Is Now The Perfect Time To Buy Diageo plc, Speedy Hire Plc And Barratt Developments Plc?

Are these 3 stocks ripe for investment at the present time? Diageo plc (LON: DGE), Speedy Hire Plc (LON: SDY) and Barratt Developments Plc (LON: BDEV)

| 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.

sdf

Shares in tool hire company Speedy Hire (LSE: SDY) have fallen by as much as 16% today after a profit warning was issued. The key reason for this is the continuation of legacy issues that the company is attempting to overcome, but which are taking longer than anticipated to put right. As a result, performance for the full-year is expected to be weighted heavily towards the second half of the year, with results due to be materially below current market expectations.

Clearly, the news is disappointing for the company’s investors.  And while Speedy Hire is attempting to become a more efficient business through improving asset availability, realigning its sales structure and changing its IT processes, any benefits are unlikely to be felt until at least the second half of the current year.

So although the 60% fall in its share price since the turn of the year puts Speedy Hire on an ostensibly tempting price to earnings (P/E) ratio of just 9.8, its shares could come under further pressure in the short run as the market begins to price in what appears to be a difficult year for the business.

Meanwhile, house builder Barratt (LSE: BDEV) is quite the opposite of Speedy Hire. It is enjoying its best performance for many years, with demand for new housing being high and interest rates being at their lowest ever level. As such, the company’s bottom line is marching onwards and upwards, with growth in earnings of 18% being forecast for the current year. This puts Barratt on a forward P/E ratio of just 12.5, which indicates that its shares are likely to continue to beat the wider index over the medium term.

In addition, Barratt seems likely to become a very enticing income play. It is due to yield as much as 4.5% in the current financial year and, with dividends being covered 1.8 times by profit, there is substantial scope for a rise in shareholder payouts in the coming years.

Also having the potential to raise dividends in future is beverages company Diageo (LSE: DGE). For a mature company operating within a mature industry, its payout ratio of 65% is rather modest when compared to a number of its global consumer goods peers. As such, its yield of 3.3% has the scope to rise significantly with, for example, a payout ratio of 80% equating to a yield of 4.1% at Diageo’s current share price.

Clearly, Diageo also has excellent growth potential. Its pivot to emerging markets may be hurting its share price performance in the short run, since economies such as China are posting falling growth rates, but in the long run Diageo is likely to be a major beneficiary of such exposure. With a growing middle class which is seeking established spirits brands, Diageo has superb long term growth prospects which seem to be on offer at a relatively reasonable price via a P/E ratio of 19.4.

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.

Peter Stephens 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

many happy international football fans watching tv
Investing Articles

Is this FTSE 250 stock gearing up to more than double its market cap by October?

Our writer considers the implications of a recent stock market announcement for the share price of this FTSE 250 retailer.…

Read more »

Inflation in newspapers
Investing Articles

3 overlooked UK shares growing dividends faster than inflation

Mark Hartley highlights three lesser-known UK shares offering inflation-beating dividends, while noting key risks investors should watch.

Read more »

Belfast City Sunset with colorful twilight over Lagan Weir Pedestrian and Cycle Bridge spanning over the Lagan River in downtown Belfast
Investing Articles

My 3 ‘secret’ rules I always follow when hunting passive income stocks

Mark Hartley reveals three perhaps not-so-secret tips he uses to ensure his passive income strategy doesn't come back to bite…

Read more »

Man riding the bus alone
Investing Articles

Is there a good reason to consider Greggs shares?

Greggs' shares have been in a state of decline over the past 12 months. However, Dr James Fox remains concerned…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

What’s going on with the Jet2 share price now?

The Jet2 share price pulled back after its preliminary results were released on Wednesday. Dr James Fox explains why this…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Is ‘SIMAGA’ the secret to avoiding stock market crashes?

Is there any way for investors to avoid stock market crashes? This method worked for centuries, but is now breaking…

Read more »

Middle-aged black male working at home desk
Investing Articles

Here’s a cheap FTSE 100 share to consider buying today and holding for 10 years!

Driven by a new commodities supercycle, I'm expecting this FTSE 100 mining stock's shares to take off between now and…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

£10,000 invested in Palantir stock 5 years ago is now worth…

Palantir stock's exceeded the expectations of probably the most bullish analysts. But Dr James Fox isn’t convinced by the current…

Read more »