MENU

Is It Time To Call The Top For Taylor Wimpey plc, Betfair Group Ltd, JD Sports Fashion plc & Sirius Minerals plc?

Taylor Wimpey

Ever since the general election in May, Taylor Wimpey‘s (LSE: TW) shares have been stuck in the 180-205p range. The lack of further upward momentum could be regarded by technical analysts as a signal that its shares may have peaked.

But the fundamentals of the housebuilder, and the sector in general, remains positive. Long term structural factors should keep property prices buoyant, as the supply of new homes has massively lagged behind demand for decades. This imbalance in demand and supply would likely continue to hold true, despite recent growth in new housebuilding.

The housebuilder looks set to continue to deliver robust earnings growth over the next two years. The consensus analyst estimate for underlying EPS in 2015 is 14.8p, which represents a 32% gain on the previous year. For 2016, underlying EPS is projected to increase by another 16% in 2016, to 17.3p.

This means its shares trade at just 13.9 and 11.9 times its expected 2015 and 2016 earnings. What’s more, its shares have a prospective dividend yield of 4.6%.

Betfair

Shares in Betfair Group (LSE: BET) have climbed 29% since the announcement of its proposed merger with Paddy Power in August. The merger will bring together two companies with highly complementary assets, with a strong presence online and on the high street.

The tie-up with Paddy Power is certainly positive, but valuations have become quite stretched. Betfair trades at a forward P/E of 39.5, whilst Paddy Power trades at 32.6 times its expected 2015 earnings. Both companies have yet to comment specifically about how much they expect to gain from synergies of the merger, which should raise doubts about the potential cost savings and revenue gains from the merger.

Its competitors are also looking to bulk up, with Ladbrokes joining forces with Coral and Bwin.party in a potential deal with GVC. So, although the number of competitors are due to shrink, its rivals could become stronger.

JD Sports

JD Sports (LSE: JD), the fashion retailer, saw its pre-tax profits rise 88% in the first half of its 2015/6 financial year. Revenues has been robust, growing 21% over the period, but that was still slower than the 29% recorded over the same period last year.

Analysts expect JD’s underlying EPS will grow 24% this year to 48.2p in 2015/6. For 2016/7, analysts expect underlying EPS wil grow by another 9%, to 52.3p. This means its shares trade at 19.4 and 17.5 times its expected 2015/6 and 2016/7 earnings.

Sirius Minerals

Sirius Minerals (LSE: SXX) has been benefiting from a series of positive news flow over the past few months. It has gained planning approval and is making progress in securing qualification for the government guarantee scheme, which would make it easier for it to secure financing.

With Sirius Minerals being at such an early stage with the mining project, there are still significant uncertainties surrounding the development of the mine and when the site will begin production. Sirius still needs to find some £2 billion to develop the site, and it is missing a key planning permit from the North York Moors National Park Authority, which it needs before it can begin construction.

But, although there are major risks facing the project, the potential rewards are also massive. Once developed, the mine would likely benefit from much lower operating costs than many existing potash mines, and this should mean it would benefit from much higher operating margins.

Buy and Hold forever?

If you're more interested in reliable income generating stocks, The Motley Fool has a free special report that's aligned with your investing goals -- "The Fool's Five Shares To Retire On".

These five large-cap shares have been selected for their combination of income and growth prospects. They generate stable cash flows from their dominant market positionsand broad global exposure.

Get your copy now! It's completely free and there's no further obligation.

Jack Tang has a position in Taylor Wimpey plc. 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.