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Why Shares In Ocado Group PLC And Marshalls plc Are Flying Today

 

Shares in Ocado (LSE: OCDO) and Marshalls (LSE: MSLH) are among the top gainers in the FTSE All-Share today, being up 11.5% and 9% respectively.

While the reason for Marshall’s share price rise is quite straightforward, the cause of Ocado’s sudden gain seems to be rather less obvious. Here’s why.

Marshalls

Today’s interim management statement from Marshalls was extremely upbeat. Indeed, the landscaping specialist posted an increase in revenue of 18% for the ten-month period to the end of October, with the company continuing to experience strong order intake and sales growth in all of its end markets. Furthermore, it stated that if current market conditions continue then it will deliver full year results that are above current market expectations.

This is superb news for investors in the stock and shows that the UK’s return to economic growth is being felt by cyclical stocks such as Marshalls. In addition, an interim dividend of 2p per share will be paid, with Marshalls now yielding 2.8%.

Looking ahead, there seems to be vast potential for Marshalls to continue to deliver strong revenue and profit growth. For example, in the ten month period, international revenue grew by a whopping 34%, with it now accounting for 6% of total sales. With such strong growth prospects outside the UK helping Marshalls to meet (or exceed) its earnings forecast for the current year of +28%, it seems to offer good value for money on a price to earnings growth (PEG) ratio of just 0.8.

Ocado

As mentioned, the reason for Ocado’s 11.5% gain today is less clear cut. There has been no regulatory release to explain the sudden increase, nor has there been any significant director buying of the shares today. In addition, there hasn’t been a results announcement, nor is there one scheduled to be released until 11 December, when Ocado is due to report on its fourth quarter sales numbers. Furthermore, BNP Paribas reiterated its ‘underperform’ rating on the stock today, so that would normally be expected to have a negative impact on the company’s share price, rather than a positive one.

So, why is Ocado up 11.5% today?

The answer could be to do with sentiment in the grocery delivery company. Indeed, Ocado’s share price has risen by a whopping 23% in the last week, with sentiment seemingly improving as investors begin to turn their attention to the e-commerce potential of grocery shopping.

In fact, the grocery space is severely underdeveloped when it comes to e-commerce. Products such as books, electrical items, clothing and a whole host of other items are purchased online. However, just 5% of grocery shopping is done online. As a result, companies such as Ocado could have stunning potential due to there being significant growth prospects on offer in the grocery delivery space.

Furthermore, with it now being viewed as a logistics and technology company that can sell its services to other companies (as it has done with Wm. Morrison), rather than a pure play grocery delivery company, Ocado could have shifted investors’ viewpoints on its future potential. With profitability expected to be delivered in the current year for the first time in its history, Ocado could see sentiment rise even further in the months ahead.

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Peter Stephens owns shares in Wm. Morrison. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.