Reporting season might be trailing off a little, but it’s not time to take our eye off the ball and let attractive candidates pass us by. Here are three firms bringing us updates today that I think are worth a closer look.
Shares in greetings card purveyor Card Factory (LSE: CARD) are down 26% to 296p since September 2015, after a 7.5% fall on the day of a first-half trading update.
Total sales grew 4.8%, with like-for-like sales up 0.2%, and the company reported a net opening of 34 new stores and said it’s “confident of delivering another year of approximately 50 net new openings.” But this half’s growth represents a slowing compared to the first half last year, and when high-flying growth candidates start to slow a little, it’s almost inevitable that their shares will take a tumble.
There’s also a hit from the falling value of the pound, but against that we heard that Card Factory is “highly cash generative, driven by its strong operating margins, limited working capital absorption and relatively low capital expenditure requirements,” and there’ll be news of a surplus cash return when interim results are released in September.
TT Electronics (LSE: TTG) shares fell 28% from their 2016 peak in March to late June, after the maker of electronics components reported two years of falling earnings. But since then, they’ve picked up 18% to 144p, perhaps showing some confidence in the current analysts’ consensus of a return to growth this year with a 14% EPS boost on the cards.
First-half results lend credibility to that, with a 25% rise in pre-tax profit and a 21% boost to EPS (16% and 12% at constant exchange rates). Net debt rose from £56.1m to £70.7m, though that doesn’t seem a problem for a company with turnover of more than £500m per year. The interim dividend was maintained at 1.7p per share.
Chief executive Richard Tyson lauded the firm’s return to profitable growth, adding “we are confident of continued progress in 2016.” So are we looking at a bargain now? With a forecast dividend yield of over 4% and further EPS growth predicted for 2017, TT Electronics shares are looking good value to me.
An investment trust?
I’m a fan of investment trusts, and a 21% rise in the share price of Witan Investment Trust (LSE: WTAN) since February has grabbed my attention. Witan is a globally-diversified trust, so could it be a good contrarian time to buy?
First-half results show a 6.4% net asset value (NAV) return, and though that was a little below the firm’s benchmark of 7.7%, excluding changes in the value of debt lifts it to 7.5%. But what really attracts me is that the shares have fallen to a discount of 8.5% to NAV, which means they’re priced at 8.5% less than the market value of the trust’s underlying investments. Investment trust shares do tend to trade at discounts to NAV, but that looks a bit too wide to me — and Witan thinks so too, having been buying back its own shares while they’re lowly-valued.
Total interim dividends amount to 8.5p per share (up from 7.7p at the same stage last year), and though yields of only a little over 2% aren’t that exciting, we’re looking at a growth vehicle rather than an income target. Could be nice.