One thing you can say about the FTSE 100 ride since the EU referendum is that it hasn’t been boring. But while boring is probably best for long-term investors, short-term ups and downs can give us ideas for buys. Here are three of today’s biggest winners.
Profit from pensions
Annuity provider JRP Group (LSE: JRP) shares jumped 18% this morning, to 104p, after a pre-results trading update. Formerly Just Retirement Group, JRP is the result of April’s merger with Partnership Assurance, and the integration of the two companies is in progress.
JRP expects to report embedded value of over 200p per share, with the current share price a considerable discount to that — but we’d need to see how it’s calculated before we get too excited. Targeted cost savings of at least £40m would also be welcome, but do we know enough to buy the shares now?
Since the company’s initial flotation in late 2013, we’ve seen a 47% share price fall, and a couple of years of somewhat erratic results. There’s a return to profit forecast for the year just ended (after a loss last year), followed by a 44% EPS rise forecast for 2017, giving us P/E multiples of 9.7 and 6.7 respectively. We’ll need to see what the results say, but JRP is certainly worth closer attention on that valuation.
Retirement housing
Retirement figures in the business of McCarthy & Stone (LSE: MCS), a builder of retirement homes, but upbeat interim results from Persimmon will be behind today’s 6.3% share price rise to 191p. The shares, along with the building sector, slumped after the EU Referendum — and today they’re still 20% down from that fateful event.
But since a low on 7 July, we’ve seen an impressive rebound of 36% as the likely effect of the Brexit vote increasingly appears to have been overestimated. Persimmon has seen no falling off of customer interest, and I really can’t see leaving the EU having any detrimental effect on UK demand for retirement homes.
Expectations for the year ending this month suggest a P/E of 11, dropping to 10.5 on 2017 forecasts, and dividends are modest at 2.5% to 3%. That’s not as cheap as the major housebuilders, but McCarthy & Stone’s customer profile should make it less risky. Looks good to me.
Demand for carpets
People who buy homes want to install carpets, right? OK, I know the link is tenuous, but shares in flooring supplier Carpetright (LSE: CPR) are up 2.5% to 226.5p as I write. Could it be the start of some respite for shareholders, who are sitting on a 62% loss since the end of June 2015?
Carpetright shares are on a forward P/E of 10.4 based on forecasts to April 2017, dropping to nine a year later — and with double-digit EPS growth, we’re looking at PEG ratios of around that magic 0.7 level. Predicted dividend yields are low at 1.1% and 1.8% respectively, but on the face of it that’s still an overall valuation that looks reasonably attractive.
The only problem I have is that every time I’ve looked at Carpetright over the years, it’s been struggling through some sort of crisis, rebuilding itself, refocusing… or whatever. And that’s led to a share price fall of more than 60% over the past 20 years. Carpetright might finally be over its long history of woes, but with better bargains out there, why take the risk?
