3 Top Turnaround Stocks? Monitise Plc, Standard Chartered PLC & WM Morrison Supermarkets PLC

Are these 3 stocks about to deliver significantly improved performance? Monitise Plc (LON: MONI), Standard Chartered PLC (LON: STAN) and WM Morrison Supermarkets PLC (LON: MRW)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

2015 was a hugely challenging year for Morrisons (LSE: MRW), with the supermarket recording a fall in its share price of 18.5%. Clearly, this was mainly due to the poor performance of the business during the period.

In fact, Morrisons is expected to report a third consecutive year of falling profitability, with its bottom line forecast to have fallen by 16% in financial year 2016. This means that, if met, Morrisons will have an earnings per share figure which is around a third of its 2013 level.

Undoubtedly, Morrisons finds itself facing a major challenge. It has lost a large number of customers who have ditched it in favour of low cost, no-frills operators such as Aldi and Lidl and, in response, Morrisons has been drawn into a price war which has hit its margins very hard.

Looking ahead, though, Morrisons could begin to make encouraging progress. That’s at least partly because its previous year’s comparatives are poor, but also because it has a simplified strategy through which to become a leaner and more efficient business. This, plus higher consumer confidence levels resulting from a real rise in household spending levels, mean that Morrisons is forecast to grow its bottom line by 22% in the next financial year. And, with it having a price to earnings (P/E) ratio of 13.3, it appears to be on the cusp of much improved share price performance.

Also experiencing a tough year last year was Asia-focused bank, Standard Chartered (LSE: STAN). Its shares fell by 42% last year and its earnings are expected to have declined by 60% for the 2015 financial year. In response, Standard Chartered launched a fundraising, slashed its dividend and changed its management team, which is intent upon shoring up the bank’s compliance function moving forward.

With Standard Chartered being an Asia-focused bank, the concerns surrounding China’s growth rate and Japan sinking into recession are clearly bad news. Therefore, short term falls in its valuation cannot be ruled out but, for longer term investors, it holds huge appeal as an investment. That’s because it is forecast to increase its bottom line by 28% this year and, with its shares having a price to earnings growth (PEG) ratio of only 0.4, its performance in 2016 and beyond could be impressive.

Meanwhile, Monitise (LSE: MONI) fell by more than Standard Chartered and Morrisons combined in 2015, with the mobile payment solutions company recording a share price slump of 88% in 2015. Investor sentiment was hurt by a lack of profitability as well as changes in the company’s management team which, judging by its 8% fall since the turn of the year, have carried over into 2016.

Looking ahead, Monitise may struggle to positively catalyse investor sentiment in the coming year. That’s because it appears to still be a long way off profitability and, while it is due to narrow its pretax loss this year, Monitise needs to convince the market that it is a viable business which can turn a profit. Until this seems relatively likely, it may be best to focus on other turnaround stocks which are already profitable and that also trade on low valuations.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Morrisons and Standard Chartered. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »