Today I am whether bargain hunters should go shopping at these four smashed-up shares.
Lonmin
With precious metals prices under sustained pressure I believe earth digger Lonmin (LSE: LMI) is a stretch too far for savvy investors. Share prices have tanked 54% since the start of July alone as commodities prices have collapsed, a rout that has seen key resource platinum sink to its cheapest since 2009 at $960 per ounce. And it is easy to see this descent worsen as demand from the critical automotive and jewellery sectors drags.
Lonmin has announced plans to shutter its Hossy and Newman mines and suspend operations at a further three projects in response to these woes, as well as to cut 6,000 of its workforce. The City currently expects the miner to finally plunge into the red for the year ending September 2015 with losses of 9.9 US cents per share, and despite its restructuring plan it is hard to see Lonmin recovering any time soon considering the platinum market’s chronic supply/demand imbalance.
TalkTalk Telecom Group
Conversely, I believe that telecoms giant TalkTalk (LSE: TALK) is a solid bet for those seeking white-hot growth prospects. The business has seen its stock price erode 19% during the past four weeks, but I reckon this presents a fresh buying opportunity — despite recent softness in its broadband business due to “higher promotional activity,” group revenues still rose 3.5% during April-June, it advised last month.
Recent acquisitions like blinkbox and Tesco Broadband have significantly boosted its position in the multi-services market, while recent initiatives like its ‘Unlimited SIM’ for mobile customers are also proving a winner. Accordingly the number crunchers expect TalkTalk to punch earnings growth of 83% and 55% in the years ending September 2015 and 2016 correspondingly, projections that drive this year’s P/E multiple of 20.8 times to a terrific 12.7 times for the following period.
James Fisher & Sons
Investor appetite for oil hardware specialist James Fisher & Sons (LSE: FSJ) has remained on the rocks thanks to a wallowing crude price, and the business’ shares have dropped 18% since the beginning of July alone. The company advised in its latest financials that “weaker market conditions” had slapped its Offshore Oil division during January-March, and with capex reductions speeding up across the industry I believe such problems could be set to accelerate.
Indeed, just last week Shell and Centrica announced massive rounds of job cuts thanks to the oil sector’s murky outlook — just this week the Brent benchmark slipped back below $50 per barrel for the first time since January. Currently the City expects James Fisher & Sons to record earnings growth of 5% this year, but I am not so optimistic given the massive overhaul across the oil industry. So although a P/E multiple of 14.6 times for 2015 is far from terrible, I believe a reading closer to the bargain barometer of 10 times would be a fairer reflection of the risks facing the rigbuilder.
Aggreko
Like James Fisher, I reckon that Aggreko (LSE: AGK) is a stock not for the feint-of-heart. Shares in the business have dived 17% during the past month, a performance not helped by its latest trading statement where the power generator provider advised that thanks to “further slowdown in our North American oil and gas related business” — not to mention security problems in Yemen — the company now expects full-year results to miss previous estimates.
I had previously been pretty bullish on the firm’s earnings prospects owing to its diversification across a number of engineering and construction sectors. But with troubles in the oil industry continuing to intensify, I believe Aggreko’s projected 4% earnings downgrade for 2015 could be in line for further downgrades. And like James Fisher, an earnings multiple of 15.5 times is hard to justify in this climate.
