As mentioned, Darty is being acquired by Group Fnac and it appears to be buying the business at a cut-price. Certainly, the outlook for electrical retailers is somewhat uncertain and the European economy in particular is enduring a prolonged period of slow growth. However, with Darty expected to increase its bottom line by 26% in the current year and by a further 42% next year, it seems to be firing on all cylinders. In fact, such a strong rate of growth puts Darty on a price-to-earnings growth (PEG) ratio of just 0.5, which makes it a rather cheap business at the present time.

Discounted valuation

Also trading on a discounted valuation are shares in WS Atkins (LSE: ATK). The engineering and project management company today announced its full-year results, with its top line rising by 6% and underlying earnings being up 10.5% on a per share basis. This represents a significant improvement in the performance of WS Atkins’ UK and European segments, with two recent major transportation project wins in North America set to provide a boost to the company’s workload in the current financial year.

While Energy continues to be a tough space in which to operate for WS Atkins, its overall performance as a business remains sound. Looking ahead, it’s expected to grow its earnings by 5% in the current year and by 4% next year. While these rates of growth may not be particularly stunning, WS Atkins offers excellent value for money and the fact that its performance is improving could be enough to boost investor sentiment in the stock. And due to it having a price-to-earnings (P/E) ratio of 10.8, its shares could benefit from a substantial upward rerating over the coming years.

Bid potential

Meanwhile, shares in AstraZeneca (LSE: AZN) also continue to offer good value for money. They trade on a P/E ratio of 14 which, for a pharmaceutical major with a strong pipeline of new treatments, seems to be rather low.

Certainly, AstraZeneca continues to experience problems with its near-term financial outlook, with the company expected to report a fall in earnings in each of the next two financial years. However, this appears to be more than adequately priced-in and due to AstraZeneca having upbeat long-term growth prospects, its shares could begin to rise even if a bid approach isn’t received.

Clearly, AstraZeneca remains a company with bid potential. Its strong financial standing, excellent cash flow and rapidly evolving pipeline show that it remains a top quality business. Allied to this is a yield of 5.1%, which means that AstraZeneca’s total returns could be superb in the long run.

The post 3 surprisingly cheap stocks: AstraZeneca plc, Darty plc and WS Atkins plc appeared first on The Twelfth Magpie.

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

Darting higher

Shares in European retailer Darty (LSE: DRTY) received a shot in the arm on Thursday following a bubbly trading update and were last trading 7% higher on the day.

Darty advised that like-for-like sales advanced 2.7% in the three months to January, underpinned by a chunky 4.4% advance in its core French marketplace. And surging online demand drove ‘click and collect’ sales 53% higher from the corresponding 2014 period.

With extensive restructuring also rattling along nicely, the City expects earnings at Darty to surge 22% and 23% in the years to April 2016 and 2017 respectively, pushing a P/E rating of 17.7 times for the current period to just 14.2 times for next year.

And Darty is expected to get its progressive dividend policy back on track from this year. Projected payouts of 3.7 euro cents and 4.2 cents for 2016 and 2017, respectively, create decent yields of 2.9% and 3.2%, and I fully expect these to keep rising along with earnings.

A box of tricks

Real estate investment trust (REIT) SEGRO (LSE: SGRO) failed to ignite the market on Thursday despite releasing exciting partnership news — the firm’s share price was marginally lower from Wednesday’s close at the time of writing.

SEGRO has inked an accord with Roxhill Development to give the FTSE 250 company access to a portfolio of ‘big box’ development sites in the South East and Midlands. This represents a canny move, in my opinion, given that demand from logistics operators and retailers boosted by the growth of e-commerce continues to rise.

The number crunchers expect SEGRO to follow a predicted 7% earnings advance for 2015 with a 6% rise in 2016, resulting in an elevated P/E rating of 23.5 times. Still, I reckon a predicted 15.9p per share dividend — yielding a very-decent 3.6% — helps take the edge off such an expensive earnings multiple.

Expect further turbulence

Engineering colossus Rolls-Royce (LSE: RR) has enjoyed a stunning share price over the past week, with news of further restructuring — combined with relief that predictions of yet a profit warning failed to materialise — pushing the engine builder 25% higher from last Friday.

In light of challenging trading conditions and a stretched balance sheet, Rolls-Royce elected to halve the dividend for 2015, the first cut for 24 years, and warn of a further similar downgrade in this year’s interim payment. But investors were widely expecting this news, and instead elected to cheer ‘Double R’s’ decision to initiative cost savings of between £150m and £200m per year, around half of which had already been identified.

Of course such moves are to be applauded given the scale of Rolls-Royce’s revenues difficulties. But these could prove nothing more than a temporary sticking plaster should problems in its key markets persist. The likelihood of prolonged oil price weakness is likely to keep Marine sales under pressure, in my opinion, while the extent of slowing engine demand at its Civil Aerospace arm is also yet to be realised.

Subsequently Rolls-Royce is expected to endure a 50% earnings slip in 2016, resulting in a slightly-heady P/E rating of 20.5 times. Given the prospect for further earnings downgrades in the coming months, I believe the engineer is an unattractive pick at current prices.

The post Should You Buy Rolls-Royce Holding PLC, Darty PLC & SEGRO plc Today? appeared first on The Twelfth Magpie.

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Royston Wild 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.

Elsewhere, if you are tempted to sell BT (LSE: BT-A), you ought to be patient at least until its interim results are due at the end of October. In the meantime, you should monitor both DCC (LSE: DCC) and Entertainment One (LSE: ETO). The stock of the latter has fallen almost 10% today…

Low-Ball Bid

Darty hit a 52-week high of 95.25p today as it emerged that it had received a proposal from France’s Groupe Fnac “regarding an all-share offer (…) on the basis of 1 Fnac share for every 39 Darty shares held“. The proposal currently values Darty at 101p per share based on its closing price on 29 September 2015, the group said — adding that the board will explore the benefits of such  a tie-up. Shareholders will be entitled to receive a final dividend of 2.625 cents. A formal offer must be announced by 28 October. 

A low-ball bid financed by equity isn’t exactly the best deal ever, so Fnac could up the ante — I’d sell my holdings today if I were invested, though. If a deal is not agreed, the risk is that your Darty investment will plunge to anywhere between 70p and 80p, hovering around that level for some time based on its growth prospects, core margins and trading multiples. 

Safety

BT is a rather more safe investment, operating in a sector that has inevitably become more volatile in recent weeks on both sides of the Atlantic. Its stock price is getting closer to a 52-week low of 381p; with its 3.4% forward yield, which is a good gauge of risk, I don’t think that BT stock will fall much further, although the enthusiasm surrounding its acquisition-led strategy seems to have vanished.

BT is fairly priced right now but based on its projected growth rate and several other key financial metrics, it is hard to envisage meaningful capital appreciation from a level of 430p/440p, which is well below the average price target from brokers (500p), according to estimates from Thomson Reuters. 

I’ll buy it when I retire, maybe. I want growth right now. 

Growth

I like DCC’s corporate strategy, which combines with a strong portfolio of assets and a clean balance sheet.

Its shares are up 37% this year, and have proved to be particularly resilient in recent weeks. If anything, they look a tad pricey based on forward net earnings multiples of 22x and 20x in 2016 and 2017, respectively. Yet if its management team continues to deliver, earnings and dividends will nicely rise over the period, likely supporting a valuation higher than 5,000p — its stock currently trades around 4,900p, which is 5% below the average price target from brokers. 

I would certainly choose DCC over Entertainment One, which is pursuing a very aggressive growth strategy. Today it announced that it had agreed to acquire 70% of Astley Baker Davies (ABD) for £140m, which implies a rich valuation based on cash flow multiples that are higher than its own. If ABD’s Peppa Pig doesn’t ring a bell, it’s because you do not have kids. 

A fully underwritten £200m rights issue (25% of its market cap) backed the deal, and was arranged by JP Morgan and Credit Suisse. Well, I don’t dislike Entertainment One (my four year-old kid would recommend it following today’s news), and I think its shares are not particularly expensive — but discipline in acquisitions is essential, and clearly the group is pulling out all the stops to chase growth, and that is a strategy that could harm long-term value. 

The post Should You Sell Darty PLC & BT Group plc To Buy DCC PLC & Entertainment One Ltd Today? appeared first on The Twelfth Magpie.

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Alessandro Pasetti 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.

Marks & Spencer 

How the market cheered back in May when Marks & Spencer (LSE: MKS) announced a decent — albeit belated — turnaround in its fashionwear sales. General Merchandise like-for-like revenues rose 0.7% during January-March, the business noted, the first advance for 14 quarters. But a couple of months is an eternity on the stock markets, and news of a 0.4% dip in the following quarter led to news that divisional head John Dixon had fallen on his sword late last night.

Still, the company’s Womenswear lines are in a far better state that they were before Dixon took over, and with the company’s new M&S.com platform proving massively popular and High Street spending power surging higher, I believe sales should keep rising across the business. This assessment is shared by the number crunchers, and ‘Marks and Sparks’ is expected to report earnings rises of 6% and 9% for the years concluding March 2016 and 2017 correspondingly.

These figures leave Marks & Spencer changing hands on very attractive P/E ratios of 15.4 and 14 times for these years. And when you factor in predicted dividends of 18.9p per share for next year and 20.5p for 2017 — numbers that produce meaty yields of 3.5% and 3.8% — I believe the retailer is a compelling stock selection.

Homeserve

Despite the release of a bubbly stating statement, home emergency specialists Homeserve (LSE: HSV) were recently dealing 1.6% lower on Friday as wider risk aversion — combined with a smattering of profit-taking after recent share price strength — smacked the stock. Homeserve advised that trading remains in line with expectations, adding that “we expect to deliver good growth in 2016.”

The business has invested vast sums into improving customer service and marketing on both sides of the Pond in recent times, a strategy that has sent new customer numbers surging whilst boosting client retention. Indeed, Homeserve now boasts 2.1 million clients in both the UK and US. In light of this pan-global success, the City expects the company to churn out earnings growth of 3% for the period concluding March 2016, a figure which leaps to 11% for the following 12 months.

This figure leaves the business dealing on slightly-expensive earnings multiples of 21.2 times for this year and 19.1 times for 2017. Still, I believe the breakneck progress Homeserve is making in territories across Europe and the US justify this slight premium. And anticipated dividends of 11.6p per share for this year and 12.5p for 2017 sweeten the investment case, yielding 2.8% and 3% respectively.

Darty

European electrical goods seller Darty (LSE: DRTY) was recently bucking the wider weakness across FTSE indices, the stock having gained 2.5% in end-of-week trade. The London-headquartered business announced in June that revenues edged 3% higher in the year concluding April 2015, helped by new store openings, a refreshed multi-channel offering and improving market conditions.

And Darty was given further cause for optimism this month when latest eurozone retail sales data showed shopper activity in April leap 2.5% on an annualised basis. With recent cost-cutting and steady divestment of underperforming assets also improving efficiency across the business, the City expects Darty to record brilliant earnings growth of 35% and 19% in 2016 and 2017 respectively, leaving the company dealing on bargain-basement P/E ratios of 12.9 times and 10.6 times for these years.

These outstanding growth projections are expected to crank Darty’s progressive dividend policy back into life, too, and a reward of 3.5 euro cents per share for the past four years is expected to rise to 4.1 cents in 2016, yielding a juicy 4%. And this readout climbs to 4.3% for 2017 amid forecasts of a 4.3-cent payout.

The post Should You Buy Marks and Spencer Group Plc, Homeserve plc & Darty PLC? appeared first on The Twelfth Magpie.

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For example, Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) is enduring a highly challenging period. The UK supermarket sector remains a tough place to do business even though the UK economy is moving from strength to strength. And, looking ahead, it appears as though the price war and margin pressure that has been a feature of the recent past for the sector is unlikely to go away. This means that things could get worse before they get better for Tesco and its peers.

However, buying Tesco at the present time appears to be a sound move. That’s because its strategy of shrinking and focusing on its core operation and offering looks sound and, with it being at the beginning of a new era for the business, investors have the opportunity to buy in now at a great price. Furthermore, Tesco is expected to return to profit growth next year, with the company’s net profit set to rise by an impressive 32% in 2016. This could act as a positive catalyst on the company’s share price and push its price to earnings growth (PEG) ratio of 0.7 much higher.

Similarly, convenience store operator, McColl’s (LSE: MCSL), has also endured an unpopular period among investors. Its shares have sunk by 1% in the last year and have thus far failed to grab investors’ attention, with them trading on a price to earnings (P/E) ratio of just 10.3. And, with competition in the convenience store space set to intensify, the outlook for McColl’s appears to be challenging.

However, where McColl’s has huge appeal as an investment is in terms of its income prospects. For example, it currently yields a whopping 6.2% and, with dividends set to rise by 4% next year, it could pay out as much as 12.6% in dividends in the next two years alone. Furthermore, its dividends are well-covered by profit, with McColl’s having a dividend coverage ratio of 1.6, thereby providing the company with huge appeal to investors at a time when dividends remain of paramount importance.

Meanwhile, multi-channel electrical retailer, Darty (LSE: DRTY), continues to be unpopular among investors due to its exposure to Europe. Clearly, the European economy is experiencing vast challenges at the present time and, despite this, Darty is forecast to increase its earnings by 37% this year and by a further 19% next year. This should act as a positive catalyst on the company’s share price and, with Darty trading on a PEG ratio of just 0.6, there seems to be considerable scope for it to soar over the medium to long term.

The post Why Tesco PLC, McColl’s Retail Group PLC And Darty PLC Are Set To Soar! appeared first on The Twelfth Magpie.

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

Tullow Oil

With the oil market set to remain drowning in excess supply, I reckon that explorer Tullow Oil (LSE: TLW) is a precarious selection for stock hunters. While the Brent price remains steady around $65 per barrel, given that subdued economic growth is failing to suck up bulging stockpiles and production from OPEC, Russia and the US edges ever higher, I believe that black gold prices could be set for another hefty shuttle lower.

The number crunchers expect Tullow Oil to swing from losses of 170.9 US cents per share last year to earnings of 17.8 cents in 2015, before advancing an additional 62% in 2016 to 28.8 cents. Still, these projections leave the business changing hands on P/E multiples of 33.3 times and 20.6 times for these years — I would consider a value closer to the bargain barometer of 10 times to be a fairer price given the worrying state of the oil market.

Although around 55% of Tullow Oil’s 2015 production is hedged, this percentage falls away drastically in the coming years. And with the producer facing a backcloth of escalating costs, a prolonged period of weak period could play havoc with the bottom line.

Darty

Electrical giant Darty (LSE: DRTY) greeted the market with better-than-expected full-year results in Thursday trade and was recently dealing 4% higher. The retailer, whose stores straddle European markets including France, Belgium and the Netherlands, saw pre-tax profit slip 12% in the year to April 2015, to €32.9m, even though revenues ticked 3% higher to €3.5bn.

But with Darty advising of improving consumer confidence in its key markets, and its Nouvelle Confiance scheme reducing its exposure to underperforming territories like the UK, Italy and Spain, slashing costs across the business, and boosting its web operations, it looks as though Darty could be set for a bumper bounceback.

The London firm has now clocked up four consecutive earnings dips, but City believes fiscal 2016 will mark a sea change in Darty’s fortunes and have pencilled in a 27% uptick for the current period, leaving the business dealing on a P/E multiple of just 13.9 times. And the ratio slips to just 11.4 times for 2017 amid expectations of a further 25% bottom-line surge.

And this bubbly earnings backdrop is expected to underpin a resumption the business’ progressive dividend policy, too. The payout has remained locked at 3.5 US cents per share since 2012, but this is predicted to rise to 4 cents in 2016 before stomping to 4.26 cents the following year. Consequently Darty sports chunky yields of 4% for this year and 4.2% for 2017.

Findel

Unlike Darty, fellow retailer Findel (LSE: FDL) was cast adrift in Thursday trade following its latest financials and was last 4.4% lower. The Hyde business swung to a pre-tax loss of £1.7m in the 12 months concluding March 2015 from profits of £5.7m previously, even though turnover crept 3% higher during the period to £284m.

However, the firm has implemented a drastic overhaul of its education operations to turn around its dragging bottom line, while sales at its Kitbag sports division are showing signs of recovery. And the galloping popularity of its Express Gifts remains a critical girder for future growth. As a consequence I reckon Findel could be considered a bona-fide bargain for investors on the hunt for turnaround stocks.

Indeed, an expected 6% earnings tick for this year leaves the business changing hands on a ridiculously-low P/E multiple of 8.7 times, while predictions of a further 11% earnings rise in 2017 drives the readout to just 7.9 times. And with profits expected to steadily improve, Findel is expected to start shelling out dividends again during this period, with a prospective reward of 0.6p per share for 2016 anticipated to rise to 1.3p the following year.

The post Should You Stash Your Cash In Tullow Oil plc, Darty PLC Or Findel plc? appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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