Shares in Premier Foods (LSE: PFD) have fallen by over 10% today after the company announced that Nissin Foods has taken a 17.3% stake in the producer of Bisto, Mr Kipling and Oxo cubes. The news comes just a day after Premier Foods rejected an attempted takeover from US spices company McCormick, with the former believing that the latter’s 60p per share offer significantly undervalued the business.
Clearly, Premier Foods’ share price is highly volatile at the present time and partly because of this, it remains a relatively high-risk play. Furthermore, Premier Foods continues to have a highly leveraged balance sheet and with the prospect of interest rate rises eventually ahead, its profitability could come under a degree of pressure.
However, with Premier Foods trading on a price-to-earnings (P/E) ratio of just 5.6, it appears to have a sufficiently wide margin of safety to merit investment at the present time. While earnings growth of just 3% is forecast in each of the next two years, Premier Foods has a number of highly appealing brands and could deliver improved performance in the long run.
Too many questions for now
Also falling by more than 10% today are shares in CPP Group (LSE: CPP). The international assistance business released its full-year results for 2015 today. But this week has arguably been overshadowed by the requisition made by Schroder Investment Management (acting on behalf of clients who hold more than 5% of CPP Group’s shares), where it called for the replacement of CPP Group’s CEO, Chairman and two other Non-Executive Directors.
According to the company, if the requisition is successful then it will likely have a detrimental impact on the future strategy and performance of the business. And with the FCA stating that CPP Group must demonstrate that management practices and shareholder influence of the past no longer exist, it may be prudent to watch rather than buy CPP Group at the present time. That’s despite the company delivering a substantial improvement in profitability in 2015 versus the prior year, as well as a clear focus on new income generation and growth ambitions.
Wait and see
Meanwhile, shares in Intelligent Energy (LSE: IEH) have fallen by around 80% today after the energy technology company released a disappointing update. It stated that due to recent and unexpected developments in the discussions with various parties, Intelligent Energy will be unable to complete a funding process, in sufficient quanta, by the end of the current quarter. While this is disappointing, more worrying for the company’s shareholders is the fact that Intelligent Energy also states that there’s no certainty an appropriate funding plan can be implemented at all.
Clearly, this news has been negatively received by the market. While Intelligent Energy may still have a bright long-term future, the sheer volatility of its shares at the moment and the lack of clarity regarding its funding position mean that it may be prudent to await more news before considering the purchase of a slice of the company.
