Which shares have been on the up today? Here’s a couple that I reckon could be set for a good future.
Gaming set for recovery?
Shares in Game Digital (LSE: GMD) spiked in early trading to 76.5p, possibly in anticipation of full-year results due on 13 October. They opened with a gain of more than 6% from Monday’s close, though by midday the price was back around the 73p mark.
But will those full-year results bring good news? Perhaps not. Forecasts are actually suggesting a pretty hefty drop in earnings per share of 67% and a slashing of the dividend from 14.7p last year to around the 3.6p mark. A pre-close update on 3 August told us that “market trends experienced in the first half of the year have continued into our second half,” with the UK market described as challenging — although the company reported good growth in Spain.
At the time, Game said it expects adjusted EBITDA to be within the range of current market expectations, but any sign of recovery could make things interesting — and could the pessimism have led to an oversold share here, after an 80% drop since the end of December 2014?
Well, earnings forecasts for this year have been slashed in recent months — three months ago City analysts were predicting 11.2p in EPS, but that’s down to just 5.3p now. Still, on the upside, when it’s performing well Game Digital is good at generating cash flow, and there was net cash of £120.2m on the books at the interim point in January — and the firm had no long-term debt.
Game Digital is struggling right now, but it looks like a company that has the potential to recover well. I’d remain on the sidelines and keep watching for now, but I can see the price blipping upwards at the first sign of optimism.
A different kind of digital
IT infrastructure provider Softcat (LSE: SCT) was also among the Footsie’s biggest early risers, with a quick 4.2% rise to 334p. By early afternoon that had settled back to 327p, but could we be looking at improving sentiment ahead of full-year results due on 19 October?
Softcat only floated in November 2015, and so far its first year of trading as a public company has seen its share price gain a perfectly reasonable 16.7% — although it’s been a fairly volatile ride.
For the first half of the year, Softcat reported a 10.4% rise in revenue with a 12.9% rise in adjusted operating profit (though reported operating profit was down 11.1%). Adjusted EPS perked up by 16.5% and a maiden interim dividend of 1.7p per share was announced.
The firm’s third-quarter update offered a positive outlook saying it should “deliver a strong performance for the full year,” so current forecasts for a 7% rise in EPS could be on the money. That would put the shares on a P/E of around 16.5, with a relatively uninspiring dividend yield of only 2.6% pencilled-in, so on the face of it there might not be too much to get excited about.
But we’ve seen a pretty good start since flotation, and with strong cash conversion I’d say the company is looking promising in a strong business — I’d say it’s definitely one to keep an eye on.