Shares in Internet of Things company Telit Communications (LSE: TCM) have sunk by over 10% after the company reduced its full-year guidance. Instead of the previously anticipated revenue of £225m, Telit now expects its total sales to be between £215m and £222m. This has clearly disappointed the market, with the company’s shares being among the biggest fallers so far today.
The updated guidance figures are somewhat surprising, since in today’s trading update Telit has reported a strong first three quarters of the year. For example, revenue in the first three-quarters of the year increased by 15% and the company has seen robust performance from its automotive product line as well as its Internet of Things services.
Looking ahead, it appears to have huge potential and is well-placed to benefit from a gradual shift towards the increased use of machine-to-machine communications, in which Telit specialises. So, while its top and bottom lines may not rise by quite as much as expected in the current year, it continues to trade on a relatively low price to earnings growth (PEG) ratio of just 0.5, which indicates that its shares offer growth at a very reasonable price. Certainly, today’s share price fall is disappointing, but it appears to be a buying opportunity for long term investors.
Similarly, Shell’s (LSE: RDSB) slump over the last year is also an indicator that its shares may prove to be a bargain. They are down by almost 20% in the last year and, with the price of oil continuing to come under pressure, Shell’s share price has failed to make a sustained comeback during the period.
Looking ahead, though, Shell may emerge from the current oil crisis in a stronger position relative to its peers. Its strategy of focusing on core areas and cutting back on exploration spend (notably in the Arctic) seems to be a sound move, while leveraging its balance sheet while interest rates are low and asset prices are cheap is likely to place its profitability on a very impressive path in the coming years. Plus, in the meantime Shell yields a very enticing 6.7%, which is 77% higher than the wider index’s yield of around 3.8%.
Dividends are also hugely appealing at house builder Berkeley (LSE: BKG). It currently yields 5.2% and has huge earnings growth potential, with there being a supply/demand imbalance within the property market which means that house prices are likely to remain buoyant over the medium term.
Certainly, interest rate rises are likely to peg back their future growth rate, but Berkeley should still be able to grow its bottom line at a brisk pace, thereby making its price to earnings (P/E) ratio of 13.1 seem rather low. And, with Berkeley’s bottom line set to rise by as much as 53% next year, there is a clear catalyst to push its share price higher in the coming months and years, too.
