Today’s small-cap winner and loser: Redde plc and Impellam Group plc

Redde pkc (LON: REDD) and Impellam Group plc (LON: IPEL) are moving in opposite directions today.

| 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.

Accident management, vehicle fleet and legal services company Redde (LSE: REDD) is today’s small-cap winner. Shares in the company jumped more than 5% in early deals after the firm issued an upbeat trading statement for the first six months of its financial year. 

Redde is planning to publish its official results for the six months to December 31 at the end of February 2017 but based on trading to date, the group is expecting to report solid year-on-year sales growth. Organic growth and its acquisition of fleet accident management company FM (acquired during October 2015) have both helped to drive sales growth. Management is so confident about the company’s outlook, the board decided to announce today that it expects to declare an interim dividend of not less than 4.9p per share, an 8.9% increase on its interim dividend in the prior financial year of 4.5p.

For the financial year ending 30 June 2017, City analysts are expecting Redde to report year-on-year earnings per share growth of 2%. However, based on today’s update City forecasts could be revised higher as the company now looks set to exceed expectations. 

That said, even if Redde does exceed City expectations for growth this year, the company’s shares already look fully valued. Shares in the company are trading at a forward P/E of 16.2, so earnings growth of 16% per annum or more is needed to make the shares look cheap. Still, after today’s dividend hike Redde’s shares support a highly attractive dividend yield of 6.6%. 

Overall, for income seekers who are not too bothered about Redde’s valuation, the company could be an attractive buy. 

Cautious outlook

As Redde rises, shares in Impellam (LSE: IPEL) are sliding today after the company announced it expects earnings for 2016 will broadly meet market expectations despite disruptions suffered in the UK healthcare market. 

It seems as if the market is concerned about Impellam’s use of language here. “Will broadly meet” is hardly the most inspiring statement and implies earnings will actually come in lower than expectations for the full year. If earnings were on track to meet full-year targets, the press release would have most likely used different terminology. 

Still, City analysts have pencilled-in earnings per share growth of 14% for Impellam this year, but the market is making it clear it doesn’t believe the company can hit this target. Indeed, shares in Redde trade at a discounted seven times forward earnings, a low multiple for a firm expected to report 14% earnings growth this year and 8% earnings growth for 2017. Put simply, it looks as if the market isn’t expecting fireworks from the company anytime soon. 

However, if you’re looking for a cheap stock that’s been neglected by the market, Impellam may be for you. 

Like many of its recruiter peers, Impellam has fallen out of favour with the market due to concerns about the company’s growth outlook after Brexit. If you believe the group has what it take to weather the storm, the shares might offer value. 

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.

Rupert Hargreaves 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.

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 »