Today I am looking at the prospects of four bombed-out stock behemoths.
Standard Chartered
Shares in embattled Standard Chartered (LSE: STAN) have bounced impressively from the multi-year lows of 624p at the end of September. Still, I believe this represents nothing more than a ‘deadcat bounce’ — the business has conceded a shocking 38% of its value during the past three months alone, and I reckon the likelihood of fresh emerging market fears should send the bank shuttling lower again.
Standard Chartered has persistently failed to get its Asian businesses moving in the right direction, a problem that also continues to fuel chatter of a potential rights issue. The banking goliath is expected to rack up a 36% earnings decline in 2015, resulting in a conventionally-low P/E ratio of 11.3 times. But given the multitude of problems the firm has to overcome, including the threat of further heavy regulatory fines, I believe the stock remains an unappealing prospect even at these prices.
Aggreko
Like Standard Chartered, power generator provider Aggreko (LSE: AGK) has also seen investor appetite collapse in recent times, and the business is dealing 27% lower from levels printed at the start of July. This comes as little surprise as slowing activity in the North American oil and gas sector hamper revenues growth.
Indeed, Aggreko announced in the period that underlying revenues slid 2% during January-June, pushing pre-tax profit 21% lower from a year earlier, to £102m. And naturally the prospect of further oil price weakness, not to mention worsening security conditions in Yemen, could keep the firm under heavy pressure looking ahead. Aggreko is expected to endure a 10% earnings slip in 2015, and a consequent P/E multiple of 13.2 times is still too heady, in my opinion.
Petra Diamonds
Precious stones digger Petra Diamonds (LSE: PDL) has also endured a torrid time of late and is trading at a 33% discount to levels seen just three months ago. Investor confidence was first shaken by news in July that revenues had slumped by a tenth during the 12 months to June 2015, to $425m, thanks to lower diamond prices and reduced ore quality at its Cullinan and Finsch assets.
On top of this, Petra Diamonds expects diamond prices to remain stagnant in fiscal 2016, while cash costs in South Africa and Zimbabwe advance 8% and 4% respectively. The digger remains bullish on its long-term production prospects, and expects output to hit 5 million carats by 2019, up from 3.2 million last year. But given the slew of production problems the firm has already encountered, I believe Petra Diamonds is in danger of extending the 32% bottom-line slide of 2015, mitigating the appeal of a low P/E reading of 11.3 times.
Mitchells & Butlers
Pub operator Mitchells & Butlers (LSE: MAB) has seen its stock price collapse 30% in the past three months alone, but — unlike the firms mentioned above — I reckon this could provide a solid buying opportunity. The Midlands business advised last month that like-for-like sales declined 0.7% in the seven weeks to September 12, and that it expects growth in the year to September 2015 to be towards “the bottom end of the range of current market expectations” as a result.
Mitchells and Butlers has suffered from adverse weather conditions more recently, and looking ahead the introduction of the ‘Living Wage’ from next April could put margins under severe stress. Still, the chain’s rampant expansion drive — the firm opened 14 new sites and converted a further 48 in fiscal 2015 — could provide rich rewards in the coming years. With an expected 9% earnings bounce in 2016 creating a P/E ratio of just 8.3 times, I believe Mitchells and Butlers could be worth a punt at current prices.