Berkeley joined larger peers Persimmon, Taylor Wimpey and Barratt in the index this time last year. However, the sector was hit hard by panic selling following the EU referendum result. While the builders have since regained some ground, Berkeley hasn’t risen enough to save it from getting the boot.

At Friday’s market close, the shares were at 2,660p, valuing the company at £3.65bn and ranking it at 113 in the FTSE All-Share index. A rank below 110 at the cut-off time (which is the close of trading today) means an automatic exit from the FTSE 100. As such, it’s looking very much on the cards that Berkeley will be demoted to the second-tier FTSE 250.

However, I wouldn’t be surprised to see the company back in the top index at some point. Unless the economic fallout from Brexit proves to be particularly severe, Berkeley is incredibly cheap, as it trades on just 6.9 times forecast earnings for the year to April 2017 with a prospective dividend yield of 7.5%.

A farewell to ARM

British tech giant ARM Holdings (LSE: ARM) is also set to depart the FTSE 100 — and in all likelihood never to return. That’s because the company is in the final stages of being taken over by Japan’s SoftBank. Indeed, ARM’s shareholders are expected to vote the deal through at a meeting today.

SoftBank made its 1,700p a share offer in the wake of the referendum, with the weakness of sterling making ARM a significantly cheaper buy for the Japanese group than it would have been just a few weeks earlier. The offer represents a heady 47 times ARM’s current-year forecast earnings, and the deal looks set to complete unless something really extraordinary occurs.

The departure of ARM, which is ranked at 22 in the FTSE 100, will wipe £24bn off the value of the index. It will also leave rather staid software group Sage as the only representative of the technology sector in the index with a weighting of just 0.4%.

Replacements

Precious metals miner Polymetal International is currently in pole position to be one of the replacements for ARM and Berkeley. At Friday’s market close, Polymetal was at the head of the FTSE 250 with a market cap of £4.7bn, having enjoyed a resurgence in its shares this year on the back of rising gold and silver prices.

The other replacement is likely to be either packaging firm Smurfit Kappa or chemicals company Croda International with today’s share price action potentially swinging it one way or the other.

The post ARM Holdings plc and Berkeley Group Holdings plc set for FTSE 100 exit appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Berkeley Group Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Most shareholders will be delighted with Monday’s 40% rise in the share price, of course. As an admirer of ARM but never an investor, I’m after some learning points from this development.

Quality costs

As a general rule, the idea that investors should avoid overpaying for stocks while also avoiding value traps makes sense. The point of investing is selling something on for more than you originally paid for it. The more you paid, the less profit (if any) you’ll make. This is easier in theory than in practice, especially when looking at growth companies where potential is matched by what appear to be sky-high valuations.

A quick scan of ARM’s financial history, however, would show that its high asking price has been justified. Its solid balance sheet, high returns on capital employed, consistent earnings growth and rapid dividend increases are indications of just how great a business Softbank has acquired. 

Not every share on a low P/E will turn into a winner and not every share on a high P/E is doomed to disappoint. This makes it more important than ever to thoroughly research companies to check whether the valuation is justified. If a share screams quality, it may be worth paying that bit extra.

Don’t time the market

Trying to predict the short term movements of an index or a particular share is difficult (some would say impossible) and waiting for shares to get ‘that little bit cheaper’ can backfire. I speak from experience.

Last August, ARM’s shares dropped to 864p on fears surrounding a slowdown in China’s economy. It’s price-to-earnings (P/E) ratio dropped to its lowest for some years. Sensing they might drop even further, however, I held off.  China recovered, as did ARM’s share price. Sometimes, as Warren Buffett would say, it pays to buy “a wonderful company at a fair price” than assume it will ever drop to bargain basement levels. Lesson learned.

On a related note, even if I’d invested when last writing about the company in May, I would still have achieved a 71% return. Supplementary lesson? Shares can always go higher.

No losers here

No one likes to lose money. One of the most interesting facts surrounding our financial behaviour is the finding that this aversion is so powerful we’ll usually choose to avoid a loss over securing a gain. This is why some traders often struggle to cut their losses.

