Today I’ll be taking a closer look at Standard Chartered Bank (LSE: STAN), Tullow Oil (LSE: TLW) and chemicals firm Johnson Matthey (LSE: JMAT). Are they right for your ISA?

In decline

Asia-focused bank Standard Chartered, or StanChart to its friends, has enjoyed a nice little rally recently, with its shares gaining around 17% in the past week. But let’s not get too excited, the shares are still 49% down on a year ago. So is there a turnaround on the horizon, or is the StanChart news going to start getting worse again?

Well, the City is optimistic, with profits forecast at £607m this year, followed by £1,313m for the year to 31 December 2017. By my calculations, that’s a whopping 116% increase. Now, if this was a tech company with a new gadget, or a pharmaceutical firm with a cure for cancer, then it would be easy for me to digest such optimistic figures, but StanChart isn’t such a company.

Revenues and earnings have been in decline since 2013, and the once-respectable dividend has been severely cut, with a measly 1% forecast for 2016. I think investors should wait until the current restructuring and cost-cutting begins to have a positive effect on actual reported earnings before diving in on the basis of optimistic forecasts.


Oil & gas explorer Tullow Oil has seen an even bigger rebound in its share price, with a 68% gain in the last three months, largely due to the increasing oil price. The company has been reporting pre-tax losses in each of the last two years, but is expected to return to profit soon, with underlying earnings of 6.04p per share forecast for this year and 15.12p pencilled-in for 2017.

These forecasts represent 150% earnings growth next year, but again I don’t share the optimism, especially with so much uncertainty regarding the future price of oil. In addition, there are no dividends forecast for this year, with a 1.15p per share payout earmarked for next year, offering a tiny prospective yield of 0.6%.

With regards to the valuation, the shares currently trade on 37.4 times forecast earnings for the current year, falling to 14.9 for 2017, based on the aforementioned earnings estimates. If the earnings fall short of the optimistic projections for 2017, the P/E ratio will start to look high, and shares could fall hard. Too risky for me, I’m afraid.

Swiss upgrade

Specialist chemicals group Johnson Matthey received a nice little boost from Credit Suisse yesterday when it upgraded its recommendation on the stock. The investment bank revised its rating on the London-based business from neutral to outperform and raised its target price from 2,850p to 3,100p – the shares closed 1.5% higher on the day.

So do I agree with Credit Suisse, or do I agree with fellow Swiss investment bank UBS that reiterated its neutral stance only last week? On this occasion I agree with UBS. The shares trade on a price-to-earnings ratio of 15.2 for the year to 31 March 2017, falling to 14.1 for fiscal 2018, so they’re not cheap enough to buy in my opinion, and dividends are pretty average for a blue-chip company at around 3%.

In summary, I think this is another solid British company with good prospects that’s already fully-valued by the market. So no bargains here, I’m afraid.

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