The Motley Fool

Is It Too Soon To Buy Rolls-Royce Holding PLC, Imagination Technologies Group plc & Petra Diamonds Limited?

Three of the biggest fallers in the FTSE 350 this year have been Rolls-Royce Holding (LSE: RR), Imagination Technologies Group (LSE: IMG) and Petra Diamonds (LSE: PDL).

As an investor, it’s tempting to think that these formerly successful businesses are now cheap turnaround buys.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

In this article I’ll take a look at each company and ask whether now is the time to buy — or whether these shares remain falling knives that are likely to slash your wealth!


Star fund manager Neil Woodford has a record of making good calls on major stocks. Mr Woodford’s blog post last week made it very clear that he’d lost faith in the ability of the firm’s management to deliver reliable profits.

One particular problem is the strange way the group sells its aero engines, taking an initial loss on the sale of the engine and making a profit on aftersales service deals. While investors were happy to accept this opaque accounting when times were good, concerns are rising as profit margins from new engines are expected to be lower over coming years.

Rolls’ new chief executive, Warren East, has said that the group will not issue medium-term earnings guidance for the next year or so, as the outlook is too uncertain. This suggests to me that current broker forecasts may be worth very little.

In my view it’s too soon to buy back into Rolls-Royce. Watching patiently from the sidelines may be the best way to avoid further losses.

Imagination Technologies

Once seen as a strong rival to ARM Holdings, Imagination is now more of a distant relative. ARM shares have risen by 74% since 2012, while those of Imagination have fallen by 72%.

Imagination shares fell by another 6% this morning, after the firm’s interim results showed a first-half operating loss of £20.8m. That’s double the £10.3m loss reported for the same period last year.

Total revenue was down by 13% to £71.1m, from £82.2m during the first half of last year.

Imagination spends heavily on research and development, and says that this spending will now be cut. That could help turnaround the business in the short term, but risks the firm falling behind its competitors for future products. I don’t see any reason to buy this stock at the moment.

Petra Diamonds

It’s been a poor year for the diamond market. Both prices and demand have fallen further than expected. Petra’s shares have followed suit, losing 66% of their value.

However, analysts following the firm are becoming increasingly bullish. They expect to see a sharp recovery in the 2016/17 financial year. The latest forecasts suggest that Petra’s adjusted earnings per share will rise from 8.9 cents for the current year to 21 cents per share next year.

This puts Petra on a 2015/16 forecast P/E of 11, falling to a P/E of just 5 in 2016/17. There’s also an attractive forecast dividend yield of 3.1% for the current year and 5% for next year.

The reason for this expected growth is that production from new mine expansions is expected late next year. The good news is that thanks to a $300m debt issue last year, the firm’s balance sheet remains relatively healthy, with net gearing of around 30%.

Petra could be a profitable buy at today’s prices, assuming diamond demand doesn’t fall further.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

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

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.