As investors focused on building wealth long term, we should remember another of Mr Buffet’s famous sayings when reflecting on missed opportunities: “Rule No.1 is never lose money. Rule No.2 is never forget rule number one.”

The fact that we’re more averse to taking a loss should be used to our advantage. If you’re ruminating over your decision not to invest in ARM, we should remember that not losing money through poor stock picking is often better than failing to invest in that golden share. It’s a simple fact, easily forgotten.

The post 3 things we can learn from the takeover of ARM Holdings plc appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Crucially, no company in the world may be completely immune from the effects of Brexit. If it goes on to cause weakness and a subsequent break-up of the EU, then the world economy may be plunged into a major depression. However, some companies will inevitably be more Brexit-proof than others in terms of being less affected by an uncertain outlook for the UK economy.

Tremendous stability

For example, Reckitt Benckiser (LSE: RB) is very much focused on the emerging world, with sales to developing economies likely to be its key growth driver over the medium to long term. Therefore, an uncertain outlook for the UK is not a major headache for the company and its investors – especially with it being so geographically well-diversified and having a wide range of products.

This affords Reckitt Benckiser tremendous stability and with it forecast to record a rise in earnings of 7% this year and 9% next year, it offers an upbeat outlook which is likely to be delivered. This latter point on reliability could count for a lot among nervous investors and cause Reckitt Benckiser’s share price to keep moving upwards.

Nimble and adaptable

Another stock which is relatively Brexit-proof is ARM (LSE: ARM). It is a truly global business which is focused on investing for the long term in areas such as the ‘Internet of Things’, as well as its excellent cash generator of smartphone processors. Clearly, a global recession would hurt ARM’s performance, but with it having a relatively wide margin of safety it seems to offer a bright long term outlook when it comes to capital gains.

In fact, ARM’s share price is up by 2% since Thursday’s vote and this provides an indication of investor confidence in the company’s future. Trading on a price-to-earnings growth (PEG) ratio of 1.7, it seems to offer good value for money and due to its asset-light business model, which focuses on intellectual property rather than on manufacturing, it should remain nimble and adaptable as the global economy evolves post-Brexit.

Robust profitability

Meanwhile, shares in Imperial Brands (LSE: IMB) have also performed well after the EU referendum. They have risen by 1.5% and this takes their rise over the last year to 17%, versus a fall of 11% for the FTSE 100. This trend is likely to continue in future as Imperial Brands is a well-diversified business with a major growth opportunity in e-cigarettes alongside the stable and robust profitability offered by its traditional cigarette business.

This combination is likely to prove highly popular among investors, and Imperial Brands’ rating could expand from its current level of 15.7. In fact, a number of global consumer goods companies outside of the tobacco sector trade on P/Es of over 20 and so Imperial Brands’ valuation could be viewed as exceptionally low on this basis.

With its earnings set to rise by 12% this year and by a further 6% next year, Imperial Brands remains a high-growth, defensive stock which continues to offer stunning long term capital gain potential.

The post 3 Brexit-proof stocks? ARM Holdings plc, Imperial Brands plc and Reckitt Benckiser Group plc appeared first on The Twelfth Magpie.

More reading

• How much do you need in an ISA to target a £9,999 second income that rises every year?
• 6.7% yield! Is Imperial Brands an irresistible FTSE 100 share to consider?
• Start buying shares with just £20 a week? Here’s how even that could help someone build wealth
• Here’s how putting £800 a month into a Stocks and Shares ISA from age 27 could fund a £2m retirement!
• Here are the stunning returns I’m targeting from £20,000 in this high-income FTSE star

Peter Stephens owns shares of ARM Holdings and Imperial Brands. The Motley Fool UK has recommended ARM Holdings and Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

For example, after making a loss in 2012, IAG’s profit has soared and the company is expected to grow its earnings by 49% in the current year. That’s an exceptional rate of growth and with a rise in IAG’s bottom line of 11% pencilled-in for next year, it remains an exceptional growth play.

Despite this (and its share price rise over the last five years), IAG trades on a very appealing valuation. For example, it has a price-to-earnings growth (PEG) ratio of only 0.2 and this indicates that while buyers of its shares today have missed out on excellent gains, there’s still scope for another doubling of IAG’s share price over the medium-to-long term.

Not too late?

Also rising rapidly in the last five years have been shares in ARM (LSE: ARM). The technology company is now trading 80% higher than it was five years ago and an incredible 800% higher than it was a decade ago.

Clearly, such a rapid growth rate could indicate that ARM’s shares are due for a fall, possibly due to profit-taking, for example. However, despite being a much more mature business than it was five or 10 years ago, ARM remains highly nimble and able to focus resources on areas where top-notch growth rates can still be achieved.

For example, it has benefitted from the surge in smartphone ownership across the globe in recent years, with ARM being a dominant supplier of processors. While there’s scope for further growth in this space as the emerging economies of the world become more consumer-focused, ARM is also investing in new growth areas such as the Internet of Things, which could sustain its double-digit earnings growth rate over the coming years. As such, far from being too late to buy ARM, now could prove to be the perfect time to do so.

Pricey P/E

Meanwhile, shares in beverages company Fevertree (LSE: FEVR) are also up in the last five years. Rising profitability has caused the company’s valuation to soar by 310% during the period and with further bottom line growth of 47% and 12% being forecast for the next two years, respectively, many investors may feel that buying Fevertree is a sound move.

While the business is performing well, the market seems to have priced-in Fevertree’s upbeat outlook. For example, it trades on a price-to-earnings (P/E) ratio of 41.1 and this indicates that while its bottom line may soar, its shares may fail to do likewise. And while the beverages sector is historically relatively expensive, there appear to be better risk/reward opportunities available elsewhere.

The post Is it too late to buy ARM Holdings plc, International Consolidated Airlns Grp SA and Fevertree Drinks plc? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Peter Stephens owns shares of ARM Holdings. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Alongside this, Domino’s has increased the breadth of its menu and has been able to pick up new customers from non-pizza fast food rivals. As such, the company’s bottom line has risen rapidly in the last five years, with it recording an annualised growth rate of over 15% during the period.

Looking ahead, further growth of 11% is forecast for this year, with 2017’s rise in earnings expected to be 12%. Both of these figures could cause investor sentiment in Domino’s to rise further and while it trades on a rather rich price-to-earnings growth (PEG) ratio of 2, its consistent and resilient growth profile makes it a strong buy for the long term.

Value for money?

Also recording excellent growth in recent years has been ARM (LSE: ARM), with increased demand for smartphones across the globe providing a boost to the company’s top and bottom lines. However, ARM offers much more than a play on the smartphone market and is investing heavily in other areas such as the Internet of Things. This could be a major growth area for the company since the world is becoming increasingly interconnected and looks set to continue in this path over the medium-to-long term.

In the shorter term, ARM is expected to increase its earnings by 43% in the current year and by a further 15% next year. This puts it on a PEG ratio of just 1.7, which for a well-established and highly consistent growth stock seems to be a very fair price to pay. Certainly, investor sentiment towards ARM has been rather lacklustre of late, with the company’s shares falling by 4% year-to-date. But due to its appealing valuation, now could be an excellent time to buy.

Risk vs rewards

Meanwhile, the last few years have been challenging for online fashion retailer ASOS (LSE: ASC). Warehouse problems and a major investment in pricing in less established markets have caused the company’s bottom line to fall in each of the last three years. However, with growth forecasts of 27% in the current year and 30% in the next financial year, many investors may feel that ASOS is worth buying at the present time.

That’s especially the case since after a fall of 4% in the last year, ASOS’s shares now trade on a PEG ratio of 1.6. And with it having a strategy focused on core markets, ASOS could deliver strong share price growth over the medium-to-long term.

However, with the UK retail sector being relatively cheap, there may be better options available elsewhere. Although for less risk-averse investors, ASOS may be worth a closer look.

The post Are ARM Holdings plc, Domino’s Pizza Group plc and ASOS plc 3 must-have growth stocks? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens owns shares of ARM Holdings and Domino's Pizza. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended ARM Holdings and Domino's Pizza. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

This is a key reason why ARM (LSE: ARM) is such an appealing stock. It’s now becoming a more mature business, offering a relatively stable financial outlook as well as increasing dividends at a rapid rate. However, it still offers a stunning rate of growth, with ARM’s bottom line forecast to increase by 43% in the current year and by a further 15% next year. And with ARM investing heavily in new market segments such as the Internet of Things, its longer-term growth potential remains highly encouraging.

With ARM trading on a price-to-earnings growth (PEG) ratio of just 1.5, it seems to offer substantial upside potential. Therefore, it remains a super growth stock worth buying for the long term.

Capital gain potential

Also offering upbeat growth prospects is patent translation specialist RWS (LSE: RWS). Its bottom line is forecast to rise by 27% in the current year and by a further 8% next year. Furthermore, RWS has a relatively wide economic moat and with it having a relatively consistent track record of growth, it seems to be an excellent growth play for the long term.

While RWS trades on a P/E ratio of 21, it still offers significant capital gain potential. Investor sentiment remains strong, as evidenced by its share price rise of 58% in the last year. And while RWS is expected to raise dividends per share by 6% this year so that it yields 2.4%, it remains an excellent growth play that has been able to increase its bottom line at an annualised rate of 10% over the last five financial years.

Wait and see

However during this period, connected healthcare software specialist Emis (LSE: EMIS) has been able to grow its bottom line at an even more appealing annualised rate of 12.4%. This shows that it has been an excellent growth play, with its share price soaring by 98% during the last five years.

Looking ahead, Emis is forecast to post strong growth numbers. Its earnings are expected to rise by 8% in the current year and by a further 9% next year. However, with the company’s shares trading on a P/E ratio of 20.7, Emis appears to be rather fully valued at the moment.

Certainly, with uncertainty among investors regarding the global macroeconomic outlook being high, more reliable growth stocks such as Emis could be of real value. But with other growth plays offering better value for money, it may be prudent to await a lower share price before piling-in to Emis.

The post 3 super growth stocks? ARM Holdings plc, Emis Group plc and RWS Holdings plc appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens owns shares of ARM Holdings and RWS. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

However, during recent months doubts have begun to emerge among some investors regarding ARM’s growth rate. That’s partly because it’s becoming a more mature business, but also because Chinese growth has slipped and with ARM being a key supplier to the smartphone industry, its future arguably looks less certain than a couple of years ago.

As a result of this, ARM’s shares have fallen by 10% in the last six months. Rather than making investors feel cautious, this fall in share price presents an opportunity to buy ARM while it has a wider margin of safety than it perhaps normally would. For example, it now trades on a price-to-earnings-growth (PEG) ratio of just 0.6, which indicates that even if earnings growth does slow to a degree, ARM’s share price could reverse recent falls over the medium term.

Great tech stock

Also offering a bright future is fellow tech stock Laird (LSE: LRD). Its shares are somewhat unusual for a tech company insofar as they offer superb dividend potential. In fact, Laird currently yields 4% after having increased dividends per share at an annualised rate of almost 11% during the last five years. This shows that it’s a relatively income-friendly stock, which bodes well for further dividend increases.

Looking ahead, Laird has the scope to increase dividends at a rapid rate. Not only are they covered 1.9 times by profit, but Laird’s net profit is expected to rise by 15% in the current year and by a further 13% next year. This puts the stock on a PEG ratio of only 0.9 and with it being a high quality company with a dependable track record of growth, Laird seems to be one of the best tech stocks around.

Dwarf star

Shares in fellow tech sector company Quixant (LSE: QXT) have soared by 32% since the turn of the year as investors begin to price-in upbeat earnings growth prospects. The developer and supplier of computer systems is forecast to increase its bottom line by 57% in the current financial year, then by a further 24% next year. This puts it on a PEG ratio of only 0.7, which indicates that its shares could have much further to go in their stunning rise.

Clearly, Quixant is a smaller business than either ARM or Laird and so perhaps lacks the scale and robustness of its larger sector peers. However, with Quixant having a relatively wide margin of safety, it seems to offer a highly enticing risk/reward ratio and could prove to be a sound long-term buy.

The post Are ARM Holdings plc, Laird plc and Quixant plc the best of the best tech stocks? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens owns shares of ARM Holdings and Laird. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Online is still strong. 2015 saw Next Directory sales increase a full 7.7% year-on-year and operating margins dip only marginally from 24.5% to 24.4%. Of course, the market is forward-looking so the lowered guidance for 2016 hurt share prices, but sales are expected to continue growing and there’s little reason to expect margins to suddenly plummet.

Next is now a mature business facing a lower growth scenario in the UK, but management is rightly focused on improving online offerings to entice more customers as well as expanding overseas. With management focusing on the right steps to take, shares trading at 11.8 times forward earnings with a 3.8% yielding dividend should at least pique the interest of contrarian investors.

Growth potential

The UK’s most famous technology brand, ARM (LSE: ARM), has seen shares slip 10% from the start of the year despite a 14% rise in Q1 pre-tax profits. The main reason for the fall despite this continued growth are fears that slowing global demand will hit ARM hard since it’s the world’s leading chip designer for smartphones. Indeed, sales of Apple’s iPhone, one of ARM’s largest customers, did fall year-on-year for the first time last quarter.

Yet management has seen this decline in smartphone growth coming for some time and has been shifting into designing chips for connected Internet of Things devices. The key to whether this transformation will be as profitable for investors as smartphone chips is to watch operating margins, which dropped to a still-astounding 48.6% in Q1. However, if management can stabilise margins after a major hiring spree, shares look are looking cheaper than they have in years at 27 times forward earnings. ARM has a proven record of designing top-of-the-line chips for new business lines, over £1bn in cash, and high enough growth to make that valuation attractive for investors looking to get in on a proven winner.

Investing in Royal Bank of Scotland (LSE: RBS) would take a very hardy contrarian, but the bank does offer significant turnaround prospects. RBS shares have dropped 29% in 2016 after it posted its eighth consecutive annual loss. Yet hidden under all the fines and restructuring costs lies a reasonably sound retail bank with return on equity of 10.9% in Q1.

The task for RBS will be to extricate itself from the billions in toxic assets it still holds in its Capital Resolution division. There’s been good news on this front as risk-weighted assets fell £36.7bn over the past year and are targeted to decline to £30bn by the end of 2016. And if the company can finally sell off the Williams & Glyn retail bank, it will be able to resume dividend payouts after last quarter’s final payment to the government. While this process will take some time, RBS had proved adept at divesting non-core assets and refocusing on domestic retail banking. Furthermore, with shares trading at just a 0.46 price/book ratio, there’s significant upward rerating possible. For a risk-hungry investor willing to take more pain in the short term, RBS could be an intriguing option.  

The post Why contrarians should love Next plc, ARM Holdings plc and Royal Bank of Scotland Group plc appeared first on The Twelfth Magpie.

More reading

• How much would you need invested for a second income that covers council tax?
• FTSE 100 banks retreat as investors react to political unrest. What lies ahead?
• Here’s how to invest £18,182 in an ISA for a 5.5% dividend yield
• Everybody is talking about Space X but I’m more excited by the NatWest share price
• How much do you need in a SIPP to replace the average £39,039 UK salary?

Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

However, this view ignores the fact that China offers a tremendous opportunity for consumer goods companies and financial services providers. Certainly, its spending on infrastructure and capital expenditure projects is falling. But with a rising middle class, demand for pensions, smartphones and clothing is likely to soar.

This is good news for Standard Life (LSE: SL), with the diversified financial services company attempting to position itself for growth within the region. With a large number of Chinese set to retire over the next few decades, Standard Life could see demand for its pension services increase while the penetration of other financial products is also set to rise over the coming years.

With Standard Life forecast to increase its bottom line by 10% next year, it trades on a price-to-earnings-growth (PEG) ratio of only 1.1. This indicates that its shares offer a very wide margin of safety and that they could deliver stunning capital growth over the medium-to-long term. Furthermore, Standard Life has a yield of 6.2% and given the opportunity for growth in China, its dividend prospects are impressive, too.

