Grainger PLC, Thomas Cook Group plc And Solo Oil PLC: Should You Buy On Today’s News?

Do today’s updates strengthen the investment case for Grainger PLC (LON: GRI), Thomas Cook Group plc (LON: TCG) and Solo Oil PLC (LON: SOLO)?

| 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.

Today’s third quarter update from travel company Thomas Cook (LSE: TCG) was rather mixed. On the one hand, trading conditions remain challenging after the terrorist attacks in Paris and Istanbul. However, on the other hand Thomas Cook has performed relatively well given the operating environment and is on track to meet full-year expectations.

The company reported a rise in revenue of 1% versus the same time period last year, with an improved gross margin also helping its underlying operating loss to narrow by 11% to £49m. And with robust customer demand in the UK and Northern Europe, the company has been able to offset weakness in Continental Europe and the Airlines Germany division. As such, its medium term outlook remains positive – especially since Thomas Cook has sold 82% of programmes in its winter trading period, broadly the same as at a similar stage last year.

With Thomas Cook trading on a price-to-earnings (P/E) ratio of 8.4, it offers excellent value for money when its earnings growth forecast of 27% for the current year is taken into account. Certainly, further economic uncertainty is likely, but the company’s risk/reward ratio is appealing and today’s update confirms that it could be a strong buy for the long term.

Overvalued shares?

Also reporting today was residential landlord Grainger (LSE: GRI). It continues to experience high demand for its wholly-owned and managed UK private rented sector homes, with there also being positive growth in regulated tenancy rents in the four months to January 31. For example, rental increases in the year for owned and managed private rented sector homes averaged 7.8% on new lets and 3.6% on renewals, with increases for regulated tenancy assets rising by 6.3%.

Despite this, Grainger is still set to report a fall in its bottom line of 24% in the current year. This puts it on a forward P/E ratio of 27.1 and a yield of only 1.4%. Certainly, there’s scope for further rises in rental income moving forward and the company has a sound strategy, particularly regarding its investment in the private rented sector. However, its shares appear to be overvalued in a cheap market, thereby making other stocks more appealing.

Risk and rewards

Meanwhile, Solo Oil (LSE: SOLO) has today announced an increase in its interest in the Kiliwani North Development Licence (KNDL) to 10%. Solo Oil currently has a 6.2% interest in the KNDL and will pay $2.16m to exercise its option and increase its holding. Solo Oil will pay $500k initially, with the balance due to be paid by the end of April 2016.

The deal appears to be an obvious move for the company and with gas production at the Kiliwani North-1 well expected to start shortly, there’s the potential for improved investor sentiment in Solo Oil following its share price fall of 28% in the last three months. And with it having relatively appealing geographical diversity via its interests in Africa, the UK and North America, it could prove to be a strong long-term performer. However, it continues to be a relatively high risk play due in part to its size, so may only be worthy of a closer look for less risk-averse investors.

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.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

5 steps to start buying shares with £5 a day

In a handful of steps, our writer explains how someone new to the stock market could start buying shares for…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

3 essential factors for investors to consider when aiming for passive income success

Mark Hartley outlines three of the most important considerations investors are faced with when attempting to secure a lucrative passive…

Read more »

Investing Articles

£10,000 invested in Barclays shares 1 month ago is now worth…

Barclays shares have carried on where they left off in 2024, by climbing far faster than the FTSE 100. Harvey…

Read more »

Investing Articles

I’ve been watching the easyJet share price like a hawk. Here’s what it did last week

Harvey Jones can't take his eyes off the easyJet share price. He thinks it looks good value and ready to…

Read more »

Investing Articles

A £10,000 investment in Nvidia stock 6 months ago is now worth…

Nvidia stock's shown a lot of volatility for a mega-cap company in recent weeks. Dr James Fox explores how an…

Read more »

Investing Articles

4 reasons Ferrari could continue to be a stock market winner

The global luxury goods market may have struggled in recent years, but you wouldn’t guess that from Ferrari’s soaring stock.

Read more »

Investing Articles

5 perfect starter stocks to consider for a Stocks and Shares ISA in 2025

Wondering which shares to buy for a newly opened Stocks and Shares ISA? Our writer thinks these five investments are…

Read more »

Row of terrace houses.
Investing Articles

Thinking about buy-to-let? Consider these UK stocks instead

Owning UK property stocks could be a better way to invest in buy-to-let, though there are drawbacks. Royston Wild explains.

Read more »