Shares in hard landscaping products supplier Marshalls (LSE: MSLH) have slumped by as much as 10% today despite it releasing an upbeat trading update. The company stated that underlying indicators within the business remain strong and it’s confident of meeting guidance for the full-year.
Marshalls’ revenue increased by 1% in the four months to 30 April, with the company experiencing a slight softening in commercial sales over the last two months as well as being up against tough comparisons from last year. Despite this, Marshalls has retained its market share and will continue to target areas of the market where above-average growth is expected.
Looking ahead, Marshalls is forecast to increase its bottom line by 24% in the current year, followed by further growth of 17% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.9, which indicates that it offers excellent capital growth potential. And with further cost savings and efficiencies to come through, today’s share price fall could prove to be a sound buying opportunity.
Upward rerating potential
Also reporting today was Marston’s (LSE: MARS), with the pub company’s shares rising by 3% as a result. Revenue for the half-year increased by 11.5%, with underlying pre-tax profit rising by 11.8%. Encouragingly, Marston’s recorded profit growth in all of its trading segments and was able to reduce leverage and increase its fixed charge cover. And with plans to open at least 20 new pubs this financial year, it seems to have a bright future.
With Marston’s trading on a price-to-earnings (P/E) ratio of 11.2, it seems to offer significant upward rerating potential. That’s especially the case since its bottom line is forecast to rise by 6% this year and by a further 7% next year, which makes a low rating difficult to justify. And due to Marston’s having a yield of 4.8%, it remains a strong income play with scope to raise dividends at a brisk pace since they’re covered 1.9 times by profit.
Time to buy
Meanwhile, shares in Burberry (LSE: BRBY) have edged lower today after the release of a rather disappointing set of full-year results. The luxury lifestyle brand has posted a fall in sales of 1% and a decline in adjusted pre-tax profit of 10% as it experienced highly challenging trading conditions. As a result, Burberry has announced plans to deliver annualised cost savings of at least £100m by 2019, with it set to review how it can make its business simpler and more efficient.
While today’s update is likely to cause investor sentiment towards Burberry to remain at a low ebb in the short run, the business has significant long-term growth potential. It has pricing power through a high degree of customer loyalty, while it has excellent growth opportunities within new products and new geographies. As such, and with it forecast to return to growth in the next financial year, now could be a good time to buy Burberry for the long term.
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Peter Stephens owns shares of Burberry. The Motley Fool UK has recommended Burberry and Marshalls. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.