There’s no better time to assess a company’s stock than when it releases its financial update. During ordinary times, companies’ financial health can be estimated with some accuracy. But the present times are anything but ordinary. There’s increased uncertainty, which makes it difficult to understand not just companies’ performance but also their outlook. This in turn impacts whether they are shares to buy or not.
No stock market crash for this FTSE 100 stock
As an example, consider the first UK share to buy on my investing radar – the FTSE 100 home improvements stock, Kingfisher (LSE: KGF), which released its half-year results yesterday. While its sales are slightly down, there’s plenty to be upbeat about. First, its post-tax profit is up 85.4% and its earnings per share have also almost doubled. Even though KGF has suspended dividends, I reckon that it could restart them if earnings continue to be robust. Sales too, are down because of a slow first quarter. But by the second quarter, KGF had already seen a robust sales increase. So far in the third quarter as well, its sales have seen almost 17% growth.
On the release of the result, the share price jumped 12% and remains at elevated levels. KGF is one of the stocks that has moved past the stock market crash at speed, and is now at its highest levels in the year. It has a steep earnings ratio of a huge 742 times, but I reckon that won’t be a deterrent for investors especially since its absolute share price is a low 297p and its prospects are good. Alternatively, I’d consider HomeServe as a share to buy, which has a more earthbound earnings ratio of 41 times.
Uncertain future keeps share price low
At the other end of the investing spectrum is the travel company TUI (LSE: TUI), whose share price is at around the lowest levels in 2020 so far. As one of the worst affected companies from the pandemic, the TUI share price crash was to be expected. So why is it on my investing radar? Because its trading update from yesterday gives me a glimmer of hope.
TUI reported an 84% average load factor since it restarted operations in June. Its overhead costs have also been reduced by 30%. While the company’s operations remain subject to further developments on Covid-19, so far things appear to be getting rather better than worse for it. It’s not without its risks, but it is a cheap UK share with an earnings ratio of 1.9 times. If I was more of a risk taker, I’d probably buy it, prepared to lose my capital. But as things stand, I’m more inclined to wait and watch what’s next for it.
Last, I’m looking forward to movie theaters’ company Cineworld interim results tomorrow. Cinemas have opened only recently, and as in the case of TUI, still face an uncertain situation. Even though the performance is expected to be weak, I’d like to know its outlook to assess if this is a cheap UK share to buy.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Homeserve. 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.