MENU

3 Shares For The Week Ahead: Hargreaves Lansdown PLC, Barratt Developments Plc And WM Morrison Supermarkets PLC

We’ve had a relatively quiet time for company earnings in the past couple of weeks, but there’s usually something just around the corner, so what do we have to look forward to in the coming days?

On Wednesday, 9 September, we should get a view of the investment business itself, with preliminary full-year results from Hargreaves Lansdown (LSE: HL). There’s no doubt the investment giant has been performing well, with earning per share up nearly 2.5 times between 2010 and 2015, but have the markets been placing too high a value on that growth?

In the current investment climate there’s actually a 2% fall in EPS forecast for this year, but that’s better than some of Hargreaves Lansdown’s peers. But with the shares priced around the 1,085p mark, they’re on a pretty heady forward P/E of almost 33, and that would drop only as far as 28 should the predicted 18% EPS recovery in 2016 come to pass. Dividends are steadily climbing, but at around 3% the forecast yields are nothing special.

Results should be pretty much in line with expectations, and this is clearly a company with a strong long-term future. But I see the shares as just too expensive now, even though there’s been a fall from May’s peak of 1,299p.

Housing boom?

A key question is how much further the boom in the UK’s housebuilders is set to go, and judging by July’s trading update from Barratt Developments (LSE: BDEV), there seems to be no reason to expect it to stop soon — and we’ll have full-year results from Barratt on Wednesday.

Completions for the year are up 10.8%, with an 8% rise in average selling prices, and the firm has told us to expect a 45% rise in pre-tax profit. But the shares are up 75% in the past 12 months, to 630p, having more than six-bagged in the past five years, so does that make them a bit pricey now? On fundamentals, no, it doesn’t, with a forward P/E of a very modest 12 and an attractive forecast dividend yield of 4.6%.

I have no idea where the boom will end, but the shares, perhaps surprisingly, still look good value to me.

Supermarket turnaround?

And then we come to what looks like an impressive turnaround, in the shape of Wm Morrison Supermarkets (LSE: MRW). The company has lagged its competitors in important areas, like multi-format shops and, more critically, online shopping. Yet only about a year after it was looking like a dead dog, a change of top management at Morrison and a new paring-to-the-bone cost strategy might just have saved the day.

There’s still an 8% drop in EPS forecast for the year to January 2016, but the City is expecting a 20% rebound the following year. And the share price slide looks to have been arrested too — its still a bit erratic, but at 167p it’s pretty much flat over 12 months (while Tesco is down 17%).

Morrison’s dividend has been slashed, but should still yield around 3.3%, and we’re looking at a P/E of 17 for this year, dropping to 14 next. It’s not one I’d buy right now, but I’ll be carefully examining the interim results due on Thursday.

Any of these three could be part of a strategy that has brought great long-term rewards for a century and longer.

To find out more, get yourself a copy of the Motley Fool's special 7 Simple Steps For Seeking Serious Wealth report, which shows you how investing in shares and reinvesting dividends has wiped the floor with every other form of investment over the past century and more.

It's completely FREE, so click here for your personal copy and get started today.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.