Should today’s updates put Restaurant Group plc, Rotork plc and Pearson plc at the top of your buy list?

Are these 3 stocks set to soar? Restaurant Group plc (LON: RTN), Rotork plc (LON: ROR) and Pearson plc (LON: PSON).

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Shares in Restaurant Group (LSE: RTN) have slumped by over 20% today after it released a disappointing trading update. The challenging trading conditions which the company flagged in March have worsened and it now expects like-for-like (LFL) sales to deteriorate by 2.5% to 5% for the full-year.

In particular, Restaurant Group’s leisure segment has struggled and due in part to this, it has initiated a review of the group’s operating strategy. This will focus on its brand positioning, store roll-out programme, property portfolio and overheads, with a number of operational initiatives being implemented over the medium term as the company seeks to improve its performance.

While Restaurant Group remains a high quality business, its shares could come under increased pressure in the short run as investors digest what’s a very disappointing update. Clearly, it has long-term potential and its financial performance could improve under a refreshed strategy. Therefore, while it may be worth buying for the long term, a keener purchase price may be possible for new investors in the short-to-medium term.

Brighter future?

Also reporting today was education specialist Pearson (LSE: PSON). It’s on track to meet full-year expectations and is making good progress with its simplification programme, while its renewed focus on student learning seems to be positioning it for long-term growth.

While Pearson is forecast to report a fall in earnings of 23% this year, its outlook for next year is much more positive. In fact, Pearson’s bottom line is expected to rise by 14% next year, which indicates that its turnaround programme is set to begin to have a major impact on its financial performance. And with Pearson trading on a price-to-earnings (P/E) ratio of just 14.9, it seems to offer good value for money as well as upward rerating potential.

A potential catalyst to push Pearson’s shares higher is its dividend yield. It currently stands at 6.5% and with Pearson stating recently that it expects to maintain dividends at their current level and build its dividend coverage ratio over time, it could appeal to yield-hungry investors over the medium term.

Shares on the rise

Meanwhile, shares in actuator manufacturer Rotork (LSE: ROR) have risen by over 6% after the release of a positive trading statement. Order intake for the first quarter of the year increased by 2.5%, while sales increased by 0.7% and were aided by favourable exchange rates as well as the impact of acquisitions.

On the topic of acquisitions, Rotork also announced the purchase of US and Italy-focused Mastergear for $25m. The deal should provide Rotork with a broader range of products and services, while strengthening its position in the flow control sector. And with Rotork’s order book being 14% higher than at the same time last year, it seems to be in a strong position to deliver long-term growth.

With Rotork trading on a P/E ratio of 21.1, its shares appear to be fully valued at the present time. Therefore, while it’s a high quality business with a bright future, it may be best to wait for a lower price before piling-in.

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

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