Today I am looking at the future prospects of four stock market stormers.
RSA Insurance Group
Shares in financial services leviathan RSA Insurance (LSE: RSA) have leapt more than 20% since the start of June, the stock gaining fire after Zurich announced its intention to purchase the firm. With the deadline looming this week, RSA announced it was “willing to recommend” its Swiss rival’s latest £5.6bn offer, worth an estimated 550p per share, and asked for the Takeover Panel to allow more time for the deal to be signed off.
The deal is far from a foregone conclusion, however, particularly as the macroeconomic jitters of recent days could prompt Zurich’s shareholders to put the kibosh on any alliance. Still, RSA’s current share price of 516p represents a chunky discount to the proposed buyout price. And the release of positive financials this week — pre-tax profit galloped to £288m during the first-half, RSA noted — could potentially attract a bidding war from other insurers won over by the London firm’s transformation plan. I think RSA’s share price could chug still higher in the weeks ahead.
JD Sports Fashion
Supported by steadily-improving retail conditions in the UK, investor appetite for trainer emporium JD Sports (LSE: JD) has lit up in recent months and the stock has risen 33% since the end of May. The business announced during the period that, thanks to like-for-like sales continuing to steam higher, that pre-tax profit for the 12 months to January 2016 should smash expectations. And with JD Sports continuing to aggressively expand I fully expect the top-line to keep on exploding in the years ahead.
With last month’s announcement having prompted scores of broker upgrades, the City expects the retailer to enjoy earnings expansion of 21% and 9% in 2016 and 2017 respectively. And despite the recent share price gain, JD Sports does not appear to be chronically overvalued, either, dealing on P/E ratios of 17.4 times for this year and 16.1 times for 2017. I believe this is a great point to get in on the sportswear giant’s terrific growth tale.
Admiral Group
Car insurance colossus Admiral (LSE: ADM) has seen its stock advance by a more modest 2% during the summer months, but I believe momentum should pick up looking ahead as industry pressures ease. Indeed, the Association of British Insurers advised last month that the average premium advanced 3.1% in the second quarter from the same point in 2014. On top of this, Admiral’s improving performance in the US and Italy also bodes well for revenues growth.
The number crunchers expect Admiral to report a 5% earnings slip in 2015 thanks to previous rate pressures, but a 3% uplift is forecast for the following year. Consequently a P/E ratio of 16 times for 2015 falls to a highly-appealing 15.8 times for 2016. Furthermore, projected dividends of 93.3p per share and 96.5p for 2015 and 2016 respectively are hard to ignore, the insurer’s robust capital base enabling yields of 6% and 6.2% for these years.
PayPoint
Shares in PayPoint (LSE: PAY) have continued the upsurge that started in the spring, and the payment collection specialists have ascended a further 7% during the summer period. The company is enjoying the fruits of surging e-commerce volumes, and announced last month that it processed 201.6 million transactions in April-June, up 6% from a year earlier, with net revenues edging 1% higher during the period to £29m.
And I believe the firm’s decision to bolster its retail operations should deliver solid returns as improving consumer spending power powers the rise of internet retailing still further. This view is shared by the analysts, and PayPoint is anticipated to enjoy earnings expansion of 6% in both 2015 and 2016, resulting in decent P/E multiples of 16.4 times and 15.3 times respectively. In my opinion this is a decent price for a company that could see the bottom line explode looking further down the line.