Can You Beat The Market With Out-Of-Favour Stocks Barclays PLC, Aggreko plc & Game Digital PLC?

Shares in Barclays (LSE: BARC)Aggreko (LSE: AGK) and Game Digital (LSE: GMD) have all drastically underperformed the FTSE 100 over the past 12 months. 

Indeed, since the end of January last year, Barclays has fallen by 23%, Aggreko has fallen by 46%, and shares in Game Digital have plunged by 63%. Over the same period, the broader FTSE 100 has fallen by 12%. 

But after these dramatic declines, Barclays, Aggreko and Game Digital are beginning to look attractive as shares in these companies are now trading at enticing valuations. 

Troubled turnaround 

Barclays’ recovery has struggled to gain traction over the past five years and, as a result, the market is punishing the bank’s shares. Excluding dividends, shares in Barclays have fallen 39% since January 2011, but there are some signs that the shares could put in a more positive performance this year. 

Specifically, City analysts expect Barclays to report earnings per share growth of 24% for full-year 2015, excluding any exceptional items. Further, earnings per share growth of 21% is expected this year, and if the bank hits this target, it will have achieved 70% earnings per share growth in four years. Pre-tax profit will have expanded 182% over the same period. 

Assuming Barclays hits City targets for growth this year, the bank’s shares are trading at a forward P/E of 8.6 and support a dividend yield of 3.6%. The payout is covered 2.7 times by earnings per share. Moreover, Barclays’ net tangible asset value per share was 289p on 30 September 2015, 37% above the current stock price. 

Struggling for growth 

Aggreko’s has slowed over the past few years as the company’s rising cost base has put margins under pressure. Pre-tax profits are set to fall to a five-year low this year and a six-year low next year. Earnings per share have fallen 30% since 2012. 

Aggreko is cutting costs and restructuring its operations in an attempt to return to growth, and the group is still achieving sector leading profit margins. Further, Aggreko’s return on capital of just under 20% makes it one of the most efficient companies on the market. 

The group’s shares trade at an enterprise value to earnings before interest, tax, amortisation and depreciation (EV/EBITDA) multiple of 4.8 compared to the sector average of 9.9. So Aggreko looks cheap compared to its close peers. The company’s shares yield 3.2%, and the payout is covered three times by earnings per share. 

A bet on the consumer

According to figures released this morning, British consumers remained upbeat about their finances in January with consumer confidence of +4 this month, up from +2 in December and relatively high compared to historic averages. 

After falling 52% in three months, Game’s shares could be a good play on the upbeat UK consumer. Game’s shares currently trade at a forward P/E of 10.7 and support a yield of 14%. Clearly, after several profit warnings, the market isn’t expecting much from this company going forward. However, Game could be set to surprise, and the company’s current valuation could offer plenty of upside if the group surpasses expectations. 

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