Passion for fashion

Another stock that should benefit from China’s shift towards a more consumer-based economy is Jimmy Choo (LSE: CHOO). The luxury brand that’s best-known for its high-heeled shoes is intent on diversifying its product range so as to broaden the appeal of its brand and tap into a new customer base. This has the potential to boost its bottom line and with the company forecast to increase its earnings by 26% this year and by a further 20% next year, it seems to be moving in the right direction.

With demand for luxury clothing and accessories in China likely to rise as earnings increase, Jimmy Choo could see its top and bottom lines increase at a rapid rate over the next decade. And with its shares trading on a PEG ratio of only 0.9, they seem to offer tremendous upside potential.

Growth potential

Meanwhile, ARM (LSE: ARM) should also be a beneficiary of China’s booming middle class, with smartphone sales likely to return to strong growth over the medium-to-long term. However, even if this doesn’t take place, ARM seems to be well-positioned to grow its bottom line via other technology segments. For example, it’s investing heavily in its capabilities within the Internet of Things space, which it thinks could positively catalyse its profitability.

While ARM is a relatively mature company, it’s still expected to grow its earnings by 43% in the current year. This puts it on a PEG ratio of only 0.6 and with an excellent track record of growth, ARM seems to be worth a much higher price than that at which it currently trades.

The post Will a slowing China cause pain for ARM Holdings plc, Jimmy Choo plc and Standard Life plc? appeared first on The Twelfth Magpie.

More reading

• How much second income could I make from £10k in the stock market?
• Has this FTSE 100 dividend stock finally turned a corner?
• How much do I have to invest in this newly-promoted FTSE gem to target £7,927 a year in passive income?
• Aberdeen shares are back in the FTSE 100 — is this turnaround stock just getting started?

Peter Stephens owns shares of ARM Holdings, Jimmy Choo, and Standard Life. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

However, ARM’s latest update indicates that it’s a company with a very bright future. One area in which the company is investing heavily is the Internet of Things, with ARM seeing this as a major growth segment for the long term. It could contribute to improved financial performance in future years and with ARM having an asset-light business model focused on intellectual property rather than the manufacturing process, it seems to be well-positioned to offer double-digit growth over the long run.

With ARM now trading on a price-to-earnings-growth (PEG) ratio of just 0.6, it seems to offer excellent value and looks likely to reverse the disappointing share price performance of the last year.

Positive outlook

Also recording negative returns over the last year have been shares in Spirent Communications (LSE: SPT), with them falling by 13%. While disappointing, the outlook for Spirent remains positive since the company is forecast to increase its bottom line by 15% this year and by a further 17% next year.

Certainly, Spirent’s track record of growth is rather mixed and in the last few years its pre-tax profit has sunk from £79m to just £6m. With guidance having the potential to be downgraded, it could be crucial to have a wide margin of safety before buying-in.

With Spirent having a PEG ratio of just 1, it seems to offer a relatively appealing risk/reward ratio and although its shares could prove to be more volatile than the wider market owing to its less consistent business model, Spirent could be a strong performer over the medium-to-long term.

Buy for the future?

Meanwhile, global mobile satellite communications services provider Inmarsat (LSE: ISAT) has recorded a share price fall of 18% since the turn of the year. This is perhaps unsurprising, since the company reported a fall in earnings of 17% last year and is due to deliver a further decline of 21% in the current year. As such, investor sentiment could come under further pressure in the short run and push Inmarsat’s share price down further.

However, with Inmarsat expected to return to growth in the 2017 financial year, its shares could be worth buying right now. In fact, Inmarsat’s bottom line is expected to increase by 20% next year and with it trading on a PEG ratio of 1.2, it seems to offer a sufficiently wide margin of safety to warrant investment.

The post Will ARM Holdings plc, Inmarsat plc and Spirent Communications plc ever reverse their share price declines? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens owns shares of ARM Holdings. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.