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Should I Buy These Shares? Tui Travel plc, GKN plc, CRH plc, Melrose Industries plc and John Wood Group plc

I’ve been popping stocks into my shopping trolley in recent weeks and it’s high time I took one or two to the checkout. Here are five tempting stocks from May and June. Should I buy any of them?

Tui Travel

Tui Travel (LSE: TT) was flying last time I looked at it in late May, soaring 120% in the previous 12 months. I suggested that Tui could have further to travel, and the sun shone on its Q3 results, with strong demand across key markets, growing appetite for its “unique” holidays, and an 18% rise in underlying operating profits to £87 million. Management is on target to achieve its full underlying operating profit growth of at least 10% this year. Travel should recover strongly if the economy keeps growing, and with forecast earnings per share (EPS) growth of 12% to September and 9% the year after, Tui could be worth a trip.

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GKN

Global engineering group GKN (LSE: GKN) has also gone a long way lately, with its share price rising 144% in three years. It is up another 20% since then, after first-half results showed profit before tax up 5% to £278 million. Group sales, including acquisitions, rose 12% to £3.86 billion, with three out of its four divisions reporting growth (profits from its Driveline business fell 3.3% to £117 million). GKN is a fast-growing company in areas that are relatively buoyant, such as aerospace and commercial aircraft. Forecast EPS is a whopping 18% in the 12 months to December 2014, but it doesn’t look overpriced at 13.2 times earnings. Despite a relatively low yield of 2.1%, GKN merits closer attention.

CRH

It has been a tough few years for the UK construction industry, but latest figures suggest things are looking up, with sector output rising 2.2% in July. That should be good news for building materials supplier CRH (LSE: CRH), which has endured a tough few years. Its share price is up 15% in three months, however, despite poor recent interim results, which saw sales down 3% and 6% on a like-for-like basis. EBITDA fell 24% year-on-year. Management remains positive in the face of European weakness, spending €470 million on acquisitions in the first half, and looking forward to a US recovery. EPS is forecast to fall 20% this year, then rise a stonking 47% in 2014. Perhaps that explains the pricey valuation of 24 times earnings. Given recent troubles, it looks risky to me.

Melrose Industries

Engineering group Melrose (LSE: MRO) is another company growing on acquisitions. I applauded its private equity-style approach to the manufacturing industry: buying underperforming companies, setting them straight, and selling them at a profit. Its share price had risen 180% over five years and has risen another 25% since then. Its interim first-half results showed revenue of £1.02 billion, up from £466 million last year. Operating profit hits £165 million, up from £75 million. Its Elster acquisition is going well with profits up by one-third and chairman Christopher Miller concluded that “2013 is looking like it could be a very successful year”. I liked Melrose in June, and I like it today, even at 18.5 times earnings.

John Wood Group

International energy services company John Wood Group (LSE: WG) enjoyed itself in 2012, helped by its exposure to the US shale industry, and rewarded investors with a 26% hike in its dividend. But its share price has fallen in recent weeks, along with the oil price. First-half growth was solid, however, with revenue from continuing operations up 3% to $3.45 billion, and EBITA up 18% to $245 million. Strong growth in the Americas, particularly US shale, North Sea contract renewals and international awards point to a positive future. I wish it was cheaper, at 18.6 times earnings, but what do you expect, with forecast EPS of 37% this calendar year? Looks like a buy to me, especially if we get a market correction at some point.

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> Harvey doesn't own shares in any of these companies

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