Why Australian Pharmaceutical Industries Ltd shares are rocketing higher

Credit: Mat Bell

One of the best performing shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) this morning has been Australian Pharmaceutical Industries Ltd (ASX: API). In morning trade its shares have surged 6% higher to $2.01.

Although the owner and operator of the Priceline pharmacy brand announced that its CEO and managing director Stephen Roche will step down from the role in February 2017, the market has looked beyond this disappointing news and focused on its full year underlying net profit after tax guidance.

In July the company provided full-year underlying net profit after tax guidance of $49.5 million, representing annual growth of 15%. The company has now upgraded this to at least $51 million, equal to 17% growth year on year.

Furthermore, the company was aiming to grow its store network by 20 stores to a total of 440. Management revealed today that at the end of August the store network had actually grown to a total of 442 stores.

Taking a bit of the gloss off this impressive performance is, of course, the news of the change at the top.

Whilst it is disappointing to see Stephen Roche step down from his role after 10 years in charge, I believe the company has chosen his replacement well. The current general manager of business development, operations and strategy, Richard Vincent, has been chosen to replace Mr Roche.

Mr Vincent has been with the company since 2005 and chairman Peter Robinson believes he is the right person to take Australian Pharmaceutical Industries forward. He stated that:

“Richard has the most relevant experience for this unique role that combines mainstream retailing and pharmaceutical distribution. He has been responsible for major programs across the total business, gaining a thorough understanding of the business drivers. To that end he has the right attributes to lead our strategy with a highly experienced retail team to execute on it.”

Mr Roche will still remain on the board of the Priceline Sisterhood Foundation.

All in all, I’ve been very impressed with Australian Pharmaceutical Industries this year and I’m not at all surprised to see its share price surge today. After all, at 18x estimated FY 2017 earnings it certainly looks to be a better option than rival Sigma Pharmaceutical Limited (ASX: SIP), which trades at 21x forward earnings.

If you're looking for even more great investment ideas then look no further than these rapidly growing shares. Each has strong growth prospects and the potential to bolt higher in the next few months if you ask me.

Why These 3 Blue Chip Shares Are Set to Soar in 2016

Discover The Motley Fool's Top 3 blue chips for 2016. These 3 'new breed' shares pay fully franked dividends AND offer the prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required!

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.