In today’s article, I’ll take a look at the latest figures from easyJet (LSE: EZJ), Persimmon (LSE: PSN) and Majestic Wine (LSE: MJW). Should investors buy, sell or hold each of these stocks?
easyJet
easyJet’s carried 69.8 million passengers last year, a 6.9% increase from the 65.3 million it carried in 2014.
The UK’s largest budget airline seems to have hit upon a successful growth formula. This doesn’t seem to be coming at the expense of efficiency either. The airline’s load factor – the percentage of seats filled on each flight – rose from 90.9% to 91.6% in 2015.
This business is clearly performing well, but are the shares a buy? easyJet trades on a forecast P/E of about 12 and offers a prospective dividend yield of 3.8%. Considering that easyJet has increased sales by almost 60% since 2010 and that the airline industry is notoriously cyclical, I’m tempted to say that this is a full valuation.
If I were a shareholder I’d hold, but I don’t see easyJet as a great buy at current prices.
Persimmon
The UK’s big housebuilders are all doing well at the moment. Persimmon took its turn in the limelight today with news that the firm sold 14,572 new homes in 2015, 8% more than in 2014.
The firm’s average selling price rose by 4.5%, meaning that total revenues rose by 13% to £2.9bn. Net cash balance rose from £378m to £570m. Persimmon’s business is performing well and the group’s 5.4% forecast yield is attractive.
However, housing is a very cyclical business and Persimmon stock currently looks expensive to me. The group trades on 13 times forecast earnings and at a whopping 2.8 times its book value. The downside risk here concerns me.
In the US, the Federal Reserve increased interest rates in December for the first time since the financial crisis. The result appears to be a collapse in mortgage applications, which fell by 27% during the first week of 2016 on a seasonally-adjusted basis, compared to the previous two weeks.
A similar experience in the UK could trigger a sharp correction for housebuilding shares.
Like easyJet, Persimmon is a stock I’d hold until evidence of a slowdown starts to appear, but I wouldn’t be a buyer in today’s market.
Majestic Wines
Majestic shares climbed more than 5% this morning, after the firm said that pro-forma sales rose by 12.2% over the Christmas period. This figure includes Naked Wines’ sales from last Christmas to provide a valid comparison.
Impressively, like-for-like retail sales from Majestic stores rose by 7.3%, while Naked Wines sales were 28.9% higher than the previous year.
The only risk is that we don’t yet know how far Majestic has had to cut prices to achieve sales growth. Back in October, the firm announced a Christmas offer giving a discount of 10% to 33% on all wines and spirits for anyone buying six or more bottles. I’m betting that almost all of Majestic’s customers took advantage of this offer.
Today’s figures suggest a positive sales trend, but I’m reserving judgement for now. Selling wines and spirits is a highly-competitive business. Trading on a 2016 forecast P/E of 21 and a 2017 forecast P/E of 18, Majestic shares don’t yet look cheap to me.
