Can March’s Losers NEXT plc (-18%), William Hill plc (-21%) & Centamin PLC (-5%) Finish With A Flourish?

Royston Wild runs the rule over London laggards NEXT plc (LON: NXT), William Hill plc LON: WMH) and Centamin PLC (LON: CEY).

| 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 considering the investment prospects of three recent FTSE fallers.

Shopper shivers

Up until last week, shares in retail giant NEXT (LSE: NXT) were broadly flat for the month of March. But a disastrous trading update last Thursday changed all that, the stock collapsing more than 15% on the day.

NEXT advised that “the year ahead may well be the toughest we have faced since 2008,” adding that “it may well feel like walking up the down escalator, with a great deal of effort required to stand still.”

Chief executive Lord Wolfson has warned that consumer spending patterns are not as encouraging as they were just six months ago as real earnings growth has slowed. Consequently NEXT expects sales in the year to January 2017 to range between a 1% fall and 4% rise — the company had anticipated growth of 1% to 6% as recently as January.

I have long been bullish about NEXT, given its terrific brand power, not to mention the exceptional online presence of its NEXT Directory service. But last week’s warning has caused me to reconsider my positive take on the firm, while the result of June’s ‘Brexit’ referendum could present further obstacles such as rising labour costs.

The City expects NEXT to record a 4% earnings uptick in the current period, resulting in a P/E rating of 12.5 times. This is a reasonable reading on paper, but given the rising challenges facing the retailer, I believe risk-averse investors would be better shopping elsewhere.

Don’t bet on it!

Betting house William Hill (LSE: WMH) also suffered the effects of evaporating investor confidence last week, an 11% decline on Tuesday putting it firmly ‘in the red’ for March.

William Hill shocked the market by advising that it now expects operating profit in 2016 to register between £260m and £280m. This compares with profits of £291.4m last year.

The bookies explained that “the worst Cheltenham results in recent history” was a major contributor to the poor performance of recent weeks, along with “an acceleration in the number of time-outs and automatic self-exclusions” used by online gamblers.

The latter is a particularly worry for William Hill — the company expects profits at its Online division to be dented to the tune of £20m-£25m in 2016 alone, and rather worryingly notes that “the trend is still evolving.”

The City is expecting earnings at William Hill to flatline in 2016, resulting in a P/E rating of 13.3 times. Again, this number can hardly be considered expensive. But I believe the bookmaker could struggle to meet current forecasts given the rising challenges for its internet operations.

Go for gold?

A stagnating gold price has seen precious metals digger Centamin’s (LSE: CEY) share price trend lower again in March, the business falling 5% since the end of February.

While wider macroeconomic worries have boosted gold prices since the start of the year — the so-called ‘safe haven’ asset touched 14-month highs of $1,280 per ounce earlier this month — the prospect  of a resurgent US dollar threatens to push metal prices lower again, in my opinion.

Indeed, strong datasets from the States in recent days has raised expectations of additional Federal Reserve rate hikes in the coming months, even if Fed chief Janet Yellen struck a more cautious tone at yesterday’s meeting.

The number crunchers expect Centamin to punch an 8% earnings improvement in 2016, resulting in a P/E rating of 15.4 times. Still, I believe this reading is a tad heady given the danger of gold prices sinking heavily once more, a scenario that could put paid to any expected earnings recovery.

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

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

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »