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Can E2V Technologies plc recover after falling 15% today?

Image: Ted Baker. Fair use

A profit warning from E2V Technologies (LSE: E2V) has left investors in a state of mild shock on Monday. The company’s shares were recently dealing 15% lower from last week’s close.

The business warned that

due to the increased possibility of further delays to the anticipated follow on orders in Space Imaging, the board now believes the trading performance for the current financial year may be modestly below our previous expectations.”

While E2V expects the division to complete three key follow-on orders during the second half of the year ending March 2017, the company advised that “the timings of these awards is not within our control.” The tech play also said that programme milestones for some of its space-related programmes will not be met until the latter half of the fiscal period.

E2V Technologies saw revenues dip 6% between April and September, to £102.8, achieved in what it describes as “challenging trading conditions.”

But the imaging specialist advised that order intake had improved during the second quarter, a factor that should underpin a better second-half performance. And E2V’s bubbly outlook is epitomised by its decision to raise the interim dividend to 1.7p per share from 1.6p last year.

Fiery forecasts

Still, many investors will be put off by the poor sales visibility created by difficult market conditions and uncertain contract completion. And in this regard, many stock pickers may be tempted by the solid growth outlook of fashion play Ted Baker (LSE: TED).

Like E2V Technologies, Ted Baker has a great record of generating solid earnings expansion in recent years, and the City believes this tale has much further to run — bottom-line growth of 13% and 14% are chalked in for the years to January 2017 and 2018 respectively.

By comparison, the trading troubles affecting E2V is expected to see earnings growth slow to 2% this year and to 8% for fiscal 2018. And today’s update is likely to lead to these forecasts being downwardly revised.

Forward P/E ratings of 22.2 times for 2017 and 19.4 times for 2018 make Ted Baker more expensive than E2V’s readings of 12 times and 11.1 times. But I believe the ‘street chic’ expert’s stronger revenues outlook merits this premium.

In good stead

Ted Baker saw group sales soar 14.4% during the 28 weeks to August 13th, it advised last month, to £259.5m.

As well as reaping the fruits of its store expansion programme — Ted Baker opened new stores in the US, Canada and China in the period, as well as department store concessions in Europe and Asia — the London firm’s decision to bolster its e-commerce presence is also paying off in spades. Total online sales leapt 29.7% from the corresponding 2015 period, it noted, to £29.7m.

And Ted Baker is paying huge attention to developing the brand through innovative marketing campaigns, and by engaging increasingly through social media. Indeed, the company’s autumn/winter campaign launch, directed by Guy Ritchie, which included interactive elements, was met with much fanfare.

I reckon the star appeal of Ted Baker makes the stock a stronger growth candidate than E2V Technologies, in the near term and beyond.

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