According to today’s update, total group income is now expected to be approximately £672m, down 8.8% year-on-year. Company earnings before interest, tax, depreciation, and amortisation are expected to slide 22% to £65m for the year. 

Most of the pain has come from the group’s sales and letting arm. Here total income is expected to slide 14% year-on-year with revenue from the UK business down 17%. Income from home sales and letting in London is down 10% year-on-year to £155m. Income from the London market accounts for 75% of the UK total. 

EBITDA for the whole sales and letting arm is expected to fall 45% to £26m “as a result of the changes in the sales and lettings structure made over the last 12-24 months.” 

Thanks to slowing transaction volumes in estate agency, income from the firm’s financial services business is set to fall from £22.6m to £20m. 

The one part of the Countrywide group that is showing growth is the business’s B2B division. This arm should now report EBITDA growth of 14% to £36m for the year. 

From bad to worse 

Over the past few years, Countrywide has continually disappointed the market. After its IPO in 2013, the shares popped to a high of 686p in 2014 as investors bought into the firm’s growth story. However, after peaking at £68m in 2014, net profit has steadily declined. For 2016, the group reported only £17m of net income, down 75% from the peak. Over the same period, the value of Countrywide’s shares has declined by nearly 80%. 

And it looks as if life is only going to get harder for the estate agent. The latest housing surveys indicate that home price growth in the UK is slowing, and in London, prices are falling at the fastest rate since the financial crisis. According to the Land Registry, the number of property transactions decreased 15.8% year-on-year to the end of August. Across the UK, the number of property transactions was down 12.9% annually during September 2017. 

So, it looks as if Countrywide is going to have to work harder to make money going forward. Unfortunately, the group is also highly leveraged, which to me is a big red flag. 

Weak balance sheet

According to today’s trading update, it is expecting to generate £59m of operating cash flow during 2017. Some of this has been used to pay down debt. However, net debt is still likely to be £193m at the end of the year (down from £248m last year). Even though management says it is “committed to reducing leverage further in the medium term,” heading into a cyclical downturn with a weak balance sheet is, in my view, a perilous situation as it places financial constraints on the business. 

So overall, even though shares in Countrywide look cheap as they currently trade at a forward P/E of 9, I would avoid the business as it’s likely there will be further pain ahead for investors in the next few years. 

The post Why I’d avoid this falling knife following today’s 15% slump appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

At first glance, it looks as if Countrywide is a company in turmoil. Three of the company’s top executives walked out this month, the latest in a long line of departures as a result of the dramatic reshaping of the group under chief executive Alison Platt. All three senior management figures walked out to pursue “other opportunities”, which was the same excuse given earlier in the year when the managing director of estate agency group, Bob Scarff, and the group commercial director, Nick Dunning, both stepped aside at short notice. It looks as if these departures are part of the group’s drastic restructuring. However, while management is busy reorganising the business, Countrywide’s profits are falling. Earlier this month Countrywide revealed operating profits for the first nine months of the year were down 11% year-on-year.  City analysts expect full-year earnings per share to fall 13% year-on-year so for the time being it might be wise to avoid the company. 

Thomas Cook fell to a 52-week low on concerns that geopolitics would weigh on the company’s earnings for the next few years. But the company dispelled these concerns this week by reporting full-year results that beat expectations. Net profit nearly doubled in the year to the end of September and based on these figures the company currently trades at a P/E of 9.1. After an impressive 2015, Thomas Cook could have more in the tank for 2016. 

Stagnant sales and concerning levels of management compensation have weighed on Vislink’s share price this year. Vislink’s shares are down by nearly 50% from their June peak and they now trade at a forward P/E of 7.5. City analysts expect the company to report earnings growth of 18% for 2015, implying that the group is trading at a 2016 P/E of 6.9. As With such a low valuation, Vislink’s shares could be worth a bet. 

Daily Mail and General Trust has been hurt by lower-than-expected visitor numbers to the company’s MailOnline newspaper. Group pre-tax profit fell 4%for the year ended 30 September 2015, but City analysts expect the company to return to growth next year. Earnings per share growth of 4% in pencilled in for next year. Daily Mail and General trades at a forward P/E of 11.8, which isn’t overly expensive and the shares support a yield of 3.2%. Still, if the company disappoints again, the shares could print a new 52-week low. 

City analysts expect UK Mail’s earnings per share to slump 50% to 15p for the year ending 31/03/2016 and based on this forecast the company is trading at a forward P/E of 21.6, a premium growth multiple the company doesn’t deserve. What’s more, UK Mail’s shares may support a dividend yield of 7.2% by the payout isn’t covered by earnings per share. Overall, UK Mail might be one company to avoid.

The post Should You Buy These Stocks Near 52-Week Lows? Countrywide PLC, Thomas Cook Group plc, Vislink plc, Daily Mail and General Trust plc & UK Mail Group PLC appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

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