Today I am looking at the investment potential of three London-listed headline makers.
Budget clothing retailer Bonmarche (LSE: BON) has failed to invigorate the market in Thursday trade despite releasing yet more bubbly trading numbers, and the stock was last dealing flat from the previous close. The company advised that total revenues during April-June advanced 3.8%, while a like-for-like sales slip of 0.7% marked a huge improvement from the 3.3% decline punched in the previous quarter, even in spite of “inconsistent” weather conditions.
With new store openings rattling along nicely and online business still taking off — aggregated internet sales leapt 11.4% during the last three months — I fully expect custom to continue rising steadily at Bonmarche. This view is shared by the City, and earnings expansion of 13% and 5% is pencilled in for the years concluding March 2016 and 2017 correspondingly.
These figures produce ultra-attractive P/E ratios of 13.6 times and 12.6 times, comfortably within the parameter of 15 times that marks excellent value for money. And while prospective dividends of 7.8p per share for 2015 and 8.6p for next year produce yields of 2.6% and 2.9%, figures that lag the market average of 3.4%, I fully expect Bonmarche’s bright earnings outlook to keep driving payments higher.
Smith & Nephew
Healthcare giant Smith & Nephew (LSE: SN) also furnished the market with strong numbers in today’s session, prompting traders to drive the stock 2.1% higher from Wednesday’s close. The London firm advised that underlying revenues advanced 4% during the first six months of 2015, a result that pushed underlying trading profit 6% higher to £512m.
Smith & Nephew had a number of growth levers to thank for this strong performance — strong knee implant demand in the US resulting in the best performance from its Reconstruction division for three years, for example. On top of this, demand from emerging markets also continues to surge at a double-digit pace, and these territories now account for 16% of group revenues, double that of just five years ago.
The City expects Smith & Nephew to record a 2% earnings dip in 2015 before rebounding with a solid 14% bounce in 2016, driving a P/E multiple of 20.7 times to just 18.4 times for next year. And this bubbly growth outlook is anticipated to keep propelling dividends higher, too — last year’s payout of 29.6 US cents per share is expected to rise to 30.9 cents in 2015 and 35.1 cents next year, advancing the yield from 1.7% this year to 2% in 2016.
Telecoms goliath BT (LSE: BT-A) has not favoured as well as its FTSE compatriots, however, the market treating its latest release with relative disdain and shoving the stock 2% lower on Thursday. Still, I believe today’s update provides reassuring news for the company’s sales outlook — the impending launch of its BT Sport Europe sports channel helped it to add 60,000 TV customers during April-June, a result that pushed Consumer revenues 3% higher to £1.1bn.
The business also added 100,000 mobile customers during the period, while BT’s superfast fibre-laying programme also continues to blast its internet base higher — the company’s network now covers four-fifths of Britain’s households and businesses. So although the cost of this massive investment is expected to push earnings 2% lower in the 12 months concluding March 2016, a 5% bounce is estimated for 2017, numbers that produce very-decent P/E ratios of 14.9 times and 14 times respectively.
And BT’s strong earnings outlook is anticipated to keep dividends marching higher as well. Last year’s reward of 12.4p per share is expected to rise to 14.3p in 2016, creating a handy yield of 3.1%. And this figure improves to 3.4% for the following year amid predictions of a 15.6p dividend.
Royston Wild has no position in any shares mentioned. 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.