Shares are down from recent highs at Diageo (LSE: DGE), Vodafone Group (LSE: VOD) and Laura Ashley Holdings (LSE: ALY) but the investment story remains compelling in each case. Are we seeing a good-value entry point for these shares right now?
Expansion in Asia
At 27.5p, the shares of Laura Ashley Holdings are almost 22% down from the 35p or so they achieved in May. The share-price movement seemed at least partly driven by the firm’s purchase of a property in Singapore for approximately £31.1 million, which cost the firm its cash balance and required a top-up loan to complete the financing.
The move into property surprised many investors, but Laura Ashley aims to establish an Asian headquarters and a strong commercial and operational presence in the region, where the directors see robust potential for growth.
With a price-to-earnings (P/E) ratio running at just over nine and a dividend yield of 7% the shares seem attractive, especially if further growth in Asia develops as the directors hope. There’s every reason to be optimistic, as the company already has around 296 franchised stores in 30 territories worldwide on top its British store estate and e-commerce operation.
Although trading was tough recently in some areas the directors expect a better performance during the second half of 2015. The Laura Ashley brand goes to market in the form of furniture, home accessories, decorating materials and fashion, and the directors reckon it appeals to many customers worldwide. I think the investment proposition here is interesting and Laura Ashley is well worth further research.
A quality outfit
International branded alcoholic drinks supplier Diageo has attractive cash-generating qualities thanks to the consumable nature of the product. The ‘defensive’ nature of the business keeps the firm’s shares changing hands at a premium. However, the share-price chart shows a gentle decline since the middle of 2013 as profits slipped due to challenging trading conditions in emerging markets and elsewhere.
At today’s 1869p, Diageo trades on a forward P/E rating of almost 21 for year to June 2016 and the forward dividend yield is 3.1%. City analysts following the firm expect earnings to grow by just 1% during the current trading year, which although slight is better than the single-digit reductions we’ve seen over the past two years. Perhaps the tide is turning with earnings. If so, any further slip in the share price could make the case for investing in this quality outfit compelling.
A rich valuation
Although at today’s 217p Vodafone’s shares are down around 15% from their recent peak, I find it hard to get past the mobile phone operator’s rich valuation. City analysts following the firm expect the company’s capital investment programme to pay off during year to March 2017 with a 21% uplift in earnings. However, the forward P/E runs at around 37 and the dividend yield is 5.3% with the payout only half covered by those improved earnings. There is surely a lot of future growth already priced in at this level, so I’m happy to watch from the sidelines.