Is IP Group Plc A Better Buy Than Blinkx Plc, 3i Group plc And Restore PLC?

Should you buy a slice of IP Group Plc (LON: IPO) ahead of Blinkx Plc (LON: BLNX), 3i Group plc (LON: III) and Restore PLC (LON: RST)?

| 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.

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.

Shares in intellectual property specialist IP Group (LSE: IPO) have risen by over 2% today after the company reported an upbeat set of half year results. It announced that the value of its portfolio, through which it helps universities to commercialise their intellectual property, had risen from £320m a year ago to £478m at the end of the first half of its current financial year. Clearly, this is a hugely impressive rate of growth and, with IP Group describing its pipeline as ‘healthy’, its long term future appears to be bright.

However, as an investment, it still seems to be rather overvalued. For example, while earnings for the current year are forecast to rise from 2p per share last year to 8.4p per share this year, it still leaves IP Group trading on a price to earnings (P/E) ratio of 25.5. That’s expensive and, with IP Group’s share price having risen by just 4% since the turn of the year, it seems likely that a degree of pressure may be exerted upon it in the short run as a result of its rather rich valuation.

Therefore, 3i (LSE: III), which invests in a range of private equity and infrastructure opportunities, appears to be a better buy. Certainly, its shares have soared by 20% since the turn of the year, but they still trade on a P/E ratio of just 9.1. And, with 3i paying out just 24% of profit as a dividend, there is tremendous scope for it to increase shareholder payouts at a brisk pace moving forward so as to improve 3i’s current yield of 2.6%.

Also having considerable future potential is document storage company Restore (LSE: RST). It today announced the acquisition of The Data Imaging and Archiving Company for £1.45m, which is slightly higher than the company’s annual turnover of £1.3m. And, while the acquisition only made a small profit last year, Restore is expected to grow its earnings by 24% in the current year, and by a further 14% next year. This means that Restore’s bottom line could be as much as 41% higher in 2016 than it was in 2014 and, with it trading on a price to earnings growth (PEG) ratio of just 1, it appears to offer considerable scope for capital gains over the medium to long term.

Meanwhile, online video search company Blinkx (LSE: BLNX) continues to offer excellent value for money, but a highly uncertain future. For example, it trades at well below net asset value, has a very strong balance sheet and impressive cash flow, but remains in a transitional period where it is expected to maintain a red bottom line in the current year and next year. And, while its strategy of focusing on mobile customers and rebranding its offering, as well as making multiple acquisitions, could pay off, the likes of Restore and 3i appear to offer greater potential rewards and much lower risk for long term investors.

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.

Peter Stephens owns shares of 3i Group and Restore plc. 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

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »