For value seekers, this low ratio might look attractive at first glance. Indeed, based on this metric, shares in BT are trading at a discount of around 13% to the broader market. The stock also supports a dividend yield of 6.1%, which looks relatively safe as it’s covered 1.7 times by earnings per share (EPS). 

However, I’m not convinced that BT shares offer value. So, today I’m looking at one FTSE 100 income champion that I believe would be a better addition to your portfolio.

Cash cow

BT is one of the most recognisable consumer brands in the UK, which makes it appealing from an investment perspective. The company has a highly visible presence across the country, so you know you’re buying into a real asset, not some imaginary mining concern on the other side of the world.

Still, a recognisable brand doesn’t mean the business has solid fundamentals. The main thing that concerns me about BT is its debt. 

I reckon the company is one of the most indebted businesses listed in London today, with more than £13bn of net debt and a net gearing ratio — the ratio of net debt to total shareholder equity — including pension obligations of 170%. What’s more, the firm’s net debt, excluding retirement obligations, has more than doubled since 2015, rising from £5.8bn to £13.3bn.

Dividend cut 

In my opinion, the best thing the company can do to get this debt under control is cut its dividend. For the financial year to the end of March, BT raised £2.4bn of debt to fund £1.5bn in dividends to investors.

In comparison, FTSE 100 peer Evraz (LSE: EVR) paid out $430m in dividends and paid off $1.1bn of debt. The company was able to do this because it’s an extremely profitable business. Free cash flow from operations for the financial year to the end of December 2017 was around $1.8bn.

City analysts believe the company’s profits will jump a staggering 115% for 2018. The bad news is, they expect a contraction next year. But overall, at the end of 2019, EPS should still be around 48% higher than the figure reported for 2017.

Debt reduction 

Evraz isn’t debt free. The enterprise has higher borrowings than BT with a net gearing ratio of around 194%. But unlike BT, debt is falling, and it’s dropping rapidly. Group gearing was 3,676% in 2015. Since then, net debt has declined from $4.9bn to $3.7bn, and gearing has dropped to around 200%. 

Now debt has been reduced to a sustainable level, management is focusing on returning cash to investors. 

Analysts have pencilled in a total dividend per share of $0.85 for 2018, falling to $0.58 for 2019. Even at this lower level, these numbers still suggest a dividend yield of 9.6% is on the cards for 2019, after a distribution of 14% for 2018. And to add to the appeal, the shares are even cheaper than those of BT right now, changing hands for just six times forward earnings.

The post Forget the BT share price, I’d buy this FTSE 100 stock yielding 14% 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.

Here are just two market minnows that have enjoyed very healthy gains over the month.

Ready for lift-off

EVR Holdings (LSE: EVRH) may not be a company on the lips of many investors but that looks all set to change if recent momentum continues. Its stock was already up 37% in April before today as excitement builds over the release of its virtual reality app — MelodyVR — that allows users to experience music concerts as if they were actually there. 

The launch of this product will be followed by the release of US giant Facebook’s new standalone VR device Oculus Go, on which the former can be experienced. The latter — expected to cost $199 — has been described by EVR’s management as “the world’s first ‘mainstream’ VR headset” (with no wires or additional hardware) and a “step-change” for the industry.

Today’s news that the company has signed more agreements with record labels and music publishers representing artists such as The Prodigy and Queens of the Stone Age has only served to push EVR’s share price even higher.

Commenting on this latest development, Executive Chairman Anthony Matchett stated that such agreements were “vital” to the firm’s long-term success and “provide the company with even greater opportunities for content creation and exploitation moving forwards”.    

Given that virtual reality is yet to be fully embraced by the masses, it could still be argued that EVR’s stock remains in ‘high-risk punt’ territory. Nevertheless, with deals/agreements already signed with Universal Music Group, Sony Music Entertainment, Warner/Chappell Music and Microsoft, the company’s prospects looks pretty good to me.

Should Melody VR be positively received, EVR Holdings could be on the cusp of something very special indeed. 

Another winner in the making?

Another small-cap that’s had a great April is relatively-new-stock-on-the-block Sumo (LSE: SUMO) — a development services provider to the video game and entertainment industries. While not quite as impressive as the rise seen at EVR Holdings, the company’s value has increased by 28% in only a few weeks, in anticipation of — and following — an encouraging set of full-year figures with revenue up 27% to £30.6m, and gross profit jumping 47% to £13.3m.

2017 was a busy year for the company. In addition to its IPO in December, Sumo acquired digital art firm Atomhawk whose half-year numbers were “well ahead of the Board’s expectations prior to acquisition“.  The former also launched the award-winning Snake Pass – it’s first own-IP game.

According to CEO Carl Cavers, trading in 2018 has “started strongly“, so much so that Sumo’s board already expects full-year numbers to be “slightly ahead” of what the market is expecting. He went on to remark that the company would be “keen to accelerate” organic growth through the continued acquisition of firms that fit in with Sumo’s strategy. A decent looking balance sheet with a £12.4m net cash position should help facilitate this. 

Based on recent numbers and the fact that it operates in an industry that appears relatively immune to changes in consumer confidence, I’m optimistic on Sumo repeating at least some of the success of Keywords Studios and Frontier Developments. One to watch, for sure.

The post These promising growth stocks have crushed the FTSE 100 in April appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Keyword Studios. The Motley Fool UK has recommended Keywords Studios. 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.

Looking ahead, there could be further growth potential for the business. It seems to have a solid strategy which is delivering strong growth numbers. However, it’s not the only stock that could double again. Reporting on Monday was a company which may double again after an 800% gain in the last five years.

Improving outlook

The company in question is EVR Holdings (LSE: EVR). The creator of virtual reality (VR) music content released a positive trading update which showed that 2017 was a transformational year for its business.

For example, it was able to complete a global deal with Universal Music Group and also announced a global partnership with Microsoft. This secured the company’s VR music platform’s availability to 500,000 Windows 10 customers. There was also a global framework agreement with Sony Music Entertainment, as well as a global partnership with Roc Nation.

Looking ahead, the VR industry could offer growth potential in the long run. VR devices are due to be released by companies such as Facebook and Google in future months. Alongside lower price points, this could drive mainstream adoption of VR technology.

As the proprietor of the world’s only VR music platform, this could mean that the company is well-placed to benefit from an upsurge in demand within the industry.

Clearly, EVR Holdings is a relatively small business which is not yet delivering a black bottom line. As such, it’s potentially high risk and its shares could be volatile. However, with relatively bright prospects, the share price could continue to rise in future years.

Improving performance

The outlook for Boohoo also appears to be upbeat. The company is expected to deliver a rise in its bottom line of 30% in the current year, followed by further growth of 25% next year and 27% the year after. This puts the stock on a price-to-earnings growth (PEG) ratio of just 1.4, which suggests that it could offer excellent value for money.

With a strong growth track and what is becoming a more diverse business model, the company may offer less risk than many investors realise. It has an international presence and a strategy of investing in its customer offering seems to be gaining traction in what remains a competitive marketplace.

Certainly, there are cheaper retail stocks on offer. Brexit risks seem to have numbed investor sentiment towards the sector, with the UK’s economic outlook being relatively uncertain.

However, Boohoo could be an exception and may be able to deliver 100% gains in the medium term after what has been a strong five years for the business.

The post Boohoo.com plc isn’t the only growth stock that could double again appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. The Motley Fool UK owns shares of and has recommended Alphabet (A shares) and Facebook. The Motley Fool UK has the following options: short March 2018 $200 calls on Facebook and long March 2018 $170 puts on Facebook. The Motley Fool UK has recommended boohoo.com. 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.

As hardware companies rush to market with their first generation virtual reality headsets, the minds behind EVR Holdings (LSE: EVRH) believe they may have struck gold due to the relative lack of content for these devices.

EVR’s plan is to make audio and visual recordings of concerts in high definition and then release them on its MelodyVR app. The company has already signed a framework agreement with major record labels Sony and Universal Music Group and is building up a catalogue of thousands of concerts, including from some hugely popular acts.

On the distribution and marketing side there will be assistance from a recently signed agreement with Microsoft that will see the Seattle tech giant invest cash and expertise into building the app while also marketing the MelodyVR name across its Windows devices.

Understandably, investors have become quite enamoured with the idea of getting in on EVH at the beginning. That’s why the company’s share price has risen over 120% in the past year alone.

However, there are a few issues that would-be investors should be aware of. For one, the company’s MelodyVR app isn’t even released to the public yet. The blame for this doesn’t lie with the company though as it’s waiting for the actual VR hardware to improve enough that it’s library of concerts will actually appear in high definition as they were recorded.

Of course, without an app that is selling access to these concert recordings, the company receives no revenue. And as it races to position itself as the market leader before competitors can take that crown, investments must be made. Indeed, in the half year to June operating, losses rose to £2.6m, the same amount lost in all of 2016. The company does have £6.5m cash on hand following a recent rights issue but investors shouldn’t be surprised if they’re tapped for funds again, especially if VR hardware improvement is slower than hoped.

EVH has a compelling investment case but for those investors like myself who think VR is simply the next 3D printing, a valuable technology but one with limited mass appeal, it may not prove the wisest investment.

Is profitable growth around the corner?

One high-flying small cap that’s actually producing sales already is Australian supercapacitor designer Cap-XX (LSE: CAPX). The company’s share price has risen over 180% over the past year as demand for its supercapacitors has increased across industries – as varied as cars and wearable devices.

In the year to June, revenue of A$4.1m was down on the A$5m posted in the year prior. Management blamed this on the timing of contract signings and said it still believes negotiations for several large deals will be completed successfully by the end of 2017.

Cap-XX is still loss-making with pre-tax losses rising to A$1.6m for the year. That said, management is doing well to trim operating costs by slashing administration expenses while maintaining a high R&D spend. Furthermore, increasing numbers of royalty licensing agreements should lead to rising profits in the coming quarters. Investing in loss-making small-caps isn’t my cup of tea but I’ll follow Cap-XX closely as it does appear to have solid growth prospects from targeting the fast-growing Internet of Things market.

The post 2 small-cap growth stocks that have returned over 125% in the past year appeared first on The Twelfth Magpie.

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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.

Specifically today EVR, which has already signed deals with two of the three major music labels (Warner Music and Universal), revealed that its subsidiary MelodyVR Ltd will collaborate with Microsoft to launch the MelodyVR platform across all Windows Mixed Reality devices. Further, Microsoft will provide MelodyVR with funding and technical expertise to support the partnership. 

No financial details of the deal have been disclosed, but it’s clear that this is a tremendous opportunity for EVR and the company’s investors. Indeed, according to today’s press release, there are currently over 500m devices worldwide running Windows 10, which will have access to the forthcoming Windows mixed reality hardware. The agreement will see the MelodyVR App made available on all Windows Mixed Reality devices. 

Funding for growth 

At the beginning of this month, EVR raised £5m via the placing of 63m shares to further fund its growth, and it now looks as if the company was thinking of this agreement with Microsoft when it decided to tap shareholders for extra cash. Melody VR is the company’s flagship virtual reality product. The technology is designed to connect music fans to the artists they love via next-generation technologies such as virtual reality, which will allow them to get up close and personal with the stars.

While it is true that virtual reality is still a fledgling and highly speculative market, there’s no denying that the potential could be enormous. The market has grown exponentially with the number of virtual reality users increasing from just under 200,000 to over 7.5m during the space of three years. By the end of the decade, market research claims that there could be 225m virtual reality devices in consumers’ hands.

EVR is trying as hard as it can to get a share of this market. During 2016, the company saw MelodyVR’s multi-year exclusive partnership agreements with venues and promoters increase by over 550% and a partnership with Telefonica put the technology in over 600 O2 stores in Germany.

Plenty to do

Despite this increased exposure, the company reported a significant loss of £2.6m for the year. City analysts don’t expect it to report a profit this year either. With this being the case, it remains to be seen for how much longer the £5m recently raised can support the firm. Having agreements in place is one thing but being able to generate revenue from these agreements is another issue altogether. 

So overall, while EVR may look attractive based on its latest agreement with Microsoft and the huge potential market ahead of it, it might be better for investors to wait for some actual revenue before taking part in this growth story.

The post Is EVR Holdings plc a buy after partnering with Microsoft Corporation? 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?

Rupert Hargreaves 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.