Can The Surges At Hargreaves Lansdown PLC, SKY PLC And Marks and Spencer Group Plc Keep On Going?

Hargreaves Lansdown PLC (LON: HL), SKY PLC (LON: SKY) and Marks and Spencer Group Plc (LON: MKS) have been flying, but will they get even higher?

| 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.

Since late January 2014, Hargreaves Lansdown (LSE: HL) shares are actually down 6%, but that snapshot hides a much more interesting story. The shares were widely considered a bit toppy back then, and some profit-taking, coupled with sell-off caused by slowing earnings, led to a slump in late October 2014 to around the 850p level.

But in the time since, a fresh spurt has seen the price put on 70% to reach 1,458p — and over five years, the price has almost trebled! But here comes the bad news: that share price climb has pushed the firm’s forward P/E as high as 37, with dividends poised to yield only around 2.5%.

Hargreaves Lansdown’s earnings growth has been impressive, and EPS is predicted to rise by 18% again in the current year. But that’s serious growth pricing, and when it looks like it’s slowing again I’d expect to see a reversion closer to the long-term FTSE 100 average P/E of 14 to 15. It’s a very well-managed company, but way too pricey for me.

Cheap telly

Over at telly and broadband supplier Sky (LSE: SKY) we’ve seen a very strong 2015, with the shares up 24% in 12 months to 1,098p. But in this case, we’re looking at a much more down-to-earth P/E of 17 based on current forecasts, with dividend yields of around 3.3%.

After three years of double-digit EPS rises to 2013, Sky’s growth went off the boil a little and we’ve had a couple of minor falls. But that should reverse again this year, with forecasts suggesting growth of 14%. First-quarter results support those predictions, too, after Sky reported a 10% rise in operating profit from a 6% gain in revenue. Customer numbers are rising nicely, as are the numbers of subscription products they’re buying.

Sky’s share price looks modest to me for a company with such good future growth prospects, and I can see further gains in the next few years.

Finally back?

Investors have had a bit of a love/hate relationship with Marks and Spencer (LSE: MKS) over the years. As a result, the share price today is only around 14% higher than it was at its 1993 peak — and we’ve been through a couple of bone-shaking booms and busts in between.

But it’s looking increasingly like the high-street favourite is finally seeing results from its turnaround plan, with Wednesday’s first-half report telling of a 6.1% rise in underlying pre-tax profit and underlying EPS up 4.9%. And though like-for-like General Merchandise (which is clothing, mainly) fell 1.2%, the firm’s online offering enjoyed a very nice 34% sales rise. Free cash flow was up, and the interim dividend was hiked 6.3% to 6.8p.

The upturn has helped push the shares up 36% since their low in October 2014, to 536p,  although they were even higher in the summer. And with forecasts of two years of growth dropping the P/E to under 14 by March 2017, while the dividend yield rises to 4%, I really can believe that M&S is back on track and looking good value.

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.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown and Sky. 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

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Investing £5,000 in a Nasdaq 100 index fund 5 years ago would be worth this much now

Zaven Boyrazian looks at the Nasdaq 100 index’s performance since December 2019. Has investing in an index fund been good?

Read more »

Electric cars charging at a charging station
Investing Articles

Why the Tesla share price rocketed 38% in November

Our writer considers the reasons for the recent red-hot Tesla share price performance. Is now a good time for him…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
US Stock

Why NIO stock fell 13% in November

Jon Smith flags up a couple of key factors that he believes contributed to the fall in NIO stock over…

Read more »

Investing Articles

Which of these UK stocks is the better bargain in December?

Stephen Wright thinks Diageo and Senior are very different UK stocks with very similar prospects. But which one offers better…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

Mistakes to avoid when investing in the FTSE 100!

The FTSE 100 offers great near-term valuations and dividend yields, but Dr James Fox believes investors should be wary when…

Read more »

Investing Articles

Here’s why the Scottish Mortgage share price jumped 9.2% in November

The Scottish Mortgage share price has been outperforming indexes over recent weeks. Ben McPoland digs into some reasons why.

Read more »

Investing For Beginners

Why the IAG share price rocketed 24% in November

Jon Smith explains why the IAG share price did so well last month, citing three factors at work that helped…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

I think Tesla stock’s overpriced. So why not short it?

Our author thinks Tesla stock has got ahead of itself since the US election. So why not put his money…

Read more »