Should you buy last week’s losers Lakehouse plc (-27%), Lamprell plc (-11%) and Greencore Group (-7%)?

Royston Wild considers whether wise investors should pile back into Lakehouse plc (LON: LAKE), Lamprell plc (LON: LAM) and Greencore Group plc (LON: GNC).

| 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 I considering whether investors should play recent weakness at three Footsie stocks.

Falling down

Shares in Lakehouse (LSE: LAKE) collapsed last week following a poor reception to the construction play’s half-year numbers. Lakehouse advised that revenues excluding acquisitions dropped 17% during October-March, to £130.1m, forcing underlying EBITA to crash 80% to £1.7m.

In particular, the Regeneration division has endured “more difficult trading conditions during the period than expected at the start of the financial year as a result of reduced client budgets and changes in procurement structures,” the firm said. This is the second profit warning that Lakehouse has issued within the space of a few months.

 Still, many investors would no doubt argue that the risks facing Lakehouse are currently baked into the price.

The business is expected to succumb to a 42% earnings slump in the period to September 2016, although still this results in a P/E rating of 4.6 times. And City expectations of a 3p-per-share dividend yields an eye-popping 8.6%, mashing the Footsie big-cap average of 3.5%.

However, the scale of internal strife at the firm — not to mention scale of problems facing its Regeneration arm — arguably makes Lakehouse a poor pick for risk-averse stock selectors.

Driller dives

Oil services giant Lamprell (LSE: LAM) also ducked during Monday-Friday, the stock defying Brent’s move to fresh six-month peaks above $49 per barrel. Investors remain concerned about the scale of capex cutbacks across the oil industry, not to mention the prospect of fresh reductions as the sector toils under chronic supply imbalances.

Just this month Shell slashed its capital expenditure budget for 2016, to $30bn from $33bn previously, despite a recovering crude values. Against this backcloth it comes as no surprise that confidence in support specialists like Lamprell remains equally creaky.

The number crunchers expect earnings at Lamprell to tank 60% in 2016, resulting in a P/E rating of 7.7 times. But like Lakehouse, I reckon current projections could be subject to severe downgrades in the near future, making Lamprell another high-risk selection.

Sandwich star

Food manufacturer and supplier Greencore (LSE: GNC) toppled further from recent record highs last week after advising of a murky trading outlook. 

Greencore saw revenues gallop 8.1% during October-March, to £691.6m, with strong food demand across the US and UK driving like-for-like revenues 12.7% higher. But investors locked onto the firm’s comments that “the UK backdrop is expected to remain uncertain given the changing nature of the grocery industry and other potential economic headwinds.”

The City expects Greencore to post earnings jumps of 10% and 11% in the years to September 2016 and 2017 correspondingly, however.

And consequently Greencore’s slightly-heady P/E rating of 18.5 times for the current period slips to an improved 16.5 times for 2017. While the sandwich maker may not be flavour of the month at present, I fully expect the business to continue serving up robust earnings growth.

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Greencore. 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 »