Today I am looking at whether investors should pile into three recent FTSE fallers.
easyJet
High-flyer easyJet (LSE: EZJ) had its wings clipped last week and then some, the business shedding 6% of its stock market value between last Monday and Friday. However, I believe this represents nothing more than near-term turbulence as demand for its budget seats takes off.
The Luton-based firm advised last week that pre-tax profit cantered 18.1% higher during the 12 months to September 2015, to £686m, representing a fifth successive annual record. This bubbly performance was driven by a 3.5% advance in revenues — to £4.7bn — as well as a backdrop of falling fuel costs and favourable currency movements. Indeed, easyJet saw costs per seat decrease 3.4% during the period.
Although recent terrorist activity affecting the airline industry has stymied easyJet’s share price performance this year, I believe the business remains an attractive long-term investment destination. The City expects the business to enjoy another 7% earnings bounce in fiscal 2017 alone, producing a P/E rating of just 11.3 times. And a projected dividend of 60p per share produces a market-busting 3.6% yield.
Randgold Resources
I am not as optimistic concerning the growth prospects of precious metals digger Randgold Resources (LSE: RRS), however. The business saw its share price duck 1% lower last week in tandem with the movement in gold values, and I believe further weakness is on the cards as the yellow metal dives.
Bullion prices sunk below the $1,070 per ounce marker once again in Monday business, edging back towards the six-year lows struck recently and prompted by further strength in the US dollar. With the greenback replacing gold as the go-to destination for safe-haven investors, I reckon gold should continue to shuttle lower as macroeconomic fears persist and Fed rate hikes materialise.
Randgold Resources announced this month that revenues sunk 12% during July-September, and I believe that should gold prices sink through the psychologically-critical $1,000 marker — chatter surrounding which is gathering a head of steam — then the mining giant could see its bottom line decimated.
The business is expected to endure a 29% earnings slide in 2015 alone, leaving it on a frankly-ridiculous P/E rating of 29.8 times. I see very little reason to invest in Randgold Resources at the current time, and particularly at current prices.
Poundland Group
Budget retail group Poundland (LSE: PLND) shocked the market with a pessimistic trading update last week, and the market reacted accordingly by sending shares in the company 19% lower between Monday and Friday. And a further 6% slide today suggests the worst could be yet to come.
The West Midlands business advised that underlying profit before tax slumped 26.3% during April-September, to £9.3m, prompted by a 2.8% fall in like-for-like sales. Indeed, Poundland advised that it had witnessed “highly volatile trading conditions” so far in the third quarter, hinting at the impact of rising competition on its recent performance.
Poundland is expected to clock up a 12% earnings slide in the 12 months to March 2016, leaving it dealing on a P/E rating of 18.1 times, a little distance above the benchmark of 15 times that indicates attractive value for money.
And given that the retailer’s sales outlook is becoming increasingly muddier, despite the recent acquisition of rival 99p Stores, I believe shares are in danger of sinking still further, particularly should trading during the critical Christmas period disappoint.