Are Supergroup plc (+13%), Hays plc (+4%) and Micro Focus International plc (+10%) buys after today’s positive updates?

Should you pile-in to these three risers? Supergroup plc (LON: SGP), Hays plc (LON: HAS) and Micro Focus International plc (LON: MCRO).

| 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.

Shares in Micro Focus (LSE: MCRO) have soared by 10% today after it released a positive set of results. Sales and profitability were both at the top end of management’s expectations and were driven by strong performance in the SUSE product portfolio, where revenues increased by 18%. Micro Focus’s financial performance was also aided by integration benefits that resulted in a $76m reduction in adjusted operating costs versus the prior year.

The software provider, however, also reported that it expects either a slight drop or flat revenue in the current financial year as it seeks to implement a four-phase plan. Furthermore, it’s aiming to stabilise revenues around a solid core from which it will aim to grow them in the 2018 financial year.

Despite this, the market has reacted positively to the Micro Focus results, with its shares up 10%. They now trade on a price-to-earnings (P/E) ratio of 15.3, which given the company’s long-term growth outlook appears to be fair value. Although Micro Focus now yields just 2.3% following its share price rise of 27% in the last year, dividends are covered 2.9 times by profit and so should rise rapidly over the medium-to-long term.

UK slowdown

Also reporting today was Hays (LSE: HAS). The global recruitment company recorded a strong performance in Europe and as a result of this, its operating profit for the full year will exceed market expectations. That’s despite a rather sluggish UK market slowing down its overall growth rate. Net fees in the UK fell by 3% in the final quarter of the year, with a challenging performance in the public sector recruitment space and a weakening of sentiment in the private sector prior to the EU referendum being the major causes.

Looking ahead, Hays is forecast to record a rise in earnings of 9% this year followed by a fall of 3% next year. Trading on a P/E ratio of 13.8, its shares appear to be fully valued at the present time – especially with the outlook for the UK jobs market being somewhat uncertain.

Super growth for womenswear

Meanwhile, high street fashion retailer Supergroup (LSE: SGP) is up by 13% today after reporting a strong set of results. Although on a reported basis pre-tax profit fell to £55m from £59m in the prior year, this was due to an exceptional cost of £17m relating to losses on financial derivatives and in the assessment of fair values. Excluding that cost, Supergroup enjoyed excellent growth, driven in part by a strong showing from womenswear, which was its highest growth category of the year.

Supergroup has also announced a special dividend of 20p per share and with it having bright future prospects, it could continue today’s share price rise in future. It’s forecast to record a rise in earnings of 10% this year and 12% next year and due to it having a price-to-earnings growth (PEG) ratio of just 1.3, now seems to be a good time to buy it.

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 recommended Micro Focus and Supergroup. 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

Here’s the latest growth and share price forecasts for Nvidia stock

Nvidia is due to report Q4 results towards the end of February. Should I buy the stock in anticipation of…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Is the party over for the S&P 500 as Trump’s tariffs loom?

Donald Trump's planned tariffs have cast doubts on the future performance of the S&P 500. What should investors do now?

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Warren Buffett continues to invest in this well-known pizza company

Warren Buffett just bought another 1.1m shares in Domino’s Pizza. Should investors follow him into the well-known fast food company…

Read more »

Investing Articles

A £100 weekly income from a Stocks and Shares ISA? It’s possible!

Mark Hartley details how a combination of good stock picks and patience could transform a Stocks and Shares ISA into…

Read more »

Young black colleagues high-fiving each other at work
US Stock

Why Apple stock could be set to soar with the new Alibaba partnership

Jon Smith explains why a new deal relating to the Chinese market could be good news for Apple stock, not…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

This FTSE stock tanked 58% last week. But there could be some good news!

Shares in John Wood Group plunged after the FTSE engineering stock released a trading update. But our writer thinks there…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£1,000 invested in Tesla shares 2 months ago is now worth…

Tesla shares have soared over the last decade. However, since 17 December 2024, they have lost more than a quarter…

Read more »

US Stock

Could Trump’s tariffs cause a stock market crash?

Jon Smith looks at the recent whipsaw movements in the markets relating to US trade policy and talks through stock…

Read more »