Are Vedanta Resources plc, Persimmon plc And Legal & General Group Plc A Buy After Today’s Updates?

Are Vedanta Resources plc (LON:VED), Persimmon plc (LON:PSN) and Legal & General Group Plc (LON:LGEN) likely to beat expectations this year?

| 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.

Interim updates from Vedanta Resources (LSE: VED), Persimmon (LSE: PSN) and Legal & General Group (LSE: LGEN) proved a very mixed bag this morning.

Are any of these firms’ shares worth buying — or selling — after today’s updates?

Vedanta Resources

Shares in India’s largest natural resources company, Vedanta Resources, slipped this morning, after the company revealed a $324.5m first-half loss and suspended its dividend. All of the firm’s key commodities — oil and gas, zinc, silver, iron ore, copper and aluminium — are currently suffering from depressed prices.

The loss of the dividend will be a blow to Vedanta shareholders, many of whom expected the $0.65 forecast payout to be delivered. At today’s share price, this would have represented a yield of more than 8%. Too good to be true, as it turns out.

There was some good news, however. Free cash flow of $1.3bn helped reduce net debt by $0.9bn to $7.5bn. If Vedanta can continue to maintain or reduce its debt, then the firm’s low cost assets could make it a very profitable way to play a commodity recovery, when prices do start to rise.

I’m not sure we’re there yet, though. In my view, there’s no rush to buy Vedanta shares at the moment.

Persimmon

Housebuilder Persimmon delivered a solid third-quarter trading update this morning. The group said that the private sales were 12% higher than during the same period last year, while visitor numbers to development sites were up by 5% on last year.

There was no mention of profit, but the firm said that its operating margin is expected to rise above the first-half level of 20.5% during the second half of this year. Net cash is also expected to be higher than at the end of 2014, when Persimmon had £378.4m in cash.

Despite this positive update, Persimmon shares are down by 2.5% as I write. One reason might be the growing feeling that housebuilders are throttling back growth in order to sustain the current housing boom. After six consecutive years of double-digit profit growth, Persimmon’s earnings per share are expected to rise by less than 10% next year.

Indeed, I think it’s fair to say that Persimmon’s main attraction is now income, rather than capital gains. So far, Persimmon has returned £733m of a planned total of £1.9bn to its shareholders.

Analysts expect a payout of 113p per share in 2016, giving a prospective yield of almost 6%.

Legal & General

Legal & General’s good run of form appears to be continuing. The insurer and asset manager said that net cash generation rose by 14% to £943m during the third quarter. The firm’s investment management business received net inflows of £21.7bn, a sharp contrast to the net outflows seen at firms such as Aberdeen Asset Management.

For income investors, Legal & General remains very attractive, in my view. The firm offers a well covered 5% prospective yield and a strong balance sheet.

Investors looking for capital gains may need to be more cautious. Legal & General shares now trade at 2.6 times net asset value and 14 times forecast earnings.

Further upside could be limited, especially as earnings per share growth is expected to halve from 14% to 7% in 2016.

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.

Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management. 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

If the stock market crashes, I’ll pour shares of this luxury brand into my ISA

Nobody knows when the stock market will next crash. But this Fool already knows the stock he will buy without…

Read more »

2024 year number handwritten on a sandy beach at sunrise
Investing Articles

A Q1 trading update pushes the Beazley share price up a bit more. Is it still cheap?

The Beazley share price has been motoring up in what might turn out to be the start of a 2024…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

Prediction: this will be the FTSE 100’s next great stock!

This FTSE 250 stock has more than doubled in value during the past five years. Our writer thinks it could…

Read more »

Yellow number one sitting on blue background
Investing Articles

Billionaire Bill Ackman has just 1 magnificent AI stock in his FTSE 100-listed fund

Our writer takes a look at the only AI stock held in the portfolio of FTSE 100-listed Pershing Square Holdings.

Read more »

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

2 penny stocks this Fool thinks could deliver phenomenal returns!

Penny stocks are a risky but exciting asset class to invest in, prone to wild volatility. Our writer thinks he's…

Read more »

Buffett at the BRK AGM
Investing Articles

I’ve just met Warren Buffett’s first rule of investing. Here are 3 ways I did it

Harvey Jones has surprised himself by living up to Warren Buffett's most important investment rule. But is his success down…

Read more »

Engineer Project Manager Talks With Scientist working on Computer
Investing Articles

Down 51% in 2024, is this UK growth stock a buy for my Stocks and Shares ISA?

Ben McPoland considers Oxford Nanopore Technologies (LSE:ONT), a UK growth stock that has plunged over 80% since going public in…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

These 3 growth stocks still look dirt cheap despite the FTSE hitting all-time highs

Harvey Jones is hunting for growth stocks that have missed out on the recent FTSE 100 rally and still look…

Read more »