It’s one of the busiest weeks of the year for first-half company results, and a great opportunity to check up on our existing shareholdings and to look for new candidates. Here are three that are worth closer scrutiny.
A great engineer?
GKN (LSE: GKN) makes major components, like driveshafts, fitted to many of the world’s cars, in addition 07bn to aerospace components. As such, it’s a relatively safe haven in these traumatic post-Brexit days, with the company’s first half announcement telling us “there should be little [Brexit] impact on GKN over the medium term and 2016 is expected to be another year of growth“.
Sales rose by 17% to £4,518m, with adjusted pre-tax profit up 12% to £344m and adjusted EPS up 7% to 15.5p, and the interim dividend was lifted 2% to 2.95p per share. Net debt did rise, however, from £769m at the end of December to £918m. Cost-cutting is expected to bring annualised savings of £30m from 2017, with a one-off £35m charge in the second half of this year.
GKN shares are up 2% to 296p as I write, and that puts them on a full-year P/E of just 10.8, dropping to 10 on 2017 forecasts, with expected dividend yields of a little over 3%. That looks good value to me, and I see an opportunity here to take advantage of a currently unloved sector.
Cheeky young bank
Challenger bank Virgin Money Holdings (LSE: VM) released first-half figures today, and they look pretty impressive, with underlying pre-tax profit climbing 53% to £101.8m. Net mortgage lending rose by 29% in the period, to £2.2bn, reflecting the bank’s potential as a newcomer to the market. Credit card balances are up 31% with cash on deposit up 8%, and key liquidity measures all look very solid.
On the key Brexit worry, Virgin said it’s “in a strong position to deal with a period of post-referendum uncertainty“, experiencing “continued strong customer demand and no evidence of changes in customer behaviour“.
Investors were pleased and pushed the shares up 7% to 262p, but they look anything but overpriced. They’re valued at just 8.8 times forecast full-year earnings, dropping to only 7.5 on 2017 forecasts, with a 3% dividend yield predicted for 2017. I see a strong prospect in a depressed sector.
A super growth share
Shares in Fevertree Drinks (LSE: FEVR) have more than doubled in the past 12 months and have nearly five-bagged over the past two years. Today’s first-half figures from “the world’s leading supplier of premium carbonated mixers” provided an extra 5% boost, taking the price up to 842p.
The company reported a 69% rise in revenue to £40.6m with adjusted EBITDA up 72% to £12.4m and EPS up 83% to 8.12p. Net cash stood at £18.6m, up from £7.9m at the same stage last year, and the interim dividend was lifted by 97% to 1.54p per share (though full-year forecasts suggests a yield of only 0.5%).
The big question now is of valuation, with the shares valued at a heady 50 times predicted 2016 earnings, falling only as far as 44 on 2017 forecasts. Though we’re looking at a strong company, it has all the look of an overblown growth share to me, and I can’t help feeling there’ll be a correction in the not-too-distant future.