The general wobble in the markets, plus some company-specific factors, make ARM Holdings (LSE: ARM), Sports Direct International (LSE: SPD) and Boohoo.Com (LSE: BOO) look excellent value at the present time.
ARM Holdings
The shares of British technology champion ARM Holdings are well off their 52-week high of over £12. They look good value for money to me at under £10.
The chip designer’s shares were marked down last week, after Apple — a major customer — announced weaker than expected quarterly iPhone sales. However, I didn’t see much wrong with ARM’s own quarterly results, which were also released last week. The FTSE 100 firm reported revenue growth of 22%, with normalised earnings up 34% and reported earnings up 39%. Profit margins were higher (again), net cash increased (again), and a record 54 processor licences were signed during the quarter.
The fall in the shares to under £10 has put ARM on a forward 12-month price-to-earnings (P/E) ratio of 29, which is just below the bottom of its 30-45 historical range. As such, I see now as a good time to buy.
Sports Direct International
The “my way or the highway” style of Sports Direct founder Mike Ashley may not be to everyone’s liking, but he certainly knows how to grow a business and sweat profits from it. Sports Direct has gobbled up numerous iconic sports brands and store estates (mainly from distressed sellers) on its way to becoming the UK’s dominant sportswear retailer. The company also has a significant international presence, contributing 20% of total group revenue.
Annual results announced a couple of weeks ago showed revenue growth of 5%, with underlying earnings up 21% and reported earnings up 32%. Profit margins improved (again) and with a number of drivers for further growth — including continuing bricks-and-mortar expansion and global e-commerce roll-out — the future looks bright.
Analysts are forecasting annual earnings increases to moderate to 10%-15%, and I see that as a sustainable growth rate well into the future. Sports Direct’s shares haven’t been too much affected by the general market wobble — at 768p, they’re only marginally off their 782p high — but they may have pushed higher in a more buoyant market, and a forward 12-month P/E of 17.5 appears good value for this sector dominator.
Boohoo.com
Launched in 2006, by savvy rag traders who had previously supplied the likes of Primark, fast fashion e-tailer Boohoo targets the 16-24 age group with “all the latest looks for less”. Institutional investors supported a flotation on the AIM market in March last year at what seemed to me like a too-rich — 50p a share — valuation.
A couple of hitches during the autumn/winter period, coupled with unseasonable weather which affected clothing retailers generally, led to Boohoo issuing a profit warning in January; and the shares crashed. Despite meeting revised expectations in its annual results released in May, and a good first-quarter update in June, the shares have remained depressed — 28.5p, as I write — in part, due to selling by disillusioned institutional investors.
Boohoo trades on a forward 12-month P/E of 24, and with earnings growth of 34% forecast, the P/E-to-earnings growth (PEG) ratio is an eye-catching 0.7; the PEG “fair value” yardstick being 1. Boohoo is awash with cash, too, and I believe the stock is an attractive buy.