ASOS
Despite falling by 58% since the turn of the year, shares in ASOS (LSE: ASC) (NASDAQOTH: ASOMF.US) could have another challenging year in 2015. That’s because they continue to trade on a valuation that seems very difficult to justify, given the company’s growth prospects.
For example, ASOS currently has a price to earnings (P/E) ratio of 60.3 which, were it delivering the earnings growth of a few years ago, would be relatively appropriate. However, ASOS has not grown its bottom line since 2012, and is forecast to fail to do so again in the current year, thereby making such a high valuation seem excessive.
In addition, its operations outside of the UK continue to perform worse than expected and, although they may succeed in the long run, it looks likely to take years rather than months. As such, ASOS’s share price could come under further pressure next year.
Balfour Beatty
Despite being a bid target during the course of 2014, shares in Balfour Beatty (LSE: BBY) have fallen by 35% this year. That’s mostly due to continued profit warnings, with Balfour Beatty’s profit for 2014 due to be an incredible 75% lower on a per share basis than it was in 2011.
Despite their fall, shares in Balfour Beatty still trade on a relatively high P/E ratio of 20.9. That’s considerably higher than the FTSE 100’s P/E ratio of 14.3 and, with Balfour Beatty’s track record of profit warnings, it’s difficult to justify such a vast premium (or, in fact, any premium at all) to the wider index.
Although the company does still pay a decent yield of 4%, dividends are likely to fall next year as the company seeks to move its dividend coverage ratio to a healthier level. And, with such a disappointing track record, it would not be surprising for its share price to fall further next year, too.
Quindell
Investors in Quindell (LSE: QPP) have endured a rough year and, unfortunately, things could get worse before they get better. That’s because an independent review by PwC has only recently been announced and, although there is no evidence to suggest there are any issues at Quindell, there is a possibility that the review may highlight further challenges that need to be rectified by the company, which could knock sentiment in Quindell in the near term.
In addition, a new management team needs to get to grips with business, which is likely to take time, and they will need to decide on future strategy. So, in other words, 2015 is likely to be a transitional year for the business, which could mean that short term performance suffers.
As a result, Quindell’s share price could come under further pressure throughout 2015 and, although it may feel as though things can’t get any worse for investors in the stock, they may well do over the next year.