Today I am looking at the investment case for three headline grabbers in Thursday trading.
PZ Cussons
Consumer goods leviathan PZ Cussons (LSE: PZC) was recently changing hands 0.5% higher after releasing another reassuring update. The company, whose brands like Carex and Imperial Leather give it market-leading positions in many geographies, said that trading “has been in line with expectations” for the year concluding April 2015, adding that it had performed particularly well in the UK and Australia.
With consumer spending power improving in traditional and emerging regions alike, the City expects PZ Cussons to recover from an expected 2% earnings dip in the period just passed with improvements of 4% and 7% in 2016 and 2017 correspondingly. It is true that these projections create P/E multiples above the watermark of 15 times that indicates attractive value — at 19.3 times and 17.9 times respectively — I reckon that these readings should continue declining as sales levels of the firm’s blue-ribbon labels march steadily higher.
Crest Nicholson Holdings
Shares in Crest Nicholson (LSE: CRST) have surged since the start of the year, and the housebuilder has added a further 1.7% during the course of Thursday’s session. The business advised last month that forward sales as of the end of April had leapt 25% from the corresponding point in 2014, at 1,786 units, helped by a combination of stamp duty changes and favourable mortgage lending rates.
With conditions for Britain’s housebuilders looking set to remain supportive for the foreseeable future, the City expects Crest Nicholson to enjoy earnings growth of 19% and 23% for the periods concluding October 2015 and 2016. These figures result in very attractive earnings multiples of just 11.2 times and 9 times. And an expected dividend of 19.4p per share for this year creates a juicy 3.7% yield, and this improves to a brilliant 5.2% for 2016 thanks to predictions of a 27.2p reward.
BTG Group
Healthcare specialists BTG (LSE: BTG) cheered the market in today’s session after announcing that its TheraSphere product — which is used to battle primary liver cancer and metastatic colorectal cancer — had treated its first patient in Singapore. This is the second Asian market where the treatment has been launched, and with a further 20 hospitals across the continent engaged in Phase III testing, the company is understandably cock-a-hoop about the potential of this treatment in emerging regions.
BTG’s shares rose 1.8% following today’s announcement, and with the London firm’s pipeline producing potential earnings superstars like its RePneu emphysema treatment, earnings are expected to gallop higher in the coming years — indeed, growth of 27% and 47% is pencilled in for the years concluding March 2016 and 2017 alone. Although BTG consequently changes hands on a huge P/E multiple of 35.1 times for this year, the number collapses to 23.9 times for next year.
Royal Mail
Shares in Royal Mail (LSE: RMG) have ducked 3.6% lower in Thursday business, the shares impacted by the UK government’s sale of 15% of its holding in the courier, reducing the taxpayers’ stake by half. The Treasury raised a colossal £750m following the move.
However, I believe that this weakness represents a fresh buying opportunity. Intense competition and vast restructuring costs are expected to drive the courier’s earnings 21% lower for the year ending March 2016, although a 6% rebound is chalked in for the following year. Consequently Royal Mail deals on cheap P/E ratios of just 13.5 times and 12.7 times for these periods. Meanwhile, predicted dividends of 21.5p per share for 2016 and 22.4p for 2017 create giant yields of 4.4% and 4.5% respectively.