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Are Australian Pharmaceutical Industries Ltd shares cheap?

Australian Pharmaceutical Industries Ltd (ASX: API) has fallen 16.8% in five days including a 7% fall on Tuesday.

At the current price of $1.20 it is trading on a forward PE ratio of 12 based on JB Were’s forecast EPS of $0.11c, up around 9% from last year and a trailing dividend yield of 5.3% per annum fully franked.

The results for 1H18 announced a few days ago revealed that Australian Pharmaceutical Industries had delivered slightly ahead on revised earnings guidance with steady business performance. Net profit was lower compared to 1H17 with the company talking about challenges in the retail environment regarding one of its core businesses, Priceline.

Aggressive discounting is having an impact on cosmetic and beauty product sales according to the company’s CEO with price falls of about 3% to 4% this year. Competition from Mecca and Sephora, favourites of millennials, are also impacting Priceline sales.

The company plans to introduce some exclusive brands, step up training of employees and make personalised offers to the 7 million women in its Sister Club loyalty program.

As mentioned previously on, Credit Suisse has placed a neutral rating on the stock with the broker saying the short-term outlook for the company is “challenging”.

Sigma Healthcare Ltd (ASX: SIG) is in the same sector as Australian Pharmaceutical Industries. It is down 40% in one year to $0.70 cents due to issues from PBS changes with its Hepatitis C medicines. It has a trailing annual dividend yield of 7% trading on a forward PE ratio of 12.99.

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Motley Fool contributor Rosemary Steinfort has no position in any of the 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 Scott Phillips.