Should You Buy J Sainsbury plc, John Wood Group PLC & Robert Walters PLC On Monday?

Royston Wild analyses the investment case for J Sainsbury plc (LON: SBRY), John Wood Group PLC (LON: WG) and Robert Walters PLC (LON: RWA).

| 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.

Today I am looking at the investment prospects of three London-quoted heavyweights.

Oil play in serious peril

Another day, another piece of bad news for the oil industry. Today brokers at Morgan Stanley soured the mood still further by advising that the ‘black gold’ price is in danger of sinking as low as the $20 marker thanks to the steady appreciation of the US dollar.

Fellow financial experts Goldman Sachs have already tipped crude to reach these levels as the supply glut washing over the sector worsens. Indeed, the Brent benchmark’s slide to fresh 11-year lows of $32.16 per barrel last week again suggested that the worst could be far from over.

Such a scenario naturally bodes ill for support services plays such as Wood Group (LSE: WG). Fossil fuel producers the world over are frantically scaling back their operational plans in a bid to conserve cash and, with crude prices continuing to sink, investors should be prepared for fresh cash-conserving measures.

Wood Group is expected to see earnings tank 12% in 2016, following on from an expected 26% decline last year. And I believe a consequent P/E rating of 12.1 times for the current period fails to fully reflect the rising risks facing the business.

Recruiter on the rise

On a cheerier note, recruitment consultants Robert Walters (LSE: RWA) eased investor nerves in Monday business with its latest trading update.

Despite hiring in the banking sector currently experiencing cyclical weakness, and the impact of adverse currency movements also hitting the top line, Robert Walters saw total net fee income advance 5% between October and December, to £59.1m, with European fees leaping 8% in the period.

For the whole of 2015, Robert Walters is expected to have kept its double-digit growth story rolling with a 25% advance, the City advises. And a further 18% rise is anticipated for this year, driving the P/E rating to a decent-if-unspectacular 16.4 times. I expect this multiple to keep on sinking as Robert Walters’ broad geographical and sector diversification strategy pays off.

Keep it shelved

Supermarket colossus Sainsbury’s (LSE: SBRY) has seen its share price rattle lower again in recent days following the release of worrying M&A news.

The firm’s proposed £1bn takeover of Home Retail Group has caused many to scratch their heads in astonishment — quite why would the grocer wish to suck up the battered Argos operator as the trading environment worsens is a puzzle too far for many analysts and commentators.

Besides, Sainsbury’s has its own crippling competitive pressures to deal with. Sure, till activity at the firm may have improved in recent months, as massive brand and product investment has paid off. But as discounters and premium chains alike accelerate their investment plans, and the critical online growth segment becomes more and more congested, I fully expect sales to trek lower again.

Sainsbury’s is expected to suffer a 16% earnings fall in the year to year to March 2015, resulting in a conventionally-attractive P/E rating of 11.3 times. But given the hard work the supermarket must adopt just to stand still, I believe the business is likely to endure prolonged earnings pain looking ahead.

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.

Royston Wild 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

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 »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »