The Motley Fool

Are Supergroup plc (+13%), Hays plc (+4%) and Micro Focus International plc (+10%) buys after today’s positive updates?

Shares in Micro Focus (LSE: MCRO) have soared by 10% today after it released a positive set of results. Sales and profitability were both at the top end of management’s expectations and were driven by strong performance in the SUSE product portfolio, where revenues increased by 18%. Micro Focus’s financial performance was also aided by integration benefits that resulted in a $76m reduction in adjusted operating costs versus the prior year.

The software provider, however, also reported that it expects either a slight drop or flat revenue in the current financial year as it seeks to implement a four-phase plan. Furthermore, it’s aiming to stabilise revenues around a solid core from which it will aim to grow them in the 2018 financial year.

Despite this, the market has reacted positively to the Micro Focus results, with its shares up 10%. They now trade on a price-to-earnings (P/E) ratio of 15.3, which given the company’s long-term growth outlook appears to be fair value. Although Micro Focus now yields just 2.3% following its share price rise of 27% in the last year, dividends are covered 2.9 times by profit and so should rise rapidly over the medium-to-long term.

UK slowdown

Also reporting today was Hays (LSE: HAS). The global recruitment company recorded a strong performance in Europe and as a result of this, its operating profit for the full year will exceed market expectations. That’s despite a rather sluggish UK market slowing down its overall growth rate. Net fees in the UK fell by 3% in the final quarter of the year, with a challenging performance in the public sector recruitment space and a weakening of sentiment in the private sector prior to the EU referendum being the major causes.

Looking ahead, Hays is forecast to record a rise in earnings of 9% this year followed by a fall of 3% next year. Trading on a P/E ratio of 13.8, its shares appear to be fully valued at the present time – especially with the outlook for the UK jobs market being somewhat uncertain.

Super growth for womenswear

Meanwhile, high street fashion retailer Supergroup (LSE: SGP) is up by 13% today after reporting a strong set of results. Although on a reported basis pre-tax profit fell to £55m from £59m in the prior year, this was due to an exceptional cost of £17m relating to losses on financial derivatives and in the assessment of fair values. Excluding that cost, Supergroup enjoyed excellent growth, driven in part by a strong showing from womenswear, which was its highest growth category of the year.

Supergroup has also announced a special dividend of 20p per share and with it having bright future prospects, it could continue today’s share price rise in future. It’s forecast to record a rise in earnings of 10% this year and 12% next year and due to it having a price-to-earnings growth (PEG) ratio of just 1.3, now seems to be a good time to buy it.

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