The Motley Fool

Is it game over for Neil Woodford flop Provident Financial after today’s 20% drop?

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.

Businessman looking at a red arrow crashing through the floor
Image source: Getty Images.

Ace stock-picker Neil Woodford seems to have lost his magic touch, making a string of bad calls over the last couple of years. Bad credit lender Provident Financial (LSE: PFG) is perhaps the most notorious of all.

Improvident

Provident has lost 80% of its value over the past three years and is down 20% today after issuing a profit warning. It said full-year figures would be at the lower end of market expectations, as customers struggle to service their debt obligations.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Group adjusted profits before tax for 2018 are set to be “towards the lower end of the range of market expectations of £151m to £166m,” with impairments “modestly higher than expected.” This reflects a continued increase in the use of payment arrangements at its Vanquis Bank credit cards arm. Today’s drop wiped out the share price progress seen in the last three months.

Subprime stock

CEO Malcolm Le May did his best to reassure by reporting progress on operational objectives, as well as tightening underwriting standards “in anticipation of the current uncertain UK economic environment we are facing.”

He said Provident has “strong funding and capital positions” and management actions over the last 18 months have established a solid foundation for continuing to deliver on its strategic aim of being the leading provider of credit products to 10m-12m consumers “who are not well served by mainstream lenders.”

Badly impaired

These are tough times and Provident is at the sharp end of consumer debt problems, as more of its customers go into payment arrangements, while Q4 new account bookings at Vanquis fell 18% year-on-year to 76,000.

With Vanquis and the group’s car finance arm Moneybarn both investigated by the FCA, you have to wonder what persuaded Woodford to go so hard into this stock. Some might see an opportunity here, with earnings forecast to grow 22% in 2019, and 20% in 2020. Provident trades at a forecast valuation of 10.6 times earnings and yields a forecast 6.2%, with cover of 1.5. 

It could be a good post-Brexit recovery play. I just fear further bad news in the pipeline.

Kier we go

Woodford-backed construction firm Kier Group (LSE: KIE) slumped 33% in December after launching a £264m rights issue, another blow to his stock selecting reputation. The group wants the money to pay down its debt pile and strengthen its balance sheet as lenders become more cautious towards the construction sector following Carillion’s collapse, as Edward Sheldon explains here.

Things have picked up since. In fact, the group trades 25% higher than it did just one month ago, even as markets generally continue to struggle.

Uppers and Downer

Kier has been supported by some positive broker updates, with Peel Hunt upgrading it to a buy with a target price of 900p, which offers plenty of upside from today’s 505p. The FTSE 250-listed firm has also raised £25m from the disposal of its KHSA operation to Australian firm Downer Group.

The real boost came when it retained its place as a contractor on procurement body North West Construction Hub’s £1.5bn high-value framework for the next four years. A forecast valuation of 5.7 times earnings will tempt some, while the forecast yield of 3.4% is covered five times. This is still a risky sector, though, as the Brexit nightmare drags on. One for risk takers. 

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

harveyj has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.