Is now the right time to buy Just Eat PLC (-16%) Centamin PLC (+93%) & Avation PLC (+10%)?

Roland Head explains the trends behind the latest updates from Just Eat PLC (LON:JE), Centamin PLC (LON:CEY) and Avation PLC (LON:AVAP).

| 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.

Time to take a bite?

Is takeaway ordering service Just Eat (LSE: JE) the new Rightmove? Shares in the tech firm are down by 16% this year but have climbed 8% today, after management increased earnings guidance for this year from £98-100m to £102-104m.

Just Eat said that like-for-like sales rose by 41% during the first quarter, while total sales were 57% higher than during the same period last year.

The firm also said that it had increased the commission rate it charges UK takeaways by 1% in April. At the same time, the company increased the frequency with which it pays restaurants the money they are owed from twice monthly to weekly. The firm says “the initial response to these changes has been positive”.

These changes suggest to me that Just Eat’s customers (takeaway restaurants) depend on Just Eat for an increasing share of their business. They now have no choice but to accept commission rate increases without much complaint.

Just Eat now trades on about 40 times 2016 forecast earnings. This isn’t cheap, but with a PEG ratio of less than 1, Just Eat could still be a profitable growth buy.

Too late for this gold miner?

Egypt-based gold miner Centamin (LSE: CEY) has climbed by 94% so far this year, thanks to a 21% rise in the price of gold.

Centamin’s share price edged 3% higher today after it said that gold production rose by 6% to 125,268 ounces during the first quarter of the year. All-in sustaining cash costs, the most complete measure of the total cost of mining and producing, are expected to be $900 per ounce this year.

With gold currently trading at $1,296 an counce, Centamin should deliver strong profits this year. The firm has no debt and does not hedge any of its gold production, so the rising gold price will feed straight through to Centamin’s profits.

The only problem is that Centamin shares are starting to look quite pricey. This stock now trades on 17 times 2016 forecast earnings and 20 times 2017 forecast earnings. This year’s gains also mean that the expected dividend yield is just 1.6%.

In my view, the shares remain a hold, but it may be too late to buy.

Is the tide turning?

German airline Lufthansa said this morning that it will scale back its plans for capacity growth. In its Q1 results last week, British Airways owner International Consolidated Airlines Group said it too would moderate its growth plans.

If the airline industry has reached the end of its long-running growth cycle and is heading into a slowdown, then then outlook for airplane leasing firm Avation (LSE: AVAP) could become uncertain.

Avation issued a brief update today confirming that its fleet utilisation is currently 100%, with an average remaining lease term of 6.4 years. Avation has experienced management but has not won over the City — Avation shares trade on just 8.8 times forecast earnings, falling to 5.7 for 2017.

One reason for this is probably Avation’s net debt of $409m. Although this is covered by the value of its fleet and other fixed assets, any reduction in fleet utilisation could make it hard for Avation to generate a profit after debt costs.

In my view, the balance between risk and potential reward isn’t very attractive, so I’m staying clear for now.

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 Rightmove. 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

The National Grid share price nosedived 21% in 2 days! Is it time to take advantage?

The National Grid share price tumbled after the company surprised shareholders by revealing plans to raise more money via a…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Dividend Shares

How I’d try to ironclad my second income before interest rates fall

Jon Smith explains a couple of tactics he's looking to implement in his dividend portfolio to try and protect his…

Read more »

Investing Articles

The FTSE 100 still looks cheap to me. But don’t just take my word for it!

The FTSE 100 (INDEXFTSE:UKX) has increased 7.5% since the start of 2024. But I think there’s evidence to suggest that…

Read more »

Investing Articles

What should the Vodafone share price be? Here are 3 possible answers

Our writer uses a number of popular financial measures to come up with an estimate of a fair value for…

Read more »

Investing Articles

Here’s how much I’d have if I’d bought 1,000 shares in this FTSE 100 defence stock 5 years ago

I could have made a pretty penny investing in this leading FTSE 100 defence stock. Now I’m looking at a…

Read more »

Investing Articles

1 potential millionaire-maker UK stock I’d like to buy for the long haul

For long-term investors, here’s 1 UK stock to consider buying right now with the potential to help power a growth…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

These cheap UK shares look way too good to ignore right now

With the UK stock market reaching new highs recently, this Fool plans to grab these two remaining cheap shares before…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

This unloved UK stock could rise 120%, according to a City broker

Some City analysts reckon a once-popular UK stock can recover from its massive recent decline and go on to more…

Read more »