We’ve had some pretty amazing share price gains in 2015, but can they keep on going?
Take online estate estate portal Rightmove (LSE: RMV), which has been profiting nicely from the recovery in the housing market. Rightmove has been enjoying years of double-digit earnings growth as buyers turn away from traipsing round high street estate agents and to the comfort of their own armchairs. And that’s been reflected in the share price, which has climbed by 88% over the past 12 months alone, to 4,054p, and has more than five-bagged in five years.
But is the bull run coming to an end? Well, we still have around 15% EPS growth per year forecast for this year and next, and July’s half-time results suggest that’s pretty much on target. Revenue grew by 16%, with basic earnings per share up 16% — and an adjusted EPS rise of 24%. The interim dividend was lifted by 23%, although it’s only expected to yield 1% at this stage.
The price rise has pushed the prospective P/E up as high as 36, though, which is around 2.5 times the FTSE’s long-term average, so growth needs to continue — and the first sign of faltering could result in a sharp price drop.
Sporty
JD Sports Fashion (LSE: JD) has done even better, with a 107% price rise in 12 months, to 1,037p. That was boosted by a trading update released on 3 December, telling us that the “exceptional” performance reported at the interim stage has continued, and that pre-tax profit is now likely to beat the current market consensus.
That consensus suggests a 25% rise in EPS for this year, which would put the shares on a P/E of 21. That’s maybe stretching it a bit, but the critical December trading period is upon us, and the firm’s Christmas trading update due on 14 January could well provide a further boost to sentiment.
JD’s international expansion currently underway and planned to continue for some years could well set it up for a nice long period of earnings growth, as it expands into market gaps created by the recession.
Scary
I confess that Supergroup (LSE: SGP) scares me, with its shares continually lurching between booms and busts. Over the past five years, the price has reached a fraction short of £19 before collapsing as low as 261p, and after a few more ups and downs it’s now back at £16.50 — for a 90% gain in 12 months.
The firm’s first-half update last month looked good, with revenue from its Superdry brand up 22% and its growth in store openings continuing at an impressive pace — average selling space was up 21%. Analysts are predicting EPS growth of 15% for the full year with a further 18% the year after, and they’re pretty bullish with the Buy recommendations.
A prospective 2017 P/E of 21 actually might not be too stretching — but, and it’s a big one, nobody knows what’s going to be fashionable next year!
