Hikma Pharmaceuticals plc set for FTSE 100 re-entry and Inmarsat plc for ejection

Hikma Pharmaceuticals(LSE: HIK) lost its place in the FTSE 100 in March, but is set to storm back into the top index when the FTSE committee announces the results of its latest quarterly review on Wednesday. Satellite operator Inmarsat(LSE: ISAT) is currently standing on the trap door for demotion to the FTSE 250, to make way for resurgent Hikma.

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Yo-yo

Hikma made history in March 2015 as the first Jordanian company to enter the FTSE 100. However, after just one year, a hiccup with a transformative acquisition of Roxane, the US generic drugs unit of Boehringer Ingelheim, saw the shares weaken to the extent that Hikma dropped back into the FTSE 250.

Hikma had agreed to buy Roxane in a $2.65bn cash-and-shares deal, but in February announced revised terms, which reduced the $1.18bn upfront cash component by about half "following the receipt of new information on Roxane's financial performance in 2015". As you might expect, such a revelation went down like a lead balloon.

However, Hikma had no sooner been demoted to the FTSE 250 than the shares began to charge north again. Investors seemed to reappraise the Roxane issue as not so serious after all, and to warm to the longer-term benefits of the acquisition for Hikma. Results in March and generally positive subsequent news flow have seen the shares climb 29% from a low of 1,704p to 2,203p, as I'm writing.

Valued at just shy of £5.3bn, Hikma will comfortably regain its place in the FTSE 100, barring a major collapse in its shares before the market closes on Tuesday.

Attractive rating

Analyst forecasts put Hikma on a current-year price-to-earnings (P/E) ratio of 26, with earnings being temporarily depressed as it digests Roxane. However, growth is expected to kick in rapidly thereafter, such that the 2017 P/E falls to 19. This looks an attractive rating for a growth company, and the value is underlined by a 2016/17 price-to-earnings growth (PEG) ratio of 0.5, which is well on the value side of the fair value marker of 1.

Canny investors did well to pick up the shares so cheaply in March, but even after the strong rise in the shares since, Hikma still appears to be good value for investors today.

Out of favour

Inmarsat's shares have been heading lower all year. They ended 2015 at 1,137p and are currently trading 35% lower at 743p, valuing the company at £3.35bn. At the time of writing, Inmarsat is the detached weakling of the FTSE 100 herd and as things stand will be the company to make way for Hikma.

Challenging markets have been Inmarsat's problem, and in Q1 results earlier this month the company revised down its revenue guidance for 2016. However, management left medium term guidance unchanged, and I tend to agree with those analysts who feel this could be vulnerable to a downgrade.

As it is, the consensus for next year's earnings puts Inmarsat on a P/E of 19 -- the same as Hikma. You can probably guess which of the two companies I prefer on this rating.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.