Are three of this morning’s biggest movers, Stagecoach Group (LSE: SGC), easyHotel (LSE: EZH) and travel firm On The Beach Group (LSE: OTB), a buy or a sell after today’s results?
Opportunity knocks
Shares in budget hotel chain easyHotel climbed nearly 10% this morning after the firm revealed a 38% rise in pre-tax profits for the year ending 30 September.
Commenting on the results, easyHotel’s new chief executive, Guy Parsons, said that the “scale of the opportunity” is larger than he originally thought. The firm’s room count increased by 17% to 1,880 last year and easyHotel now has 21 hotels in eight countries.
I was pleasantly surprised by this firm’s results. Operating cash flow covered 81% of easyHotel’s expansion costs and the group had net cash of £15m at the end of the year.
However, earnings of 1p per share and a maiden dividend of 0.33p per share give the shares a demanding trailing P/E of 70 and a yield of just 0.5%.
Although it plans to open three hotels in the next eight months and 1,600 rooms in the UAE and Oman by the end of 2020, broker forecasts suggest earnings may fall slightly this year.
I believe that while easyHotel may be attractive, this stock could be fully priced at the moment.
Stagecoach
Shares in passenger transport operator Stagecoach fell by nearly 15% to 307p this morning after the firm cut its guidance for full-year profit.
Stagecoach said that revenue growth in the UK and parts of Europe had slowed, partly as a result of the Paris attacks. The group also said that the UK regional bus business had been “softer than expected”. As a result, Stagecoach has “modestly revised” forecasts for full-year earnings.
What does this mean for shareholders? Today’s interim results show adjusted earnings per share of 17p for the first half of the year. Broker forecasts were suggesting a full-year figure of 29.3p. I’d guess that this will now be cut by 5-10%, giving a full-year target of perhaps 27p.
After this morning’s falls, this puts Stagecoach shares on a 2015/16 forecast P/E of about 11.5, with a prospective yield of 3.8%. That seems reasonable to me, although as always with profit warnings, it’s worth considering the risk that further downgrades will follow over the next six months.
Beach beauty?
One of the newest arrivals on the London Stock Exchange is online travel agent On The Beach Group, which floated in September. Shares in the firm have fallen since its flotation, but rose by 13% this morning following publication of the firm’s annual results. Revenue was up by 37% to £63.1m, while adjusted pre-tax profits were 46% higher, at £14.5m.
So is now the right time to buy into the On The Beach story? The firm, which unsurprisingly specialises in beach holidays, reported adjusted earnings per share of 8.9p, slightly ahead of forecasts for 8.4p per share. This puts the shares on a trailing P/E of 21. However, earnings per share for the current year are expected to rise to 12.1p, giving a forecast P/E of about 16.
On The Beach has net cash and a respectable 12% operating margin. If the firm’s growth continues, the current price of 195p could prove to be good value.