Johnson Matthey (LSE: JMAT) has emerged as one of the winners from the drive to cut diesel emissions. Profits from the firm’s emissions control division rose by 15% last year as demand for diesel catalysts rose strongly in Europe and remained firm elsewhere.

Unfortunately, these gains were offset by falling sales in the group’s chemical and precious metals refining businesses. The overall effect was that the firm’s underlying pre-tax profits fell by 5% to £418m last year. Underlying earnings per share fell 1% to 178.7p, giving Johnson stock a trailing P/E of 16.

Shareholders were compensated with a 5% dividend increase. The total payout for last year will be 71.5p, giving a yield of 2.5%. Other bright spots included a 32% reduction in net debt, which fell to £674m.

The problem is that the outlook remains fairly cautious. Earnings are expected to rise by 5% this year, but with a forecast P/E of 15.4, I’d argue that this is already reflected in the share price. The yield is nothing to write home about either. In my view, Johnson Matthey is a hold, but not a buy.

A difficult problem

Shares in Marks and Spencer Group (LSE: MKS) have fallen by nearly 20% since last week’s results announcement. New boss Steve Rowe warned investors that cutting prices and investing in improved customer service and product would hit profits “in the short term”.

City analysts responded by slashing their earnings per share forecasts for the current year by 10%. Coupled with the falling share price, this puts the stock on a 2016/7 forecast P/E of 11.2.

M&S shares are now worth 38% less than they were one year ago. Mr Rowe’s downbeat outlook may mark the bottom for the firm, but I’m not convinced. The M&S clothing problem has defeated the company’s last two chief executives. Solving it could take time.

Luckily, the firm’s financials remain reasonably strong. Last year’s free cash flow of £539m was up 2.9% on the previous year. It was enough to cover the £451.7m the firm spent on dividends and share buybacks. The only fly in the ointment is that Marks’ net debt is still quite high, at £2.1bn.

My view it’s probably too early to invest in Marks and Spencer’s turnaround. Things may get worse before they get better.

Is this the beginning of a downturn?

Shares in plumbing and building supplies firm Wolseley (LSE: WOS) have fallen by 8% so far this week, after the group warned of slowing sales growth and higher restructuring costs.

Although Q3 sales were 10.8% higher than during the same period last year, most of this increase was the result of acquisitions and exchange rate movements. Like-for-like sales rose by just 2.8% and Wolseley said that “recent revenue growth trends have been weaker”. The majority of Wolseley’s profits come from its US operations. The UK — where Wolseley owns Plumb Center — is second. In both markets the group says demand is subdued. 

Wolseley says that this year’s results are expected to be in line with expectations, which puts the stock on a forecast P/E of 15.3 with a prospective yield of 2.6%. In my view, this valuation looks reasonably full. Wolseley shares are close to a post-2009 peak and don’t look especially cheap to me.

Indeed, I believe there are far better buys elsewhere in the FTSE 100.

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