Great Titchfield Street, London -- Stagecoach (LSE: SGC) is a popular share with private investors at the moment. Our own message board for this company has well over 2,000 posts, making it one of the busiest non-tech share boards around. The transport firm was a stock market star during the 1990s, with its share price nudging close to the £3 level in 1998. But ambitious acquisition plans have crippled its performance since. For the last two years, the shares have trundled along between 50p and £1, and it seems that Stagecoach is in danger of becoming the perennial bridesmaid of value shares.
On the face of it, the company is cheap. It is valued at less than half its £2b annual sales and is on a forward price to earnings ratio of around 10 times. However, earnings forecasts may be lifted a little as the interim results it posted today where above expectations. Profits before tax and exceptional items dropped by 18% to £75m.
The group's broad spread of businesses have offered it some protection recently. About a third of the business is UK rail, another third is UK and Far East buses and the remainder is Coach USA. It's the last of these three divisions that is causing most concern at the moment. To be honest, Stagecoach has never really recovered from overpaying for this business back in 1999.
All of Stagecoach's rivals, the other transport mini-conglomerates, are sitting on similar valuations.
Company Mkt Cap P/E (year Current
£m after next) Yield
FirstGroup (LSE: FGP) 1160 9 3.4%
Stagecoach (LSE: SGC) 925 9 5.5%
National Express (LSE: NEX) 710 9 4.0%
Arriva (LSE: ARI) 670 9 4.9%
Go Ahead Group (LSE: GOG) 300 8 2.6%
There seems little to choose between them. The sector's low rating is another reason why Stagecoach's share price has failed to recover, with the inherent uncertainty of the UK rail system hanging like a millstone around each company's neck. All of them have relatively high gearing as well. Arriva is the only company to have gearing of less than 100% -- it has 70%. Perhaps it's time for a little consolidation in this sub-sector?
At its current share price of 70p, Stagecoach looks like reasonable but not outstanding value. If only we could say the same about bus and train tickets! Its past glories look way beyond reach for the foreseeable future. On the face of it, the shares may be cheap. But there needs to be a reason for them to become more expensive. It's difficult to see one at the moment.
More: Stagecoach discussion board
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