to, with a 2.6% yield on the cards for 2026.

Looking forward…

As well as the profit guidance mentioned above, management expects reported costs for the full year to remain broadly flat. And we should see a statutory RoTE of “greater than 12%.” That might turn out a little disappointing if it’s too far below this quarter’s 17.4%.

So, at today’s valuation, do I rate Standard Chartered shares as something for ISA investors to consider buying? For those who can stand the potential volatility I think we could see in the short term, I’d say yes.

The post As Standard Chartered shares jump on impressive Q1, is this a FTSE 100 banking bargain? appeared first on The Twelfth Magpie.

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Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc and Standard Chartered Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Unilever (LSE: ULVR) shares have suffered from all the global turmoil happening in 2026. The price has crashed more than 20% from February’s high. And we’ve had a 16% drop over the past 12 months.

But first-quarter results released Thursday (30 April) make me think this could be one for cool long-term heads to consider. So what were the highlights? They include:

• Underlying sales growth of 3.8%.
• Full-year outlook for 4%+ sales growth.
• New €1.5bn share buyback.

Long-term strength

Currency effects did result in a 3.3% fall in total turnover, coming in at €12.6bn. But that 3.8% underlying growth in sales value was made up of a 2.9% volume increase — and only 0.9% in price rises. I rate that as a solid sign of Unilever’s long-term strength.

I’m thinking Unilever shares have what it takes as a defensive investment. The key is that the company has such a wide range of product lines covering so many essential categories. And its international reach provides geographic defence against localised disruption.

Actually, considering the worldwide fallout from the Middle East crisis, I’d say this quarter shows superb global resilience. I think it’s summed up by the opening words from CEO Fernando Fernandez.

We have started the year well with volume-led growth driven by our Power Brands and a positive performance across all business groups. There is broad-based momentum across our emerging markets business, with a strong performance in India, and a good recovery in Latin America following the decisive actions we have taken in that region.

Buyback too

The new €1.5bn share buyback shows how much surplus capital Unilever is throwing off, even in times of economic pressure. It’s starting right away, and management intends to complete it by July.

And looking forward, Unilever expects to return a total of €6bn in buybacks between 2026 and 2029. We’re also looking at a full-year dividend forecast at 4.1%, which is pretty decent. And future repurchases should help keep per–share measures like the dividend yield going.

Do Unilever shares sound like the kind of thing it would be nice to tuck away in a Stocks and Shares ISA and just forget for a couple of decades? Diversification is a vital part of long-term investing. And I reckon Unilever could be considered as a cornerstone for any ISA, whatever an investor’s main strategy.

Uncertain year?

One thing does count against it at the moment. And that’s uncertainty over the upcoming sale of the company’s foods business to McCormick. It’s not expected to conclude much before mid-2027. And that’s if a shareholder vote, regulatory approvals, and other formalities work out.

Is it a mistake? And will Unilever get enough cash from the transaction? Investors do appear split over the deal. Forecasts did show solid earnings growth in the next few years — but the foods disposal means they’re up in the air now.

Investors should expect some volatility, I think. But with Unilever shares lowly valued compared to historic averages, now could be a great time to consider adding some to your long-term ISA holdings.

The post Are Unilever shares the perfect ISA buy for troubled times after Q1 impresses? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Lloyds Banking Group (LSE: LLOY) share price is in negative territory in 2026, and it’s mostly down to a fall on Q1 results day Wednesday (29 April). At the time of writing, Lloyds shares are down 1.8% on the day — and 1.4% year to date.

The actual results show a solid performance to start the 2026 year. But one broker, at least, isn’t impressed. Shore Capital has Lloyds as a Sell, on the basis that the latest results were already baked into the share price — implying there’s little room for safety.

So what did the quarter actually look like? Highlights include…

• Statutory profit before tax up 33% year on year
• Underlying net interest income up 8%
• Operating costs reduced by 3%

But one thing Shore points out is that the Lloyds share price is around 1.7 times tangible net asset value, which it sees as too high. So should I dump my Lloyds shares? I don’t feel any urgent need to hit the Sell button, but we do need to dig a bit deeper.

Short-term targets

I’m sympathetic to a potential asset-related overvaluation. And with Lloyds so heavily into the UK’s mortgage market, I think that might weigh on sentiment. Especially as the latest expected round of inflation and economic squeeze could put more pressure on asset values.

But even Shore’s bearish Lloyds share price target helps to reassure me a little. It’s at 91p, and only 6% below the price at the time of writing. If I sold shares every time I thought they might be 6% overvalued, and bought when they looked 6% undervalued… I’d quickly spend all my money on trading fees.

I want to think beyond the latest numbers themselves — which are just a short-term snapshot, at a confusing time for economic and company outlooks. And I’m struck by something CEO Charlie Nunn said…

Our differentiated business model remains resilient in the context of the current economic uncertainties. We remain focused on supporting UK households and businesses as they look to strengthen their financial positions and achieve their goals.

Trust in the UK?

Buying Lloyds shares is very much an investment in the UK itself. And it does come without the direct global worries that afflict other banks — though in addition to not enjoying their international opportunities. So an obvious question for potential investors arises in my mind: do you have confidence in the long-term future of British businesses?

My personal answer is yes. Otherwise, how could the UK stock market have so soundly beaten other forms of investment for well over a century?

Inflation and interest rates are indeed threats for Lloyds. And valuation concerns in the light of current uncertainties are real ones. Valuation fears — after a 113% rise over five years — could alone mean a further weak spell for the Lloyds share price.

But I’m holding. And I don’t think investors should write off considering Lloyds shares — though waiting another few months for more clarity might help.

