3 smaller shares to buy on today’s results?

Do today’s updates provide us with rich pickings?

| 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.

In these post-referendum days, the investing headlines have focused on our big FTSE 100 companies, but there are plenty of smaller companies being overlooked. Here are three that have released first-half results today.

Rocky ride

Shares in Sportech (LSE: SPO) have had a volatile ride over the past 12 months, soaring and plummeting as a VAT claim by HMRC swung this way and that — as it stands, HMRC is seeking permission to appeal the most recent Court of Appeal ruling in favour of Sportech.

Putting that aside, Sportech, which billls itself as “one of the world’s leading pool betting organisations,” reported first-half revenue of £48.7m and adjusted pre-tax profit of £5.6m. The company is only just (hopefully) into sustainable profits and there are no dividends yet, but there are strong forecasts on the cards — analysts suggest an 11% rise in EPS this year followed by 30% in 2017, giving us P/E ratios of 14.3 and 11 respectively.

That valuation doesn’t look like bargain territory to me, especially as Sportech is carrying adjusted net debt of £59.8m, which seems high compared to current profit levels. I also wouldn’t touch it until the VAT dispute is finally settled.

Cheap challenger bank?

OneSavings Bank (LSE: OSB) was a bit of a ‘challenger bank’ darling until the Brexit vote put the wind up the banking sector. Since the fateful day, the shares were down 29% — until today’s interim figures, which have spurred an 11% resurgence to 263p.

Underlying pre-tax profit rose 36% to £64.6m, with a 10% rise in the bank’s loan book. Liquidity measures look strong, and the interim dividend was lifted by 45% to 2.9p per share. Chief executive Andy Golding did say that it’s “too soon to predict the medium to long-term impact of Brexit on the UK economy.” But has the uncertainty unfairly depressed OneSavings Bank’s shares and are they in bargain territory?

I’d say they are, with post-referendum forecasts holding strong and the City expecting a 7% rise in EPS this year with a 3.6% dividend yield (rising to 4% in 2017). That puts the shares on a P/E of only seven, which I see as significantly undervaluing OneSavings’ long-term prospects.

Printing success

As company names go, Xaar (LSE: XAR) has always been one of my favourites, even if I haven’t been so keen on the trajectory of its share price in recent years. Soaring earnings saw the printing technologist’s shares rocket to more than £11 apiece by the end of 2013, but several years of contraction have seen it crash back down to today’s 505p.

But we’re at least seeing a 4% rise on the back of this morning’s interim figures, which showed continuing falls in profits — but that was in line with expectations, as the firm commits bigger sums to R&D and seeks to succeed with the new “strategic vision” launched in March. According to chief executive Doug Edwards, Xaar has launched “major new products” and has announced a “strategic partnership with Ricoh” as it works towards its “2020 vision.

Would I buy the shares? On a forward P/E of 26, rising to 36 on 2017 forecasts, nope. The latest interim report contains too many fancy-sounding marketing buzzwords for my liking — I want to see the colour of Xaar’s money first.

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.

Alan Oscroft 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

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 »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »