Gresham Computing
Shares in Gresham Computing (LSE: GHT) are up 19% today as the specialist provider of software based solutions has announced the winning of three further contracts for its CTC risk management platform.
The news is clearly hugely positive for the company and its investors, although Gresham Computing did not identify the three firms in its press release. Indeed, it only stated that one is a derivatives clearing house, another is a legal services business, while the third is a buy-side financial services company that has contracted to use CTC for reconciling and matching broker fees, cash allocation and bank reconciliations.
As mentioned, shares in Gresham are up significantly following the news, but continue to be down 38% since the turn of the year due to a profit warning in early October. Furthermore, with shares in the company trading on a forward price to earnings (P/E) ratio of 20.9 – even when next year’s improved profit expectations are taken into account – they appear to be rather enthusiastically priced.
As such, shares in Gresham Computing may be unable to continue today’s sharp gains over the medium term as a result of a very generous valuation already being placed upon them.
Rank Group
Shares in Rank Group (LSE: RNK) are up 6% today despite no significant news flow being released by the company. Indeed, shares are still little changed on their level prior to the quarterly management statement released in mid-October that showed the company remains on-track to deliver on its full-year guidance. Clearly, like-for-like revenue growth of 3% for the group is relatively strong and could help it to turn around a disappointing recent period.
Furthermore, with wages set to rise at a faster rate than inflation during the course of 2015, disposable incomes could rise in real terms and demand for gaming services such as Rank Group’s Mecca bingo and Grosvenor casinos could increase. This would clearly be beneficial for the company and could help to stimulate a bottom line that is set to grow by just 3.6% next year.
With shares in Rank Group currently trading on a P/E ratio of just 11.5, they appear to offer good value. Meanwhile, there appears to be scope for a substantial increase in dividends, with Rank Group’s payout ratio being only 35% and shares in the company yielding 3.1%.
As such, Rank Group could appeal to income investors, as well as value investors, over the medium to long term.