Today I am discussing whether investors should book profits on several London risers.
Sports Direct International
Shares in trainer emporium Sports Direct (LSE: SPD) have galloped 15% higher during the past four weeks, extending the stellar run which started back in the spring. But rather than cash in, I believe investors should hang onto their shares as further gains appear likely — the Mansfield firm saw total revenues advance 4.7% in the 12 months to April 2015, a result that drove underlying pre-tax profit more than a fifth higher to £300.3m.
With Sports Direct benefiting from Britain’s intensifying sports craze, not to mention fizzy demand for branded products at cheap prices, I reckon the retailer is a strong bet for brilliant long-term earnings growth. And with overseas expansion also rattling along, the City expects Sports Direct to report earnings growth of 11% in fiscal 2016 and 14% the following year, pushing a P/E multiple of 18.4 times for the current period to just 16.1 times.
Likewise, I believe that savvy investors should hang onto hot British fashion label Ted Baker (LSE: TED) as demand from foreign markets surges. The stock has gained 13% during the past month as its steady upward march has continued, with market optimism boosted by bubbly June interims — these showed retail sales leap 18.9% during the four months to June, helped by massive investment in developed and emerging markets alike.
On top of this, improvements to its US website and a new Canadian online presence helped drive internet revenues 46.9% higher during the period. Given these factors Ted Baker is predicted to post terrific earnings growth of 21% for the year concluding January 2016, and 16% for the following period. So although these forecasts produce hefty P/E ratios of 32.5 times and 27.9 times respectively, I believe the designer’s brilliant growth prospects — not to mention great track record of generating excellent double-digit earnings expansion — fully merits this premium.
Private healthcare provider Spire Healthcare (LSE: SPI) has seen its stock ascend 10% since the start of July, and I reckon the company still has plenty of legs as demand from NHS, self-pay and PMI patients keeps on rising. The group operates almost 40 hospitals and more than a dozen clinics in Britain, and following global operator Mediclinic’s acquisition of 29.9% of the firm in June I believe Spire’s expansion plans should receive a shot in the arm, while costs could also come down.
The abacus bashers expect Spire to enjoy an 11% earnings bump in 2015, producing a P/E multiple of 19.3 times. And this value falls to 18.4 times next year amid expectations of a further 2% rise. With the business also ploughing the cash into hot growth areas like radiotherapy, cancer care and orthopaedics, I fully expect revenues to keep charging higher.
Shares in technology play Laird (LSE: LRD) have gone absolutely gangbusters since the firm released its full-year results late last month, and the business has gained 14% during the past four weeks. The electronics manufacturer advised that revenues jumped 21% during January-June, a result that propelled underlying pre-tax profit 35% higher to £26.9m.
The business’ relationship with gadget giants like Apple continues to provide handsome returns, while massive investment across multiple tech areas — such as the rapidly-growing ‘internet of things’ sector — also promises to deliver resplendent returns. Consequently the City expects Laird to record earnings growth of 16% and 13% in 2015 and 2016 correspondingly, driving this year’s P/E ratio of 17.6 times to just 15.9 times for next year.
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