In mid-morning trading the companies’ shares are up 6%, 4% and 5%, respectively. Could the time be ripe to buy a slice of these three stocks?
Global information services group Experian — probably familiar to most readers as a consumer credit score firm — is a FTSE 100 blue chip, valued at £12bn based on a current share price of 1,170p.
In today’s half-year results, Experian posted a 6% fall in revenue from continuing operations, and a 7% fall in underlying earnings per share (EPS), reflecting foreign exchange headwinds during the period. However, at constant exchange rates revenue was up 4% and underlying EPS rose 5%.
Experian reported “good growth momentum” in the business, and full-year EPS should be helped by today’s news that the company is extending a $600m share buyback programme by a further $200m as it recycles proceeds from recent non-core divestments.
A full-year EPS outturn of 60p may be achievable. That’s a little above the analyst consensus ahead of today’s results, but still leaves Experian on a highish price-to-earnings (P/E) ratio of 19.5. The dividend yield is only modest at 2.2%, so the stock does not appear particularly cheap at the present time.
Engineering software company Aveva also reported currency headwinds in the first half of the year. However, even at constant exchange rates, revenue was marginally down year-on-year, while profit before tax dived 20%. The reason is that Aveva has significant customers in the struggling oil & gas sector.
Given the heavy de-rating of companies exposed to this sector — either directly or indirectly — you may be surprised to learn that Aveva, with its shares currently trading at 2,085p, is on a sky-high current-year forecast P/E of 28, with a prospective dividend yield of just 1.4%.
However, Aveva — a FTSE 250 firm, valued at £1.3bn — has agreed to acquire Schneider Software to create “a global leader in industrial software”. The deal, a reverse takeover, would give Schneider Software’s parent (Schneider Electric) a 53.5% ownership of the enlarged Aveva.
The parties to this complex deal have been working towards finalising due diligence since July. Aveva said today that they expect to reach definitive terms in December, with completion anticipated to occur by mid-2016. I find it hard to put a value on Aveva at present, and to weigh up the potential risks and rewards, but City analysts are largely positive, rating the stock as either a Buy or a Hold.
Last year was disappointing for Oxford Instruments, which supplies high technology tools and systems for industry and research. Macro headwinds in Japan and Russia, and weaker trading than expected in the company’s Industrial Analysis business, took their toll, and EPS fell 29%.
This year is looking brighter, with the company today reporting an uptick of 2% in first-half EPS, and a 21% rise in the order book since the start of the year. Margins have improved, as the group addresses its cost base, and management is confident the performance for the full year will be in line with expectations.
EPS of above 50p is expected by the City, giving an attractive-looking P/E of 12 at a share price of 605p. This smaller company — currently valued at around £350m — was rated considerably higher by the market not so long ago. I see the shares as very buyable at their present level, with the business looking set to return to growth.
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G A Chester 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.