Up 200% in a year, is the Chemist Warehouse merger already fully priced into Sigma shares?

Have investors gotten too ahead of themselves with Sigma?

| More on:
Two pharmacist talking to each other.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the most successful ASX 200 shares to have been invested in over the past year has been healthcare stock Sigma Healthcare Ltd (ASX: SIG). 

This time in 2023, you could have picked up a share of Sigma for just 62 cents. But today, that same share will set you back $1.88.

That means the Sigma share price has rocketed by just over 200% in that 12-month period.

Check it out for yourself below:

Of course, these astonishing gains haven't come out of the blue. They are almost certainly a result of Sigma's ambitious plans to merge with the pharmacy giant Chemist Warehouse. 

This merger, first announced in December last year, will result in a complicated 'backdoor listing' of Chemist Warehouse on the ASX through its marriage to Sigma.

Most of the Sigma share price's phenomenal gains of the past year have come over just the past month. This coincides with the merger overcoming several regulatory and legal hurdles and looking relatively certain to proceed.

ASX investors are clearly excited over the opportunity to invest in Australia's largest pharmaceutical chain. But with much of the excitement arguably already baked into Sigma shares at their current pricing, is it even worth buying into this merger today?

Are Sigma shares a buy ahead of the Chemist Warehouse merger?

Well, it seems ASX experts are fairly united on this one.

Last week, my Fool colleague went through the views of the management team of WAM Research Ltd (ASX: WAX). As we covered then, Wilson Asset Management currently holds Sigma shares in its WAM Research portfolio with the expectation that it will deliver for its investors.

WAM is confident the merger will go ahead. Its management is reportedly "excited at the prospect of owning one of the country's best retailers with a global store roll-out on the horizon". The company also anticipates that Chemist Warehouse has plenty of room to keep expanding, both in Australia and overseas.

But Wilson Asset Management isn't the only professional investor eyeing Sigma off right now.

Fund manager Surrey Asset Management also currently holds Sigma as a major investment in its Australian Equities Fund. Surrey has just told its clients that it was impressed with Sigma's recent earnings. It also reportedly views Chemist Warehouse's latest financials "favourably".

The fund manager believes that these earnings improve the chances of the merger going ahead. Surrey seems content with Sigma as a "material holding of the fund".

So, these two ASX experts seem to argue that it is still very much worth buying Sigma shares today. That's thanks to the fact that the full value of the Chemist Warehouse merger isn't yet reflected in the Sigma share price. That's despite the 200% gain that Sigma shares have already delivered over the past year, of course. No doubt investors will be delighted to hear this.

But let's see if the marriage does indeed go ahead later this year. 

Should you invest $1,000 in Sigma Healthcare right now?

Before you buy Sigma Healthcare shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Sigma Healthcare wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 7 February 2025

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Healthcare Shares

Six smiling health workers pose for a selfie.
Healthcare Shares

Guess how much $5,000 invested in Sigma shares in December 2023 is worth now!

Sigma shares have soared over the past year alongside the merger with Chemist Warehouse.

Read more »

Woman with headphones on relaxing and looking at her phone happily.
Healthcare Shares

Everything you need to know about the latest CSL dividend

CSL's latest dividend should be turning investors' heads...

Read more »

thoughtful investor sitting at computer
Healthcare Shares

What are brokers saying about CSL shares after the selloff?

The biotech giant's shares hit a 52-week low yesterday. Is this a buying opportunity?

Read more »

A man looking at his laptop and thinking.
Earnings Results

CSL shares push higher despite 'mixed result with headline misses'

There were positives and negatives in the company's first half performance.

Read more »

Scientists working in the laboratory and examining results.
Earnings Results

CSL share price on watch amid $2.1b half year profit and dividend hike

Let's see how this biotech giant performed during the first half of FY 2025.

Read more »

Two lab workers fist pump each other.
Healthcare Shares

Guess which ASX 300 healthcare stock just rocketed 20% on BIG earnings growth

Investors are piling into the ASX 300 healthcare stock on Monday. But why?

Read more »

Health professional putting on gloves.
Earnings Results

Why this ASX 200 share is soaring in Monday's sinking market

The ASX 200 share is shrugging off the broader market fall today to rocket higher. But why?

Read more »

Three Archer Materials scientists wearing white coats and blue gloves dance together in their lab after making a discovery
Healthcare Shares

Why is the Sigma share price soaring 6%?

Sigma has upgraded its FY25 guidance ahead of the anticipated Chemist Warehouse merger completion.

Read more »