Can Boohoo.Com PLC (+73%), Randgold Resources Limited (+81%) And NMC Health PLC (+69%) Keep On Soaring?
From their 12-month low in May 2015, shares in boohoo.com (LSE: BOO) have climbed by 73% to 44p, but is more to come? More traditional clothing stores like Marks & Spencer are struggling (M&S’s Q4 performance in clothing was “unsatisfactory“). But online vendors are doing much better than I’d expected — I might be old-fashioned, but I always thought touch and feel was an essential part of the transaction.
Results from boohoo should be with us on 26 April and should be good with analysts expecting a 46% rise in EPS. They have further gains above 20% per year pencilled-in for the next two years. But one thing that still leaves me wary is the volatility of the share price — since floatation in March 2014, the shares are actually down 39%. I’m also keenly aware of the ups and downs that ASOS shareholders have faced. Over five years those shares are up 62%, yet if you’d been unlucky enough to buy at their peak in February 2014, you’d be down 53%.
There’s a bit of a “dotcom bubble” feel about boohoo (and ASOS) to me, with boohoo shares on a forward P/E of 25 as far out as February 2018 (though it’s a lot lower than the multiple of 47 for ASOS based on August 2017 forecasts), and that puts me right off. But I’m an old bloke and I buy my shares the way I buy my clothes — conventional stuff that I intend to keep for years — so what do I know?
If you’d bought Randgold Resources (LSE: RRS) at their low point in September 2015, you’d be sitting on a nice gain of 81% right now as the shares have reached 6600p. That’s on the back of the rising price of gold, which has reached the $1,200 level per ounce from only a little over $1,000 in December.
Buying mining shares is a good way of gearing up the profits you can make over buying the metal itself — every percentage rise in the price of gold represents a bigger percentage rise in a miner’s profits once it has cleared the cost of production. Of course, the same works in reverse and a gold price fall is geared up to a bigger percentage fall in miners’ profits.
What I don’t like about Randgold shares is their high forward P/E of 37, dropping only as far as 31 on 2017 forecasts, because that suggests there’s a fair bit more gold price growth built into the share price. I reckon trying to guess where something as fundamentally useless as gold is going is a waste of time.
NMC Health (LSE: NMC) has been a growth star, with a 69% rise since last April’s peak to 1120p, and a 390% gain over five years. And for once, I’m seeing a growth share that I actually like the look of. NMC operates a healthcare chain in the United Arab Emirates, where oil wealth has produced plenty of customers who want top medical treatment — as shown in several years of accelerating earnings growth.
What’s more, we have an EPS rise of 58% forecast this year, followed by 23% next, and that would drop the P/E to just 16. We’re also looking at PEG ratios (which compare the P/E with the growth rate, the lower the better) of 0.3 this year and 0.7 next — and that’s firmly in the territory that would have excited the growth investor in a younger me.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
From their 12-month low in May 2015, shares in boohoo.com (LSE: BOO) have climbed by 73% to 44p, but is more to come? More traditional clothing stores like Marks & Spencer are struggling (M&S’s Q4 performance in clothing was “unsatisfactory”). But online vendors are doing much better than I’d expected — I might be old-fashioned, but I always thought touch and feel was an essential part of the transaction.
Results from boohoo should be with us on 26 April and should be good with analysts expecting a 46% rise in EPS. They have further gains above 20% per year pencilled-in for the next two years. But one…