Do The Latest Updates From Tesco PLC, ASOS plc And Fidessa Group plc Confirm Their Recovery Potential?

Should you buy these 3 shares ahead of improved performance? Tesco PLC (LON: TSCO), ASOS plc (LON: ASC) and Fidessa Group plc (LON: FDSA).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Shares in information solutions provider Fidessa (LSE: FDSA) have risen sharply today after the release of its full-year results. That’s despite the company recording zero growth in pre-tax profit for the 2015 financial year even though revenue rose by 7%. This top line figure was, however, a strong performance since the company experienced volatile conditions in financial markets.

Looking ahead, Fidessa’s end markets continue to improve and it believes there are increasing opportunities for new services, with a strengthening pipeline on offer throughout the business. Furthermore, with Fidessa reassuring its investors that its current level of investment won’t hurt its potential to pay dividends in future, its appeal as an income stock remains relatively high – especially since it yields 4.6% at the present time.

However, with Fidessa trading on a price-to-earnings (P/E) ratio of 23.3, its shares appear to be overpriced in a relatively cheap wider market. As such, there may be better options available elsewhere.

Fashionable-but-unappealing

Also lacking value for money are shares in ASOS (LSE: ASC). The online fashion retailer recently reported positive results for the key Christmas trading period, with retail sales increasing by a very impressive 22%. Furthermore, the company remains on track to deliver on its full-year guidance and with a strong balance sheet and impressive cash position, it appears to be well-placed to deliver on its long-term growth strategy.

Despite its potential as a business, ASOS continues to lack appeal as an investment. That’s largely because it trades on a P/E ratio of 49.1, which indicates considerable downside potential and a lack of upward rerating prospects. That’s especially the case since ASOS is forecast to grow its bottom line by 23% this year, which puts it on a price-to-earnings growth (PEG) ratio of over two. Therefore, with the prospects for the stock market and the consumer spending space being uncertain, it may be prudent to avoid ASOS at the present time.

Encouraging investment?

Meanwhile, Tesco’s (LSE: TSCO) Christmas trading update was perhaps better than many investors expected. For example, it recorded like-for-like (LFL) sales growth of 2.1% over the six-week Christmas period, with a particularly strong performance being delivered by its international operations. That part of Tesco saw LFL sales increase by 4.1% versus the comparable period from last year and this indicates that the company’s new strategy is gaining traction in an improving macroeconomic environment.

Looking ahead, Tesco appears to offer excellent value for money as evidenced by its PEG ratio of just 0.2. And with the likes of Aldi and Lidl unlikely to be able to sustain their previous rates of growth simply due to them becoming more mature businesses with more limited expansion potential, the outlook for Tesco and its investors remains encouraging. As such, now appears to be a good time to buy it for the long term.

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

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »