However, stocks such as Morrisons (LSE: MRW) could offer sound long-term investment potential. The company is making numerous changes to its business model within what remains a challenging wider sector. As such, it could be worth buying alongside another company which released results on Wednesday and who also appears to be unpopular among investors.

Uncertain future

The stock in question is estate agency Countrywide (LSE: CWD). It released a trading statement for the 2018 financial year, reporting total revenue of £627m versus £672m for the previous year. This was a relatively resilient performance given challenging operating conditions and a previously-reported 19% opening pipeline deficit in sales at the beginning of the year.

The company has made progress in implementing its revised strategy. It’s been able to increase its register of properties available by 9% while building its expertise in Sales and Letting.

Although it remains cautious about future trading conditions, Countrywide is forecast to post a rise in earnings of 131% in the current year. This puts its shares on a price-to-earnings growth (PEG) ratio of around 0.1. This suggests it could offer a margin of safety. While potentially risky due to uncertain operating conditions, it may offer high return potential in the coming years.

Improving business

Also offering a positive long-term outlook is Morrisons. The company has made several fundamental changes to its business in the last few years, which have helped to strengthen its growth outlook and position within a highly competitive supermarket sector.

For example, a reduction in net debt has eased the pressure on the company’s balance sheet. It has even been able to commence a special dividend, which suggests it’s in a strong financial position. It has sought to improve levels of customer loyalty at a time when consumer confidence is weak, while the threat of budget retailers such as Aldi and Lidl remains high. This could provide it with a wider economic moat over the medium term, as the customer experience continues to improve.

Since Morrisons is now focused on its wholesale sales as well as retail sales, its level of risk may have been reduced in the last few years. It now has a healthy online and convenience store exposure. This may allow it to transition towards a more flexible operating model, which is better suited to fast-changing consumer tastes. As such, its long-term growth potential could be strong, and it could be worth buying while the wider retail segment is somewhat unpopular at present.

The post Have £1k to invest? I think the Morrisons share price could beat the FTSE 100 this year appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Morrisons. 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.

The bad news is a little surprising, not least because the firm issued an in-line set of half-year results at the end of January. This was followed by directors buying £583,000 worth of shares in the market.

Perhaps we should have been suspicious about such buying, which looked co-ordinated to me. You’d certainly have to pay me to buy the shares after yesterday’s news.

What’s gone wrong?

The company said adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is now expected to be 20% below forecasts for the year ending 30 April.

Two reasons are given: The first is an error in the financial forecasts for its Conviviality Direct wholesale business, which will reduce EBITDA by £5.2m; The second is that margins in the wholesale business have “softened across January and February”.

The company said sales and orders have been maintained, so this suggests to me that costs have risen for some reason.

Although it’s surprising that such big problems have surfaced with less than two months of the financial year remaining, that’s not my biggest concern.

Why I’d steer clear

Broker notes I’d seen prior to yesterday’s warning suggest that adjusted EBITDA for the current year was going to be around £70m for the current year. A 20% reduction takes this down to about £56m.

The company expects net debt of £150m at the end of the year, which implies a net debt-to-EBITDA ratio of about 2.7. That could be a problem because, according to January’s half-year results, the firm’s banking arrangements require this ratio to stay below 2.5x.

If the company breaches this limit when it’s next tested, its lenders could force it to raise fresh cash from shareholders in order to reduce debt.

Although the shares offer a forecast dividend yield of 12%, in my view this is almost certain to be cut. The shares look like a gamble to me at current levels. I plan to steer clear.

Another stock I’d sell today

My next stock is estate agency group Countrywide (LSE: CWD), which issued a grim set of results yesterday. These were ably covered by my Foolish colleague Ian Pierce, who spotted that the group’s net debt-to-EBITDA ratio has risen to a worrying 2.97 times.

Today, I’d like to explain a little more about why this is so risky for shareholders. As with Conviviality, Countrywide’s debt is subject to a net debt/EBITDA leverage covenant set by its banks. The company hasn’t disclosed its covenants, but we do know that its lenders “agreed an amendment to its leverage covenant” in February.

Despite this helping hand, the firm says it’s still at risk of breaching this covenant if it doesn’t achieve its forecasts for the current year. Worryingly, Countrywide says it would “be unable to meet its liabilities as they fall due” without the support of its banks.

This tells me that if market conditions don’t improve, there’s a good chance the group will have to tap shareholders for fresh cash this year. For this reason alone, I rate the shares as a sell.

The post 12% yielder Conviviality plc isn’t the only turnaround stock I wouldn’t touch with a bargepole appeared first on The Twelfth Magpie.

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• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Roland Head has no position in any of the shares 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.

Before I take a swing at answering that question, it’s worth taking a closer look at what Countrywide’s management itself decided to call a “disappointing year” at the very beginning of its results document.

Revenue for the year dropped 8.8% to £671.9m, underlying profits more than halved to £19.5m, and thanks to £225.9m in write downs, the group posted a statutory loss of £208.1m. With this type of performance in mind, its easy to understand why its CEO left in January following a profit warning and a new executive chairman has been brought in, with a sweeping business model overhaul in mind.

His new business model of getting “back to basics” may be a bit boring — after all, it just means supporting local estate agents to sell and let homes. But it does make a good bit of sense as the previous management team seems to have lost focus on that core part of the business.

However, I can’t say I’d recommend investing in Countrywide at this point in time. Although the group is still cash generative, it has plenty of problems ranging from a weak sales pipeline for 2018 (that has already caused a downward guidance revision for H1) to net debt rising to 2.97x EBITDA, well above management’s 1.5x-2x target.

And on top of these internal issues there are industry-wide headwinds such as high levels of economic uncertainty and, more worryingly, the rise of upstart, fixed-fee, online estate agents that are making traditional operators look like overpriced dinosaurs in the eyes of many consumers.

With these issues in mind and a weakening financial state, I’ll be steering well clear of Countrywide until the new management team is in place and able to point to concrete success in turning the struggling business around.

A possible bargain?

Another struggling company that may appeal to contrarians is Next (LSE: NXT). The FTSE 100 clothing retailer has had a tough time of late as falling footfall on high streets, stagnant wage growth and more rapidly shifting fashion trends have caught the once-pioneering firm flat footed.

There’s good news too. Next sports a low valuation, has a still-growing online business, is comfortably levered with net debt of £861m expected at year-end, and its operations are kicking off enough free cash flow to sustain a large share buyback programme, in tandem with a dividend that yields 3.3%.

That said, these positives aren’t enough for me to overlook management recently issuing weak forward guidance, a business that is probably encumbered with too many physical outlets and a management team that appears no closer than rivals to figuring out how to compete with both e-commerce giants and fast fashion retailers that are siphoning away its customer base.

The post Is plummeting Countrywide plc a fantastic bargain or falling knife to avoid? appeared first on The Twelfth Magpie.

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• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Ian Pierce has no position in any of the shares 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.

Small-cap investing can be fraught with danger even at the best of times, and when things turn sour, share price movements can be much more pronounced than with their large and mid-cap counterparts. Shareholder concerns can quickly turn to panic, with many investors heading for the exit at the first sign of trouble, leaving a decimated share price in their wake.

High-performance materials

But for those willing to dig deeper and differentiate between short-term issues and more serious underlying problems, there can often be great investment opportunities. I believe international performance materials group Low & Bonar (LSE: LWB) might well offer such an opportunity right now.

The UK-based firm produces advanced, high-performance materials from polymer-based yarns and fibres, which it then weaves and creates into products with exceptional strength and versatility using its own proprietary technologies.

Investors spooked

Low & Bonar’s share price was moving along nicely, up from 65p at the start of the year to around 90p, but things went awry in October, when the group warned that challenging conditions for its Civil Engineering business meant that it was no longer expected to make a profit for the year.

Management stated that although year-on-year revenue was ahead on a constant currency basis, demand for higher value specification projects remains subdued, resulting in an adverse sales mix. Consequently, the expected improvement in financial performance in the second half of the year would not be achieved. Investors were spooked, resulting in a share price drop of 16% following the trading update.

Chinese sales

But I still see Low & Bonar as a solid long-term prospect. The group’s Building & Industrial business unit continues to perform well, as are the Interiors and Transportation divisions, aided by strong sales growth in China.

Despite the recent challenges in the Civil Engineering business, analysts still expect the group to report solid revenue and earnings growth for the full year to November, and pay out an improved dividend. With the forward price-to-earnings ratio now down to just nine for the forthcoming year, and a prospective 4.9% yield, I see Low & Bonar as a bargain growth and income play to tuck away for the long term.

Economic uncertainty

Unfortunately the same can’t be said for another potential turnaround candidate that I’ve been mulling over. In its most recent trading update, the UK’s largest integrated property services group, Countrywide (LSE: CWD), said that the market for housing transactions remained challenging and was likely to be down overall compared with 2016.

The Milton Keynes-based estate agency said that total group revenue for the third quarter was £175.1m, 2% higher than in Q2, but 7% down on the same period a year earlier. Management also warned that it now expected results for the full year to be towards the lower end of market expectations.

The currency economic uncertainty caused by Brexit is clearly having an impact on the number of housing transactions, and until the outlook improves I would be inclined to ignore Countrywide’s cheap valuation which stands at just eight times 2017 earnings.

The post One small-cap turnaround stock I’d buy and one I’d avoid appeared first on The Twelfth Magpie.

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• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Bilaal Mohamed has no position in any shares 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.

But I reckon the focus is too heavily biased towards the newcomer now,  and even though the shares have fallen back a bit, I still wouldn’t buy.

Recovering rival?

Sentiment could already be swinging back, as we saw a 10% share price hike for rival Foxtons (LSE: FOXT) on Tuesday, with the shares now trading at 73p.

There was no news on the day, but the spike comes a day before the firm is expected to release a third-quarter update, so optimism appears to be high. What should we expect?

Analysts are currently forecasting a 50% drop in EPS for the full year after a similar crash last year, but even after the firm’s interim results, it might not be as bad as expected. In the first half, pre-tax profit was slashed by 64% to £3.8m and basic earnings per share (EPS) crashed by 74% to 0.43p.

There could be some optimism rebuilding for the second half, despite the firm’s warning that it expects “conditions to remain challenging for the remainder of 2017.“

One thing I do like is the company’s liquidity. At the halfway stage, chief executive Nic Budden told us that Foxtons has “a robust balance sheet, good cash generation and … no debt,” adding that, despite political and economic uncertainty, he expects London “to remain a highly attractive property market for sales and lettings.“

The forward P/E remains high with a forward multiple of around 22 on the cards for 2018 (after a predicted 13% rebound in EPS), but further recovery could drop that to attractive levels. 

Better value?

For a candidate in the same sector with a lower valuation, I’ve been looking at Countrywide (LSE: CWD), whose shares have crashed by more than 80% from their peak in March 2014 to 119p as I write.

Plummeting earnings have been behind the fall, with EPS set to drop for three years in a row if current 2017 forecasts prove accurate, and the previously attractive dividend yield of around 3.5% has been wiped out.

But forecasts put the shares on a low P/E of only eight, which would drop to around 7.5 based on 2018 forecasts — while the dividend would come back nicely to offer a yield of 2.7%. Is that the steal that it appears?

Well, caution is needed, because Countrywide is not debt-free like Foxtons. In fact, at the end of the first half in June, the company reported net debt of £217m. That was down from £248m at the same stage the previous year, but only after a new placing in March 2017.

And to put the debt level into perspective, it’s the equivalent of 77% of the entire market capitalisation of the company — and that scares me. In fact, on that score, I can’t help thinking that a P/E ratio of under eight is perhaps still overvaluing the firm.

Having said that, with a highly-leveraged company like this, the leverage can work to investors’ advantage too — if an earnings recovery does set in and continue over the next few years, we could see an upwards re-rating of the share price.

Too risky for me, though.

The post A turnaround stock to buy after 10% share price hike? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Alan Oscroft has no position in any shares 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.

Country classic

There is a classic today, in the interim results of property company Countrywide (LSE: CWD) for the six months ended 30 June. CEO Alison Platt assured investors that: “We are building a stronger business for our future and remain on track with our goals to broaden our digital capability, reduce our operating cost base and strengthen our balance sheet… we expect our results and our leverage for the full year to be within the range of market expectations.”

The response to these soothing words? A 10.65% drop in the share price, triggered by a perilous 10% year-on-year plunge in total income, from £370.3m to £333m in first-half 2017. Operating profits fell from £28.3m to £6.5m. Earnings per share dropped from 9.8p to -0.1p. Countrywide blamed the 7% drop in housing transactions, while noting that its sales market share held broadly flat at 4.9%.

No dividend

Countrywide said it continues to invest in cost and growth initiatives to build a sustainable and profitable business and remains committed to reducing its leverage, which is the long way of saying: we are not paying you an interim dividend this year. There was positive news too, with growth in mortgage distribution market share, cash generation of £11.8m against £1.6m last year, and a reduction in debt from £248m on 31 December to £217m.

UK house prices remain robust but shortage of supply and lack of affordability are hammering transaction levels and Countrywide is paying the price. Trading at 8.49 times earnings and yielding 3.49%, it may be worth a punt for those who are bullish on bricks and mortar. City analysts reckon that three years of double-digit EPS losses could reverse in 2018, with a rise of 14%. Today could be your chance to get in early.

What does the FOXT say?

London-focused estate agency chain Foxtons Group (LSE: FOXT) is also hurting today, down 5.25% after posting a 64% drop in profits in its interim results for the half year to 30 June. Pre-tax profits plunged from £10.5m to £3.8m, as revenues fell 15% to £58.5m. 

Lettings revenue dipped 2% to £32.1m, although volumes rose 1% and Foxtons CEO Nic Budden hailed this resilient, recurring revenue stream. Sales revenue fell a hefty 29% to £22.2m, although that looks worse than it is due to last year’s Q1 surge as investors rushed to beat the April 2016 stamp duty surcharge. Q2 sales revenue fell just 3% overall, partly hit by electoral uncertainty.

Property crash

At least Foxtons is paying its 0.43p interim dividend. Budden said the company is working hard to beat challenging conditions, and its balance sheet and brand should support long-term shareholder growth. Trading at 16.84 times earnings and yielding 2.19%, it is less of a bargain than Countrywide.  

That said, Foxtons has struggled for some time, with pre-tax tax profits more than halving to £18.77m in 2016, and EPS falling 54%. It has levelled off after a dismal three years that have wiped two thirds of its share price, but the turnaround could take more time.

The post Should you dump Countrywide plc and Foxtons Group plc after today’s disappointing updates? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Harvey Jones has no position in any shares 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.

Poor performance

Reporting on Thursday was the UK’s largest integrated property services group, Countrywide (LSE: CWD). Its revenue increased marginally in 2016, but its profitability recorded a steep decline, as challenging trading conditions took their toll. Operating profit fell from £53.8m in 2015 to £28.9m in 2016, while pretax profit was 59% lower at £19.5m. The company cancelled its dividend for 2016 and now intends to pay out between 30% and 35% of earnings to shareholders each year. As such, it is unsurprising that its shares have slumped by 52% in the last year.

A new strategy

In response, Countrywide has sought to strengthen its business. On Thursday, it announced a successful placing of 9.99% of share capital in order to bolster its balance sheet. This seems to be a logical move, given the uncertainty faced by the sector. In addition, it is implementing key cost initiatives to boost margins and future profitability. The company is also seeking to improve its customer offer in order to remain competitive in what is likely to become an increasingly overcrowded marketplace.

Looking ahead, Countrywide is forecast to record a fall in earnings of 4% this year. While disappointing, it is expected to recover somewhat in 2018 with growth of 16%. Assuming it meets these forecasts, its price-to-earnings (P/E) ratio could be as low as 8.3 by the end of 2018. On an absolute basis, that is clearly exceptionally low. When compared to the company’s average P/E ratio of 16.2 over the last three years it suggests there is major recovery potential on offer over the long run.

Sector potential

Of course, Countrywide isn’t the only company in the property sector with recovery potential. Premium estate agent Savills (LSE: SVS) is expected to record a rise in its bottom line of 2% in 2017 and 7% in 2018. And while its shares currently trade on a P/E ratio of 13.2, this is lower than their historic average of 13.8. As such, there is scope for an upward re-rating over the long run.

Savills could benefit from weaker sterling. It may eventually lead foreign investors to resume their purchases of prime London property. While this may not occur in the near term, for long term investors the chances of this taking place seem fairly high. After all, London remains one of the most popular cities in the world, and this status is unlikely to be significantly altered by Brexit. As such, buying Savills could be a sound move. However, Countrywide could be an even more enticing investment for the long run.

The post This could be the best recovery stock ever appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Peter Stephens 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.

Let’s look at the arguments for and against staying invested in the industry disrupter.

The arguments for

Perhaps the clearest reason for staying the course with Purplebricks is the fact that its flat fee business model appears to be gaining popularity with sellers. For evidence of this, just consult the company’s half-year results from December.

Back then, the company reported that it had sold and completed on £2.59bn of property compared to almost £2.77bn in the entire previous year. With revenue climbing 159% to £18.7m and maiden profits of £300,000 before interest and tax for the UK business (compared to a £6m loss over the same period in 2015), the Solihull-based business is clearly making the sort of progress early investors hoped for.

Another reason for thinking there could be more to come from Purplebricks’ shares is the company’s decision to enter the US market, especially given that its foray into Australia already appears to be progressing well. 

With its recent £50m placing “materially oversubscribed“, it seems many institutional investors agree. Purplebricks will now use this money to finalise the recruitment of a management team for its US operations, build its brand and continue developing its platform. After recruiting the requisite local property experts, the rollout is expected to start in the second half of 2017.

Based on its success elsewhere, it seems fairly safe to assume that the company’s low cost offering will have appeal for sellers in the highly fragmented US market — estimated to be worth $70 annually in estate agent commission. That said, its decision to concentrate on a number of key states also seems sensible for now. Better to trial its services before committing wholeheartedly.

Aside from the above, Purplebricks’ £29m net cash position and first-mover status are both highly attractive. Make no mistake, more established players are going to find it very tough to keep up with the company if it can hit its ambitious growth targets.

The arguments against

Perhaps the biggest issue with Purplebricks is its current market capitalisation. At £837m, it now towers over more traditional agents such as Foxtons (£277m) and Countywide (£404m). Shares in the the former — which announces full-year results on Wednesday — now trade on 17 times forecast earnings for 2017. The latter is even cheaper on just nine times earnings. With investor expectations growing by the day and fairly limited profits at the current time, Purplebricks will need to put in an astounding performance over the next few years to justify its vertigo-inducing valuation.

There is also the argument that Purplebricks’ interest in cracking the US market is a case of too much, too soon. While giving the company a degree of geographical diversity, some investors would prefer to see clear evidence that it has dominated its home market before venturing into new territories.

Bottom line?

Only time will tell if Purplebricks really is the game-changer it purports to be. For now, I’ll be sticking with the shares. Should these astounding gains continue (shares are already up 8.5% today) however, it may be sensible to take at least some cash off the table.

The post After 3-bagging in 3 months, is Purplebricks plc set to crash? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Paul Summers owns shares in Purplebricks. 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.

Since the credit crunch, the UK property market has soared. Particularly in London and the south east, it has offered relatively dependable growth that has left many investors contemplating selling shares and piling into property. However, results released today from diversified property business Countrywide (LSE: CWD) are rather disappointing. Could now be the right time to ditch UK property?

Falling profitability

Countrywide’s trading update for 2016 shows that total income rose by just £3m to £737m. However, total income for the final quarter was down year-on-year. It was just £179m versus £196m for Q4 2015. As anticipated, the underlying level of market transactions in the final quarter continued to run below 2015 levels and there’s expected to be a total drop of 6% for market volumes from their levels in the previous year.

The company’s London and Retail divisions were a main cause of the disappointing results. Lower volumes were somewhat offset by the strong performance from Lettings, as well as from the Financial Services and Surveying divisions. However, the overall picture seems to be downbeat and the business is focused on delivering cost reductions and increased productivity. It hopes that this move will mitigate the impact of a 2017 sales market that’s expected to show a reduction on 2016 volumes.

Wide margin of safety

In 2017, Countrywide is expected to post a fall in its bottom line of 2%. While disappointing, the company’s shares appear to factor in this difficult outlook. It has a price-to-earnings (P/E) ratio of just 8.6, which indicates a wide margin of safety. And with it yielding 5.7% from a dividend covered twice by profit, now could be a good time to buy it.

Similarly, commercial property specialist Land Securities (LSE: LAND) also offers upside potential. It’s expected to report a rise in its bottom line of 4% this year, followed by growth of 7% in the following year. Although it has a P/E ratio of 22.2, its price-to-book (P/B) ratio of 0.7 shows that it also has a wide margin of safety. And with a yield of 3.6% covered 1.3 times by profit, now could be the right time to buy it for the long term.

Challenging outlook

Of course, wide margins of safety are required for both Countrywide and Land Securities because of the uncertainty facing the broader UK economy. Inflation is expected to increase to as much as 3% this year, which could prompt discussion of a higher interest rate. This could make the affordability of property lower due to higher borrowing costs. Similarly, confidence among businesses and individuals may fall as negotiations start between the UK and EU.

However, with high and well covered yields, plus appealing valuations, both Countrywide and Land Securities could be worth buying for the long term. Their share prices may be volatile this year, but could deliver high total returns in future years.

The post Should you avoid UK property? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Land Securities Group. 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.

Biggest losers

Accusations of dubious working practices, public spats with politicians and numerous public relations gaffes have led shares in Sports Direct to surrender over half their value in the last 12 months.

Although the company is at pains to say that it’s addressing its various problems, this is unlikely to soothe investors nerves after December’s interim results revealed a 57% plunge in half-year profits. News that the company is in the process of purchasing a £40m corporate jet isn’t the best way of regaining trust.

Back in October, Laird’s shares tanked after the company reported reduced demand from its biggest customer, Apple. This was particularly problematic for the £420m cap component supplier as it had been hoping for a surge in demand from the latter’s new phone in September. When this didn’t happen, Laird was forced to estimate that full-year pre-tax profits would be far less than the £67m-£80m analysts were expecting. The company was also dealt a blow when Samsung — another customer — experienced problems with its now infamous Galaxy Note 7.

Things haven’t been much better for £383m cap Countrywide, the UK’s biggest lettings and estate agency company. Priced around 400p at the start of the year, it’s been downhill ever since June’s referendum vote triggered a slowdown in the property market. Last month’s decision by Philip Hammond to ban companies from charging fees to tenants only increased the pain. 

Despite losing over 57% in value in 12 months, shares in Countrywide are likely to dip even lower in the short term as the company — along with Laird — is removed from the FTSE 250 and fund managers adjust their portfolios.

Contrarian bets?

If you can ignore the behaviour of its board (which, admittedly, is quite a big ask), Sports Direct is still a decent business. After all, this is a company that once managed to generate consistently high returns on capital and double-digit earnings growth.

That said, a forecast price-to-earnings ratio (P/E) of 16 — thanks to a predicted 66% reduction in earnings per share — makes this one to avoid for now. There’s not even a dividend to tide investors over.

On a forecast P/E of just 10 for 2017, shares in Laird might be a more enticing proposition. Although warning that visibility on volumes “remains poor” for its Performance Materials division, the company’s wireless division continues to perform well with Q3 revenues up 58%. Given that this side of the business is involved in providing aerials and systems for the connected vehicle sector (a potentially huge growth market), things could dramatically improve for Laird in the medium term. The £263m debt on its balance sheet is still a concern though.

Shares in Countrywide now trade on a P/E of under 6, making it the cheapest of the three to own. However, those attracted to value will need huge amounts of patience and zeal (not to mention a risk-tolerant nature) with the manner of our departure from the EU still to be officially confirmed. With so many better opportunities in the market, Countrywide still warrants a wide berth.

The post These 3 dogs have turned £10,000 into £4,300 in one year appeared first on The Twelfth Magpie.

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