Do The Risks Outweigh The Rewards For AstraZeneca plc, Ocado Group PLC And Supergroup PLC?

Should you buy or sell these 3 stocks? AstraZeneca plc (LON: AZN), Ocado Group PLC (LON: OCDO) and Supergroup PLC (LON: SGP).

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For many investors, AstraZeneca (LSE: AZN) may appear to be a hugely risky stock. After all, it’s currently in the midst of a patent cliff that’s seeing multiple key, blockbuster drugs lose their patents. The impact on AstraZeneca’s bottom line has been huge, with the company set to report a fall in earnings of 6% this year and a further 2% next year.

As a result of this, AstraZeneca’s share price could come under pressure in the coming months after its decline of 10% year-to-date. And while there’s no certainty that the company’s bottom line will mount a successful recovery, the potential rewards on offer seem to outweigh the risks.

That’s because AstraZeneca is in the process of rapidly improving its drug pipeline through a major acquisition programme. Although this hasn’t yet fully borne fruit, AstraZeneca has the financial strength to make further deals in order to boost its long-term outlook. And with the company’s shares trading on a price-to-earnings (P/E) ratio of 14.7, they seem to offer good value for money when their growth potential is taken into account.

Should you invest £1,000 in AstraZeneca right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if AstraZeneca made the list?

See the 6 stocks

Online potential

Also offering excellent long-term growth prospects is online grocery company Ocado (LSE: OCDO). It’s benefitting from a gradual change in consumer habits, with more people switching each year to having groceries delivered. And while this market has quickly grown, there’s still a very long way to go. Evidence of this can be seen in Ocado’s bottom line that’s forecast to rise by 25% this year and by a further 44% next year.

The risk to Ocado’s investors is the lack of a margin of safety in the company’s share price. In other words, Ocado’s valuation seems to be up with events in terms of the company’s impressive growth outlook being priced-in. For example, Ocado trades on a price-to-earnings-growth (PEG) ratio of 2, which indicates that it may be wise to await a lower share price before piling-in.

Super player

Meanwhile, Supergroup (LSE: SGP) also has impressive growth prospects, with the high street fashion brand expected to grow its earnings by 16% this year and by a further 12% next year. Under its current management team, Supergroup seems to have become more efficient and better organised, with changes made to its supply chain helping to provide a more stable platform for future growth.

After its shares have fallen by 24% this year, investors may be uncertain about buying Supergroup. Certainly, its valuation could come under further pressure in the short run, but with Supergroup trading on a PEG ratio of 1.2, it seems to offer good growth prospects at a very reasonable price. Therefore, it seems to be worth buying for its long-term potential.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in AstraZeneca right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if AstraZeneca made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of AstraZeneca. The Motley Fool UK has recommended AstraZeneca and Supergroup. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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