Can last week’s losers Standard Life plc, DFS Furniture plc and Gulf Marine Services plc bounce back?

Royston Wild considers the bounceback potential of Standard Life plc (LON: SL), DFS Furniture plc (LON: DFS) and Gulf Marine Services plc (LON: GMS) in the light of a tough environment.

| 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.

DFS sofa

Image: DFS: Fair use

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.

Asset manager Standard Life’s (LSE: SL) 10% share price slump from last Monday-Friday isn’t difficult to understand after the shockwaves hitting its UK property fund became apparent.

Standard Life — like seven other major asset management providers including Aviva and Prudential — advised that it had halted redemptions on its £2.9bn fund. The sector is battening down the hatches in order to avoid an asset fire sale as investors head for the door.

The scale of market panic makes this a potentially-perilous time for Standard Life and its peers, a situation that could lead to massive outflows across the business.

At face value these risks may arguably baked-in to Standard Life’s share value, the firm dealing on a forward P/E rating of just 10.3 times. But I reckon the company’s uncertain outlook for the near term and beyond still makes it a gamble too far at the present time.

Sales set to slouch

An environment of sinking consumer confidence following the EU referendum has sent DFS Furniture (LSE: DFS) sliding in recent weeks.

Indeed, the sofa seller has seen its stock price erode 38% since the ballot boxes were closed, including a 12% dip between last Monday and Friday. And I believe further weakness can be expected in the weeks and months ahead as Britons put off spending on ‘big ticket’ items.

Research specialists GfK and YouGov have both released disappointing gauges in recent days, painting a picture of restrained shopper spend as Britons hunker down for a potential recession. As such, it’s easy to see sales of DFS Furniture’s goods declining sharply.

Like Standard Life, DFS Furniture deals on very cheap earnings multiples, the firm changing hands on P/E ratios of 8.1 times and 7.3 times for the years ending July 2017 and 2018 respectively.

But I reckon the strong possibility of significant earnings downgrades for this year and further out still makes the furniture flogger an unattractive pick for the moment.

Contracts corked

Oilfield services provider Gulf Marine Services (LSE: GMS) has also seen its share price decline during the past week, the firm suffering a 27% decline following a disappointing trading update.

Gulf Marine Services announced that two contracts had been cancelled by Middle Eastern customers, an environment of low oil prices prompting its clients to keep the lid on costs. As a result, Gulf Marine Services now expects EBITDA for 2016 to ring in at between $100m and $110m, down from $138.5m in the prior 12-month period.

And it’s difficult to see how oil prices — and with it Gulf Marine Service’s earnings performance — can significantly recover from current levels, as US producers get back to work again and a desperately-required output cut from OPEC remains as elusive as ever.

Sure, some would say that Gulf Marine Services is worth a punt at current prices, the firm dealing on a meagre P/E rating of 3.4 times. But its fragile financial position adds a further layer of risk for stock pickers. I reckon investors should steer well clear at present.

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 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

Investing Articles

Would Warren Buffett buy BP shares, as oil excitement grows?

Warren Buffett is a big investor in the oil business, and BP's performance has been attracting investor attention in results…

Read more »

Cropped shot of an affectionate young couple posing with a bunch of flowers in their kitchen on their anniversary
Investing Articles

Here’s how long-term loyalty to UK shares can lead to dazzling returns!

The most successful UK and US share investors buy shares to hold for the long term, as this report shows.

Read more »

Investing Articles

NatWest has just smashed brokers’ dividend forecasts!

After NatWest delivered a Valentine’s Day surprise to investors, our writer thinks the experts may have to raise their dividend…

Read more »

Investing Articles

The NatWest share price slips in early trading despite positive FY 2024 results. What’s the deal?

The NatWest share price is down slightly this morning after the bank released its final results for 2024. Our writer…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

My Legal & General shares have climbed just 7% — so how come I’m sitting on a 20% gain?

Harvey Jones' trading account is showing only a modest return on his Legal & General Shares, but on drilling down…

Read more »

Investing Articles

Prediction: the BP share price could rise in 2025 (or it might fall!)

Following this week’s release of the energy giant’s 2024 results, our writer reviews the prospects for the BP (LSE:BP.) share…

Read more »

many happy international football fans watching tv
Investing Articles

What’s gone wrong with the FTSE 100’s ‘King of Trainers’?

Feeling the pain of a 28% drop in the JD Sports share price over the past three months, our writer…

Read more »

Investing Articles

Is it too late for investors to consider buying these outstanding FTSE 100 shares?

Stephen Wright wonders whether now's the time to consider buying shares in the FTSE 100’s outstanding companies, despite some high…

Read more »