2016 is shaping up as a poor year for investors in Britvic (LSE: BVIC), which is down 23% since January, BTG (LSE: BTG), down 19%, and Tasty (LSE: TAST) which has sunk by 25% since the beginning of the year.
Should you shun these 2016 losers or are they primed to rebound during 2017 and beyond?
Challenges ahead, but confident directors
Britvic delivered its full-year results statement at the end of November. Despite challenging conditions, 2016’s trading was good with revenue and profit both up around 10%. In a show of confidence, the directors hiked the dividend by 6.5%.
However, in 2017 the firm will face difficult trading conditions and input cost inflation, the directors say. They point to the UK’s vote to leave the EU and the proposed soft drinks levies in Britain and Ireland from April 2018 as drivers of additional uncertainty.
Yet the directors remain upbeat suggesting the firm’s strong balance sheet and a robust strategic plan will overcome obstacles to deliver results in line with expectations for 2017.
We don’t often have the chance to buy a defensive consumer goods business when it looks out of favour. At today’s share price around 560p Britvic trades on a historic price-to-earnings (P/E) ratio just over 11 and the dividend yield runs around 4.4%. I think it’s a good time to look past short-term concerns at the bigger long-term picture here.
‘Double-digit revenue growth drives strong first-half performance’ trumpets November’s interim report from specialist healthcare company BTG. The firm’s chief executive, Louise Makin, reckons the outlook for the full year is strong.
Indeed, BTG is making great progress growing revenues and profits internationally from several products, so what’s this falling share price all about? It could be that previously the shares moved too far ahead based on expectations surrounding a new varicose vein treatment that the firm is rolling out in the US. Progress is slower than expected by many and political uncertainty surrounding the healthcare sector across the pond won’t be helping investor sentiment around BTG either.
Yet BTG remains a quality enterprise with strong, profit-supporting cash inflows, no debt, and growing revenues capable of generating a decent double-digit profit margin. At today’s share price near 562p, BTG trades on a forward P/E ratio just over 17 for the year to March 2018 but there’s no dividend, suggesting the directors see plenty of opportunity for further growth.
A successful rollout programme
A placing in November at 145p per share raised a gross £9m to help Tasty fund its successful restaurant rollout programme. I suspect that the placing price could act as a cap on the share price for a little while but based on all past performance, rising profits, revenues and cash flow will shine through to push the shares back on their upwards trajectory in due course.
Tasty is adding Wildwood-branded restaurants to its estate at a rate measured in high-single-digits each year at the moment and I’ve been impressed with the consistency of growth in all the right financial measurements. At today’s share price around 143p, you can pick up the shares on a forward P/E rating of just under 18 for 2017.