Today I’ll be taking a closer look at three companies whose share prices have collapsed over the past 12 months. Should savvy investors pile-in and take advantage of these half-price bargains or stay well away?
Cut-price estate agent
Mid-cap estate agent Countrywide (LSE: CWD) has warned that the slowdown in the housing market has worsened since the UK’s shock decision to leave the European Union, and that it expects full-year earnings to be lower than 2015. Countrywide prides itself on being the UK’s largest and most successful estate agency and property services group, but with its market capitalisation now down to £503m, the firm is worth only half what it was just a year ago. Not surprisingly, brokers in the City have downgraded earnings forecasts since the 23 June referendum, but I think the market may have over-reacted with the share price sinking to all-time lows.
At around 240p the Milton Keynes firm is trading at eight times forecast earnings for the full year to December, falling to just seven times for FY2017. This year’s share price slump also means the dividend yield has jumped to 5.9% for the current financial year, rising to an even meatier 7.4% for 2017. The payouts look affordable at twice forecast earnings and should tempt income seekers as well as patient contrarians looking for a long-term recovery play in the real estate sector.
Oversold and undervalued
Specialist building products distributor SIG (LSE: SHI) is another FTSE 250 firm whose share price has been on the slide over the last 12 months. Of course the vote to leave the EU didn’t help matters and further accelerated the share price collapse. Management admitted earlier this week that the uncertainties caused by Brexit have made it difficult to assess the trading outlook, but at the same time revealed very positive first-half results to June, with a 20% rise in pre-tax profits together with an 11% increase in revenues.
Despite the market pessimism, analysts are still expecting the Sheffield-based firm to post 6% earnings growth in each of the next two years. I would argue that the uncertainties around Brexit are already baked into the share price and that SIG looks undervalued trading at just eight times forward earnings for 2017.
Europe’s second largest travel firm Thomas Cook (LSE: TCG) has been forced to lower its profit forecasts for the full year after announcing disappointing third quarter results for the three months to 30 June. The company revealed a widening of pre-tax loss to £64m from £44m, with revenues falling to £1.85bn from the £1.95bn for the same period a year earlier.
The bombings in Brussels have been blamed for the disappointing numbers, as well as the attempted coup in Turkey where summer bookings have dropped by 5%. The shares are now trading at multi-year lows and certainly look cheap. But I think the level of risk is much higher with Thomas Cook, and would argue that the stock is for die-hard contrarians only.
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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.