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Should You Buy These Former Market Darlings At 52-Week Lows: Weir Group PLC, Pearson plc, Smiths Group plc, William Hill plc And Hunting plc

Trying to seek out the market’s most undervalued and undiscovered value stocks can be tricky. However, the 52-week low ‘bargain bin’ never fails to throw up some interesting ideas.

So, here are just five former market darlings that have fallen from grace during the past few months and now trade at or near 52-week lows.

No growth

First up is William Hill (LSE: WMH). William Hill crashed to a 52-week low after issuing a profit warning last week. During the third quarter, the company’s revenue fell by 9%, and operating profit declined by 39%.

The company’s shares now trade at a forward P/E of 13.6 and support a dividend yield of 4%. That said, William Hill’s earnings are expected to stagnate over the next two years so investors won’t see much in the way of capital growth over this period. 

Oil & gas causalities

Investors have turned their backs on engineering group Weir (LSE: WEIR) owing to the company’s exposure to the oil & gas industry.

City analysts have slashed their earnings estimates for the company and now expect the group to report earnings per share of 58p for 2015. That’s a massive drop from the EPS of 143p for full-year 2015 that  analysts were forecasting a year ago. But Weir still trades at a high valuation of 18.2 times forward earnings, so the company’s shares could have further to fall. 

Hunting (LSE: HTG) is another company that’s suffering from the slowdown in capital spending across the oil & gas industry. And despite the fact that City analysts believe Hunting’s earnings per share will slump a staggering 84% this year, the company’s shares still trade at an eye-watering forward P/E of 38.2.

Further, even though analysts expect Hunting’s earnings to rebound by 53% in 2016, the group is trading at a 2016 P/E of 21.8. The company’s shares support dividend yield of 2.3%. 

Time to buy

On the other hand, engineering firm Smiths (LSE: SMIN) could be a bargain. The company’s shares currently trade at a three-year low and their lowest valuation for five years. Smiths currently trades at a forward P/E of 12.5, below its five-year average of 13.6. Also, the company’s shares now support a dividend yield of 4%. The dividend payout is covered twice by earnings per share. 

Income investment

And finally Pearson (LSE: PSON), the former owner of the Financial Times, which has realigned its business towards education. Year-to-date Pearson’s shares have slumped by around a third as the company has failed to meet lofty targets for growth. Around a week ago the company’s shares lost as much as 25% over two days after the group lowered its full-year profit guidance by 10%.

Pearson had been guiding for earnings per share of between 75p and 80p but now expects the figure to be at the bottom end of a new range of 70p to 75p, owing to continued challenges in its operating divisions. The sale of the FT, Economist and PowerSchool caused earnings forecasts to fall by around 5p and lower Community College enrolments in the US have also weighed on the company’s outlook. 

Based on the company’s revised earnings forecast Pearson currently trades at a forward P/E of 12.8 and supports a yield of 6.1%. The dividend payout is covered 1.3 times by earnings per share so, at the very least Pearson looks like an attractive income investment.  

 

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