We don’t use cash like we used to. I don’t, I’m sure that you don’t either. There’s a whopping space in my wallet where my cash used to be kept. If I don’t use the handful of cards that I keep inside it, then I use Apple Pay on my iPhone. Everything else is too much hassle, right?
Well, latest data from UK Finance seems to suggest so. It said earlier this week that just one in 10 retail transactions in Britain is made using cash nowadays. And it predicts that the country will be “virtually cashless” by the middle of the 2030s.
Don’t bank on a comeback
This is a trend that mirrors changing consumer habits around the whole world. It’s a phenomenon that has unsurprisingly buried De La Rue (LSE: DLAR). The money printer’s share price has fallen around 85% over the past three years as cash usage has moved into terminal decline.
Latest results from De La Rue don’t suggest that it’ll rise like the proverbial phoenix from the flames either. Revenues from its Currency unit tanked by almost a third year-on-year between April and September as volumes and prices of its banknotes slipped.
So City analysts expect the FTSE 250 firm’s earnings to plummet again in the current fiscal year (to March 2020). A 76% bottom-line drop is currently being predicted. If proven correct it won’t be the first time annual profits have tanked in recent years. But it could be one of the last, the business saying that there is “significant doubt” over its ability to continue trading due to its high debt levels just three months ago.
So forget about De La Rue’s low forward price-to-earnings (or P/E) ratio of 9.8 times. Not even these levels of cheapness are enough to tempt me to invest today.
Hunting’s headaches
For bargain hunters, buying shares in Hunting (LSE: HTG) might seem a more sensible option. This is a company that also trades on a rock-bottom forward P/E ratio of around 10 times. And unlike De La Rue it also offers a dividend for the current year, one which creates a chubby 2.8% yield.
In my book, though, this is another share that’s loaded with an alarming amount of risk. Freshest trading details in December underlined the huge troubles at the energy services provider as North American shale activity decelerated. It said that the pace of decline is actually accelerating and particularly so in the US onshore segment.
It’s possible that the rig count will keep on falling too, what with key macroeconomic issues (like trade wars, Europe’s lurch towards recession, and Brexit) lingering on in the background. Moreover, the recent coronavirus outbreak threatens to keep oil prices under pressure as well.
A 3% annual earnings drop in 2020 is currently forecast for Hunting by City analysts. I wouldn’t be surprised if its bottom-line troubles extend beyond the current year though, given the alarming shrinkage in the company’s highly-competitive marketplace. This is another share I would say is to be avoided all costs.
