Today I am explaining whether or not investors should take a look at these start-of-month shakers.
Trifast
Screw and bolt behemoth Trifast (LSE: TRI) is a terrific selection for growth hunters, in my opinion, a view shared by the market in Monday trade — the company was recently 4% higher from last week’s close. The Surrey firm’s latest update advised that results for the year concluding March 2015 should be “at the upper end of current market expectations,” and with good reason — Trifast is a key supplier for a variety of blue-chip companies around the globe, and in hot growth sectors from high-tech electronics through to carbuilding.
Trifast is expected to record earnings growth of 31% for fiscal 2015, according to the City, results for which are due on June 16. And further growth of 4% is expected in both 2016 and 2017, producing very decent P/E ratios of 13.8 times and 13.3 times for these years — any readout below 15 times is widely considered attractive value.
These steady growth projections also produce handy-if-unspectacular dividends through this period, too, with Trifast expected to lift a predicted 1.8p-per-share payout for 2015 to 2p for 2016 and 2.2p for the following year. Consequently the bolt builder carries yields of 1.7% for the current period and 1.8% for 2017.
Lamprell
Conversely, I believe that oil rig builder Lamprell (LSE: LAM) is in danger of significant earnings weakness looking ahead as reduced sector spend weighs. The market has shrugged off these concerns more recently, however, and the business has gained 7.2% in Monday business alone following a positive broker update from Numis Securities.
But quite why investor sentiment remains quite so frothy escapes me, I’m afraid, particularly as a slew of fresh supply/demand data from the oil market over the past week suggests that crude prices could fall yet again. Indeed, these issues have prompted the City to pencil in a 42% earnings decline at Lamprell in the current year, and the bottom line is anticipated to stagnate in 2016.
These projections leave the company changing hands on P/E readings of 13.3 times for 2015 and 12.9 times for 2016. While it is true such projections are far from fearsome, I believe that a reading around or below the bargain barometer of 10 times would be a closer reflection of the perilous profits outlook facing Lamprell in the coming years.
Vedanta Resources
Like Lamprell, I believe that a backcloth of worsening natural resources markets are likely to put the kibosh on strident earnings performance at Vedanta Resources (LSE: VED) looking ahead. The metals and energy giant was recently dealing 1.6% lower on Monday, and I reckon that further weakness can be expected as prices in its critical markets are set to remain under the cosh.
The business swung from earnings of 14.7 US cents per share for the 12 months concluding March 2014 to losses of 14.2 cents the following year as oil asset writedowns and weak metals prices weighed. And these factors are not expected to disappear any time soon, the City says, forcing losses to widen to 29 cents in 2016.
Like many major commodities producers, Vedanta remains committed to ramping up production in key sectors to mitigate the problem of weak prices, particularly across the troubled iron ore, copper and aluminium sectors. But in the long term these measures are likely to keep revenues on the back foot as market fundamentals worsen, a scenario likely to make the possibility of any meaningful earnings rebound an elusive scenario, in my opinion.
Ocado Group
Although the issue of significant price-slashing has weighed on the earnings outlook of Britain’s established supermarkets, I believe that Ocado (LSE: OCDO) is a solid pick for those seeking excellent earnings expansion looking ahead. Like Waitrose and Marks and Spencer, the retailer is benefitting from rising demand from more affluent customers, while its market-leading e-commerce proposition also promises to drive sales higher as the internet shopping phenomenon flourishes.
Investor faith in Ocado has failed to take off in start-of-week business, however, and the grocer was recently 3.4% lower on the day. Still, I believe that terrific earnings growth projections for this year and next should make the market sit up and take notice — expansion of 67% and 46% is currently chalked in for the years concluding November 2015 and 2016 respectively.
It is certainly correct that these projections leave Ocado changing hands on eye-watering P/E ratios for this year and next — the business currently sports figures of 173.8 times for this year and 103.8 times for 2016. Still, I expect these numbers to continue crumbling in the coming years as the bottom line swells.
