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Should you buy the Sports Direct share price as it slides further?

Beleaguered Sports Direct International (LSE: SPD) shares took another battering today, losing a further 11% to take them down 45% over the past 12 months.

Hammered by the near-inexplicable delay in publishing its (ultimately disappointing) full-year results, which eventually appeared on 26 July, the firm has now been hit by the resignation of its auditor Grant Thornton.

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Just a day after Sports Direct had announced its intention to reappoint Grant Thornton for another year at its AGM on 11 September, having failed to attract new tenders for the job, the auditor signalled its unwillingness to accept and will terminate its engagement effective from that date.

No time to lose

There’s very little time now until the AGM to find a new auditor. And, according to the Financial Times, the company has asked the government about its options should it fail to find a replacement in time. The business secretary has the power to appoint an auditor, but that’s not been needed by any previous major public company. At the very least it would be a horrible embarrassment for the firm, and it could even raise questions over whether the company’s listing might be suspended.

This comes just weeks after Mike Ashley admitted his regret at having taken over House of Fraser, which added a £54.6m operating loss to his woes. And though anybody can make a mistake, that’s got to raise questions about his judgment in his aggressive pursuit of takeover targets.

But, how low can the shares fall, and at what price will they start to look like an unmissable buy? With P/E multiples now down to around 10, they might look cheap. But I’d need to see the company’s multiple problems addressed first.

737 contagion

Looking at a second downtrodden share price, John Menzies (LSE: MNZS) perked up 7% on Wednesday, in a delayed reaction to Tuesday’s first-half results.

The company’s aviation business is another that’s been hit by the grounding of the world’s Boeing 737 Max fleet, and chief executive Giles Wilson added that the half was “impacted by the loss of exclusive licences in H2 last year and generally weaker markets.”

The company reported a pre-tax loss of £4.4m, though underlying figures weren’t so gloomy — underlying pre-tax profit was down 47% to £8.2m, with underlying EPS down 48% to 6.8p.

The interim dividend was maintained at 6p per share, and the forecast 20p for the full year would provide an attractive yield of 4.7%. While I don’t see much danger of a dividend cut this year, I think we will need to see stronger business in the next few years for that kind of level to be maintained.

Looking oversold

Analysts are currently predicting an EPS fall of 7% for the full year, and have a 27% recovery marked in for 2020. But with the firm’s markets so uncertain, and having seen the halfway figures this year, I can’t really see those forecasts as much better than straight guesswork right now.

Saying that, they do suggest a P/E of only around 9.5 for 2020, and if that’s anywhere close to accurate, then I think it undervalues the long-term quality of John Menzies. It’s a stock I’ll certainly be watching, but I wouldn’t be moved to buy before I see an earnings upturn actually happening.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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