Are Globo Plc And Findel plc Set To Double Or Halve In Value?

Here’s why this Fool would choose Globo Plc (LON:GBO) over Findel plc (LON:FDL).

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.

That was quick!

You’d have recorded a 35% pre-tax gain if you had followed my advice to consider Globo (LSE: GBO) at 28p a share on 16 September — a “top pick“, as I described it.

The obvious question now is whether its shareholders will enjoy a true value story, or if rapidly rising returns are destined to fade away — let’s delve into its interim results, which were released today. 

Strength

Globo’s stock price has risen 8.2%, to 38p, so far today — and rightly so, in the wake of a solid trading update.

Recent news about its strategy also bodes well for long-term value. 

Strength is in the numbers, and although its growth rate for net income per share is lower than that of other key metrics and may point to a risky investment, you should pay attention to a few other details at this stage of maturity for this tech business. In fact, its most relevant financial metrics indicate that the group is on the right pattern of growth, driven by mobile. 

Its interim results for the years ended on 30 June showed: 

  • Revenue up 56% to €72.4m (1H14: €46.5m);
  • A 55% rise in EBITDA to €34.2 (1H14: €22m);
  • Last twelve months EBITDA at €63.1m;
  • Pre-tax profit up 37% to €22 (1H14: €16.1m);
  • Net operating cash up €21m (1H14: €16.6m);
  • Net cash increased to €47.4m (31 December 2014: €40.4m).

Based on the value of its current assets, its price-to-tangible book value, cash flow and earnings multiples, I don’t see why Globo could not double to 74p, or at least trade closer to its 52-week high of 64p over time.

While it’s true that its lowly earnings per share (EPS increased 14% to €0.049 versus €0.043 in 1H14) could get lower following the issuance of its upcoming high-yield bond, your focus over the next four to six quarters ought to be on its revenues and core cash flow profile, both of which in my view suggest that Globo deserves a valuation some 15p to 25p higher, based on fundamentals. 

Better Value Elsewhere? 

Elsewhere, Findel (LSE: FDL) rose over 15% in early trade today as it emerged that Sports Direct had acquired a stake of almost 19% in the retailer. Strategically, I am not sure this is a great deal for the buyer, although the valuation of Findel is attractive based on earnings and cash flow multiples. 

Findel also said that since completing the strategic review of its sports retailing business, Kitbag, it had “subsequently received an approach for the business from a third party and has agreed terms subject to contract,” adding “However, there can be no certainty that a deal will be reached.

Its shares look fully priced to me right now. 

Today’s rise to 230p appears obvious, as investors bet on deeper ties between Sports Direct and Findel from now on, but aside from that single element, I really struggle to be bullish about a business that is not expected to grow at a particularly fast pace, whose underlying core margins could come under more pressure and whose balance sheet is not particularly strong, to put it mildly. 

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.

Alessandro Pasetti 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

Investing Articles

Here’s how investing £250 a month could bag me over £10K in passive income annually

This Fool breaks down how she would go about building a passive income stream worth over £10,000 annually to enjoy…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

I’d snap this FTSE 250 stock up in a heartbeat for juicy returns and growth!

Sumayya Mansoor explains why this FTSE 250 property stock is firmly on her radar as she looks to buy stocks…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

1 dirt-cheap FTSE 100 stock investors should consider buying in June

The FTSE 100 is littered with bargains, according to our writer. She explains why investors should be taking a closer…

Read more »

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

The Legal & General share price has gone nowhere. Why?

The Legal & General share price has performed much worse than the the FTSE 100 over the past five years.…

Read more »

Investing Articles

Where will the BT share price go in the next 12 months? Here’s what the experts say

The BT share price has been sliding for years. But after the latest set of results, it looks like the…

Read more »

Investing Articles

Are National Grid shares now a brilliant bargain?

National Grid shares look exceptionally cheap following last week's selloff. Is now the time to buy the FTSE 100 firm…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Up more than 15%! — this small-cap company is delivering phenomenal dividend growth

There’s more good news in this company’s interim report and it may be shaping up as a decent dividend growth…

Read more »

Electric cars charging at a charging station
Investing Articles

Big news for Tesla stock investors!

Tesla has just quietly dropped a key target it set for itself just a few years ago. What does this…

Read more »