Why BT Group plc, ASOS plc and Monitise plc are set to underperform the FTSE 100

With shares in ASOS (LSE: ASC) having risen by 20% during the last month, investors may be wondering whether the online retailer can continue this momentum in the long run. After all, as a business ASOS is performing relatively well since it adopted a new strategy that’s seeing it focus on core markets rather than attempting to buy sales through price investment in new territories.

Furthermore, ASOS has excellent growth forecasts. It’s expected to grow its bottom line by 24% in the current year and by a further 32% next year, both of which are good enough to significantly improve investor sentiment in any stock. However, with ASOS trading on a price-to-earnings (P/E) ratio of 67, much of this growth appears to already be priced-in. As such, the prospects for major share price gains may be somewhat limited, with ASOS’s margin of safety being rather narrow and indicating that its downside could be greater than its medium-term upside potential.

Elusive profits

Also having the potential to disappoint in future are shares in mobile payments solution specialist Monitise (LSE: MONI). Under its new management team Monitise seems to be making strong progress and is now a better business than it previously was. And as ever, it has an excellent product and some blue-chip client names that shows its offering is very sound.

The problem is that Monitise is still not a profitable entity and with the mobile payments space constantly changing at a rapid pace, a new technology or product could begin to dominate in the coming years. Therefore, Monitise doesn’t seem to be ‘making hay while the sun shines’ and with it failing to find a buyer during its recent strategic review, the outlook for the company remains relatively challenging. With the FTSE 100 offering good value for money, Monitise may struggle to keep up with it in the coming years.

Quad-play quandary

Similarly, BT (LSE: BT-A) could also disappoint versus the FTSE 100. It has embarked on a highly ambitious strategy that’s seeing it attempt to dominate the quad-play space. This requires huge investment in sports rights, broadband capabilities as well the acquisition of EE. Such major changes to any business will cause the risk of failure or delay to rise and this could have a negative impact on BT’s share price.

In addition, the quad-play space has been built up as a major opportunity for incumbents such as BT, since cross-selling opportunities are set to be significant. However, with greater competition from rivals, pricing could come under pressure and this has the potential to hurt BT’s profitability. With BT set to increase its bottom line by just 1% this year, its P/E ratio of 13.9 could begin to look a touch high in the coming months.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. 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.