The post As the Lloyds share price falls while profits rise, is it time to dump? appeared first on The Twelfth Magpie.

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Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

GSK (LSE: GSK) beat first-quarter earnings expectations Wednesday (29 April), but the shares responded with a 5% drop. Highlights from the update included:

• Oncology sales up 28%, Shingrix vaccine sales up 20%.
• Full-year guidance reaffirmed.
• Over £40bn sales targeted by 2031.

Some of the figures were a bit mixed, but I can’t help thinking investors might have missed the big picture. Let’s take a closer look.

Sales up, but…

Total sales in the quarter reached £7.6bn. But that did mean only a modest 2% rise — or 5% at constant exchange rates (CER). And though Shingrix led GSK’s vaccine sales, Arexvy vaccine sales fell 18%. And General Medicines dipped 6% at CER.

I don’t, however, really think that takes much of the edge off what looks like an impressive quarter. And I’m buoyed by what CEO Luke Miels had to say about upcoming prospects.

Alongside operational delivery, we are focused on execution and accelerating R&D. This is visible in filings we have achieved for bepirovirsen, our potential functional cure for hepatitis B; updated phase III plans for our oncology ADCs; and completed acquisitions for new pipeline assets: ozureprubart for food allergies, and HS235 for pulmonary hypertension.

These mostly target ailments on the rise in wealthy, developed, nations. Addressing those has to be a good thing, for so many reasons.

What should we expect?

A plan to exceed £40bn in sales by 2031 could make GSK shares a very nice long-term investment. And it could happily fuel a progressive dividend prospect. The company has 70p per share pencilled in for the full year, which would mean a 3.6% dividend yield on the price at the time of writing.

But what does management see happening in 2026? Full-year guidance (at CER) hinges on three key expectations:

• Turnover to increase between 3% and 5%.
• Core operating profit to increase between 7% and 9%.
• Core earnings per share to increase between 7% and 9%.

The shares look cheap

Investors had been piling into the stock after February’s FY25 results. I don’t see anything so far to take the shine off what was an impressive year, and GSK shares are still up 7% year to date. But enthusiasm appears to have cooled, with the price falling back.

Whatever’s turned investors off the stock, even if only briefly, I can’t really see it being valuation. Forecasts put the forward price-to-earnings (P/E) ratio at under 13. And that’s even with analysts predicting a 28% rise in earnings between 2025 and 2028.

There’s one major hurdle in the road ahead, though. GSK faces the expiry of a handful of blockbuster drug patents before the end of the decade.

Don’t panic!

Against that, it has a good number of very promising drugs reaching late trial stages. There’s nothing guaranteed, of course. And it’s good to be aware of the cost and risk of failure of any prospect.

But right now, I see this as a good time for long-term investors to consider GSK shares while the valuation looks a bit weak.

The post As GSK shares fall 5% on Q1 news, is this a buying opportunity? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended GSK. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

AstraZeneca (LSE: AZN) shares wobbled a bit Wednesday morning (29 April), even though the pharma giant reported more than $15bn in first-quarter revenue. The results beat expectations, and the company reaffirmed its positive full-year guidance.

CEO Pascal Soriot told us the company is “on track to achieve our ambition for 2030 and beyond.”

The share price dipped a couple of percent, edging into negative territory year to date. But AstraZeneca is still up 19% over 12 months — and has soared 85% in the past five years. Let’s dig in and see what’s happening…

Double-digit growth

The company reported a 5% rise in core earnings per share. And the board says it expects mid-to-high single-digit revenue growth and low double-digit core EPS growth for the full year.

It’s hard to think of a better example of how a long-term plan can outstrip short-term earnings targets than AstraZeneca. And it’s all thanks to the stunning turnaround Pascal Soriot kicked off when he took on the challenge in 2012. AstraZeneca needed to focus on getting its research pipeline up to strength. And the new boss made it clear it would need time and patience.

As an aside, an investor who put £5,000 into AstraZeneca on the day Soriot became boss would today be sitting on shares worth £23,550, by my calculation.

What’s next?

Looking at these results, I’m struck by one part of what the CEO said.

We are advancing through our catalyst‑rich period, with positive readouts for four high-value Phase III programmes since our last quarterly results, including first pivotal data for two key NMEs – tozorakimab in COPD and efzimfotase alfa in hypophosphatasia.

Expertise in oncology and rare diseases lies behind AstraZeneca’s success. And these new developments, with the boss talking about multiple launches in preparation, convince me the company still has its eye on the ball — and its sights set on long-term growth.

There’s a strategic collaboration with CSPC Pharmaceuticals too, “to advance the development of multiple next-generation therapies for obesity and type 2 diabetes.” AstraZeneca will invest $1.2bn upfront.

Potential pitfalls

An aggressive drug research pipeline is, however, in part a case of running to stand still. We’ll see the expiry of some profitable patents in the coming years, including a handful of blockbusters.

And even an impressive pipeline like AstraZeneca’s is no guarantee that lost blockbuster profits will be replaced. It’s a problem that faces all pharmaceutical companies.

Whether the stock’s high valuation is fair is a tricky question. We’re looking at a forward price-to-earnings (P/E) ratio of close to 24 for the current year. And this is a company with only modest dividend yields — there’s 1.7% forecast for this year.

So what’s the verdict?

The weak reaction to this latest quarter doesn’t surprise me that much, as a company can need to smash expectations to impress growth investors at these levels. And this was largely as expected.

But I think AstraZeneca deserves its premium rating, and I reckon long-term ISA investors should consider it.

The post What next for AstraZeneca shares, after another cracking quarter? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.