Should you buy or sell these shares after today’s updates?

Three shares, three sets of results, three bargains or three to avoid?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

July was a hectic month for first-half results, and though things are slowing a bit through August, we still have a news-packed week. Here are three firms making the headlines today.

Growth story?

Shares in Dialight (LSE: DIA) rose by 2.6% in morning trading, to 579p, on the back of a pleasing set of first-half figures. Revenue actually fell slightly, but underlying operating profit came in at 2.5 times the same period last year, or £4.2m, although there was a statutory pre-tax loss of £7.1m as the firm emerges from its turnaround plan.

Underlying EPS picked up by 44% to 7.8p, and the firm turned an £8m net debt at the H1 stage of 2015 into net cash of £7.2m. Chief executive Michael Sutsko spoke of greater revenue visibility with second half orders up 10%, and told us the board is “confident of making progress this year and beyond“.

After a couple of erratic years, the LED technologist is forecast to boost EPS by 49% this year as Mr Sutsko said expectations are unchanged. That would put the shares on a P/E of 29, but a further 60% in earnings growth pencilled-in for 2017 would drop it to 18, and we have likely PEG ratios of 0.6 and 0.3 for this year and next. Dialight could be an attractive growth opportunity.

Big drop

Rotork (LSE: ROR) shares had been picking up strongly with a 40% climb since late February until Monday’s close. An 8.6% drop to 195p has taken the shine off that a little on the occasion of the company’s first-half update. The firm, which makes valve, sluice gate and damper actuation products for the oil, gas, power and waste industries, reported falls across the board. Revenue is down 3.7% to £263.9m, with adjusted pre-tax profit down 21.8% to £50.1m and adjusted earnings per share down 21.9% to 4.25p. But at least the interim dividend was maintained at 1.95p per share.

The slump is largely down to the depressed oil price, which has now fallen back below $40 per barrel again, and the knock-on effect on orders from the oil and gas business. According to chief executive Peter France, full-year margins should be lower than 2015’s as he said that “activity in the oil and gas markets will remain subdued, and the timing of order placement will be difficult to forecast“.

Rotork will almost certainly do better when oil finally gets back to more profitable levels, but in the meantime a forward P/E of 21 looks demanding to me.

Marketing magic

Direct marketing firm 4imprint Group (LSE: FOUR) has seen its shares more than double in two years and six-bag in five. Against that a modest 1.3% rise to 1,498p on the day of first-half results might not be too exciting. But the figures do look good — revenue is up 17% to $270.2m with underlying pre-tax profit up 18% to $14.3m and underlying EPS up 19% to 37.28 cents. The interim dividend was lifted 35% to 16.32 cents (or 59% to 12.3p thanks to the drop in sterling).

The bulk of the firm’s revenue comes from North America, so there’s no real Brexit risk here. So with a solid record of rising earnings and two more years of growth forecast this year and next, is it too late to buy the shares? Well, we’re looking at P/E multiples of around 20 with PEG ratios above one, and that suggests the super-bargain days are behind us.

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.

Alan Oscroft 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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »