I’ll share my view on this in a moment, but first I want to consider the latest news from a recovery stock I believe could have reached a turning point.

The cost of bad weather

Shares of UK regional airline Flybe Group (LSE: FLYB) rose slightly this morning, despite the company warning that the bad weather seen across the UK in February and March would cost the group around £4m in lost revenue.

In total, Flybe cancelled 994 flights during the first three months of 2018, compared to 372 last year.

However, bad weather and airport closures are beyond the airline’s control. What’s important is its operational performance. And today’s statement suggests to me that this is improving.

A turning point?

By early April, the group should have returned six end-of-lease aircraft to their owners, reducing its fleet size to 79. Trimming unpopular routes is also helping the airline to improve its overall load factor — the percentage of available seats that are filled.

During the three months to 31 March, Flybe’s load factor rose by 6.8% to 73.5%. As a result, passenger revenue per seat rose 9% to £50.84. Passenger numbers rose 3.7%, even though aircraft disposals reduced total seating capacity by 6%.

If this improvement can continue into the busy summer season, then the group could have a good chance of returning to profit during the current year.

Analysts’ consensus forecasts suggest a net profit of £1.5m and adjusted earnings of 3.2p per share for the current year. These projections put the stock on a modest forecast P/E of 10.

It’s also worth noting that infrastructure and aviation specialist Stobart Group recently considered making a bid for Flybe. No offer was made, but this episode suggests to me that Flybe could have value to a trade buyer.

In my view, this stock is worth considering as a recovery buy following today’s news.

A proven success story

Passengers don’t always enjoy flying with budget airlines, but their low ticket prices mean that seats are always full.

Central and Eastern Europe specialist Wizz Air Holdings (LSE: WIZZ) has an impressive 12-month load factor of 91.3%. This figure has risen by 1.5% over the last year, despite the airline increasing total seating capacity by 22.2% over the same period.

Unlike Flybe, Wizz Air has given investors clear proof of the profitability and growth potential of its business model.

A buy for growth?

The larger airline’s share price has risen by 91% over the last year, but still doesn’t look especially expensive to me. City forecasts suggest that the group will report earnings growth of 23% for the year, which ended on 31 March.

Earnings are expected to rise by another 20% during the current year, giving the stock a price/earnings-growth ratio of just 0.7. That’s well below the level of 1.0, which growth investors believe indicates a cheap stock.

Wizz Air’s forecast P/E of 13.7 for the current year also seems affordable to me. I believe this stock could deliver further gains. I’d rate the shares as a buy for growth investors.

The post One growth stock and one turnaround that could double this year appeared first on The Twelfth Magpie.

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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.

Unlike other companies that usually fall into this valuation, Mission isn’t struggling to grow either. Over the past six years, earnings per share have grown at a steady rate of 5% per annum and net profit has increased at a rate of 7.5%. 

And today, the company announced that it expects to report further growth for 2017. Management expects revenue to be “6% ahead of last year, reflecting like-for-like growth of almost 4%.” Meanwhile, headline profit before tax “is expected to be 10% higher, at £7.7m, representing the seventh consecutive year of growth.“

Avoiding the business

Despite Mission’s low valuation and steady growth, there are some issues with the business. For a start, the balance sheet is weak. Intangible assets accounted for around two-thirds of the £134m in total assets booked on the balance sheet at the end of the first half. Excluding these intangibles, total shareholder equity is negative £7m. The group also has a reputation for being heavily leveraged. Net debt was £9.4m at the half-year compared to net fixed assets of £3.8m. What’s more, cash flows tend to be weighted to the second half of the year, which means that there’s a lot of uncertainty surrounding the company. 

Still, management is trying to change investors’ perception of the business. Today’s update notes that thanks to an “exceptional year for working capital reductions,” net debt ended the year at £7.5m, reducing the net debt-to-EBITDA ratio below one “thereby triggering a 0.5% reduction in interest rates on the group’s debt facilities.” Moreover, the management announced last year that it was planning to improve its operating margins from 11.5% to 14% by March 2020, which should unlock additional cash to improve the balance sheet. 

So overall, Mission is heading in the right direction, and as the valuation already reflects the worst-case scenario, I believe that there could be considerable upside for the shares if management manages to change investor perceptions. 

As well as Mission, airline Flybe (LSE: FLYB) is another value stock I believe you should consider in 2018. 

Long-awaited turnaround 

Over the past few years, it has been undergoing a transformation plan. The previous management had presided over a sad period for the group as over-expansion inflicted heavy losses. Flybe’s new chapter revolves around being the best it can be by providing services only on the routes where there is suitable demand.

The good news is that on more than two-thirds of the company’s routes, it has no competition, so unlike other carries, it does not have to worry about price wars. These domestic routes are seeing rising demand as train fares increase, and it becomes cheaper and faster to fly across the country rather than go by rail. 

Unfortunately, it has been a consistent under-performer in recent years. The firm’s recovery was supposed to get under way this year, but an IT upgrade has resulted in further delays. 

Still, when the airline finally takes off, the gains could be huge. Thanks to the market’s downbeat view, the shares are trading at a price-to-book ratio of only 0.5. 

The post Should I bet on these 2 value stocks for 2018? appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Mission Marketing Group and Flybe Group. 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 profit warning stock is regional airline Flybe Group (LSE: FLYB). Its shares fell by 14% this morning, after management warned that unexpectedly high maintenance costs would hit profits this year.

Adjusted pre-tax profit is now expected to be between £5m and £10m for six months to 30 September, compared to £15.9m last year.

Short-term turbulence

There’s no denying that today’s news is disappointing. The company says that the extra spending is the result of a drive to improve the reliability of its aircraft. Disappointingly, no explanation was provided about those reliability issues being experienced, or the nature of the expected improvements.

However, I don’t think today’s news should have much impact on the wider recovery story here. That’s because the firm’s biggest historic problem – having too many aircraft – is now gradually receding.

Christine Ourmieres-Widener, Flybe’s chief executive, confirmed today that “with the fleet size now reducing… both yield and load factors are increasing.” In my opinion, this could have a transformative effect on its profitability, especially if the group can manage its costs more tightly.

Today’s update indicated H1 net debt should be “broadly in line” with the end of last year, suggesting a figure slightly above £64m. That’s high enough, in my view, but I’m optimistic that the recent arrival of a highly experienced chief financial officer, Ian Milne, will bring a fresh discipline to Flybe’s finances. I expect Mr Milne to complete the changes needed for this long-delayed turnaround to finally deliver.

Flybe isn’t without risk, but I believe the shares deserve a closer look.

Shareholders will need patience

One-time FTSE 100 member Tullow Oil (LSE: TLW) is a shadow of its former self. Revenue has fallen by almost 40% since 2013 and the group has lost money every year since 2014.

The only part of Tullow that hasn’t got smaller is its net debt, which rose from $1.8bn in 2013 to a peak of $4.8bn in 2016. The project spending which triggered this rise is now largely complete and cash flow is improving. A rights issue during the first half also helped and net debt has now receded to $3.8bn.

However, there’s no escaping the fact that the group’s debt burden remains greater than its market cap of £2.5bn ($3.3bn). When this happens to a company, it often means that shareholder returns have to take a back seat to debt repayments.

I believe Tullow shares are likely to lag the wider oil market over the next few years, as management uses much of the firm’s cash flow to reduce debt. The only exception to this might be if we see a major surge in the price of oil, which could lift profits sharply.

Tullow’s debt situation might be acceptable if the shares were cheap enough, but in my view they’re not. At around 185p, the stock trades on a 2018 forecast P/E of 20 and offers no dividend. I believe there are far better buys elsewhere in the oil market.

The post One small-cap turnaround stock I’d buy before Tullow Oil plc appeared first on The Twelfth Magpie.

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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.

Not only is the carrier set to benefit from the wave of tourists that now need to rebook their flights, but it is also reportedly bidding on Monarch’s coveted Gatwick landing slots. Winning these would enable the firm to increase its capacity from the UK’s second largest airport.  

And it’s not just the collapse of Monarch that will help easyJet grow. Italy’s Alitalia SpA and Air Berlin Plc of Germany also filed for insolvency over the summer, taking a chunk of capacity out of the crowded European short-haul market. 

Making the most of a crowded market 

The demise of the company’s weak peers is excellent news for easyJet’s outlook. Indeed, in a trading statement published today, CEO Carolyn McCall said: “The current turmoil in the sector provides EasyJet with opportunities to capitalise on its strong customer proposition and grow and strengthen our positions in Europe’s leading airports still further.”

For the full-year to the end of September, the company now expects to report a pre-tax profit for the year of between £405m and £410m. That’s at the high end of previous guidance but is a decline of at least 17% from fiscal 2016’s £495m. However, these figures include a £100m hit from the fall in the value of sterling, which is expected to ease to £20m for fiscal 2018. Advantageous fuel hedging should pare the kerosene bill by as much as £145m for the year ending 30 September 2018. 

As short-term headwinds abate, City analysts believe easyJet’s earnings per share will rebound by 18% next year to 99.4p as pre-tax profit recovers to £478m. Considering these figures, it looks as if at 1,250p, shares in the company are fully valued as they trade at a forward P/E of 12.3, in line with the five-year average. 

With this being the case, I believe that the company’s smaller, domestic peer Flybe (LSE: FLYB) might be a better buy for growth and value hunters. 

Making the most of a dangerous situation 

Since 2011, Flybe has struggled to take off. After an ill-advised expansion drive, the company had a near-death experience, and it has taken years for management to sort out the mess. Nonetheless, now capacity has been cut and the group has a strong balance sheet, the airline is well-positioned for growth. 

Passengers have responded well to the changes.  For the company’s first fiscal quarter, revenue was up 11.7% year-on-year as passenger numbers rose 7.1% and the yield per seat increased 7.9% to £51.73. 

One of the most attractive qualities about Flybe is that the company has no competition on more than two-thirds of its domestic routes. What’s more, the airline is a more attractive proposition than rail. For example, a flight from Cardiff to Aberdeen costs £110 and takes three hours. A similar train journey on the same day (22 November) costs over £200 and takes nine hours. 

As the turnaround starts to yield results, for the fiscal year ending 31 March 2019, analysts expect the company to earn 7.2p per share. Based on this estimate, the shares could be worth as much as 87.3p, 120% above today’s price if they command the same valuation (12.3 times forward earnings) as easyJet. 

The post One bargain growth stock I’d buy ahead of easyJet plc appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Flybe. 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 business sales and brokerage specialist — which was only admitted to the London Stock Exchange’s AIM market in April — advised that group revenues charged 26% higher in the 12 months to May 2017, to £10.8m. As a result, pre-tax profit rose 18% to £3.6m.

And the company’s bullish view of the market suggests that it can look forward to further hefty sales growth.

Chief executive John Rigby said: “The small-cap M&A market continues to enjoy robust market conditions, with deal volumes above the 10-year average. Despite Brexit and wider economic and political uncertainties, the market has been boosted by a significant upturn in inward investment, as foreign bidders look to take advantage of favourable exchange rates.”

“This coupled with high levels of private equity funding, creating strong activity from both UK and overseas houses, are just two factors driving current transaction volumes,” he added.

And Rigby noted that the improving momentum witnessed through the course of last year has continued into the current period, the company talking of a “strong start to the new financial year, with trading comfortably in line with management expectations.” K3 Capital has already chalked up two significant transactions so far this year, each of which has generated transaction fees in excess of £1m.

Be patient

Those hoping for immediate, stratospheric long-term earnings growth may be disappointed as the Bolton-based company is expected by analysts to endure a 63% bottom-line fall in fiscal 2018.

Having said that, I believe the ever-improving backdrop, allied with K3 Capital’s ambitious growth strategy (it is investing huge sums in its marketing and sales capabilities to secure higher value and more profitable mandates) should deliver excellent bottom-line growth in the longer term. Indeed, the number crunchers are predicting this to start with profits growth of 17% next year.

And I reckon a forward P/E ratio of 13.6 times is an attractive level upon which to latch onto the M&A mammoth.

Heading higher

Those seeking exceptional long-term earnings growth also need to take a look at Flybe Group (LSE: FLYB), in my opinion.

The budget flyer has not proved to be a resilient profits creator in years gone by, but the City is expecting the Exeter business to break this trend by posting earnings of 1.6p per share in the year to March 2018, and to follow this up with a further upward blast — to 7.2p — in the following period.

And it is difficult to disagree with analysts’ bullish projections, certainly in my opinion. Not only does traveller demand for cheap airline tickets continue to take off (Flybe itself saw passenger numbers soar 7.1% between April and June, to 2.4m), but the company’s plans to dial back its previously-lofty expansion programmes should create a more efficient, earnings-generating machine.

Whilst looking toppy on paper, I reckon a forward P/E ratio of 23.3 times is fair value given Flybe’s fast-improving earnings outlook.

The post 2 growth stocks that could make you rich appeared first on The Twelfth Magpie.

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Neither Royston Wild nor The Motley Fool UK have any 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 low-cost airline announced that revenues soared 13.4% in the year to March 2017, to £707.4m, but it swung to a pre-tax loss of £26.7m from a profit of £6.8m a year earlier.

Flybe had £4.8m worth of IT-related writedowns to thank in some part for last year’s reversal, and the business warned of another £6m worth of similar costs in the present period due to contract cancellations.

But this was not the only cause for some hand-wringing, with Flybe’s ambitious expansion strategy appearing to have overshot the runway. The company announced that it had increased capacity 12.3% in fiscal 2017, to 12.7m seats, but that traveller numbers rose just 7.6% to 8.8m.

As a result, Flybe plans to dial back the number of planes in operation, and has pencilled-in the return of six leased Bombardier craft to optimise its fleet more effectively looking ahead.

Flying high

While Flybe may have been hasty in spreading its wingspan, the stratospheric growth in passenger numbers across the continent still offers the Exeter flyer with plenty of upside further out. Indeed, airport trade association ACI Europe announced this week that average passenger traffic rose 14.1% year-on-year in April.

The City certainly expects earnings at Flybe to snap higher again following last year’s turbulence, and have pencilled-in growth of 39% and 179% for the years to March 2018 and 2019 respectively.

Consequently the budget flyer deals on a forward P/E ratio of 14.2 times, a little distance below the widely-considered value watermark of 15 times.

So with Flybe still trading just off recent record lows of 33p per share, I reckon now is a great time for dip buyers to dive in.

Eastern promise

I believe that BGEO Group (LSE: BGEO) is also on course to deliver stonking earnings growth in the years ahead, thanks to its exposure to fast-growing Eastern Europe.

The business, which incorporates regional powerhouse Bank of Georgia, saw revenues rocket 20.2% during January-March, to GEL221.4m (one Georgian Lari is worth about 32p at the moment). This drove profits 24.3% higher, to GEL108.2m.

BGEO is the country’s largest retail banking operator with some 2m customers, but owing to the relatively low industry penetration rates, as well as the strength of the Georgian economy, it still has plenty of room to go. The financial firecracker noted that Georgian GDP grew 5% in the first quarter.

The number crunchers expect BGEO to keep earnings rolling comfortably higher, and have chalked in expansion of 26% in 2017 and 15% next year. And these projections make the banking behemoth irresistible value for money.

Not only does BGEO deal on a meagre forward P/E ratio of 9.4 times, but the stock also carries a sub-1 PEG multiple of 0.4. I reckon the FTSE 250 bank is worthy of serious attention at current prices.

The post 2 bargain growth shares you need to consider right now 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. 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.

Both companies have problems at the moment. But both have new chief executives and are working hard to deliver a recovery.

A troubled flier

Regional airline Flybe Group (LSE: FLYB) specialises in short-haul flights using smaller planes. It operates domestic services in the UK and flights from regional UK airports to Europe.

On Wednesday morning, the group issued a profit warning. Flybe now expects to generate a small loss this year, instead of the forecast profit.

One problem is that the firm’s aircraft are flying one-third empty at the moment, pushing up the cost per passenger. However, I think the real problem is that historical commitments are forcing Flybe to operate too many aircraft.

This could soon change

Flybe’s fleet is expected to start shrinking later this year, as leases expire on older aircraft. If the airline can get rid of aircraft on unprofitable routes and focus on busier routes, then its profitability could improve rapidly.

In my view, the main risk for shareholders is that Flybe’s turnaround will be weaker and slower than hoped for. The firm has disappointed investors several times before.

An added concern is that Wednesday’s statement shows that the group has moved from having net cash of £62.2m one year ago to having a net debt of £75m today. Most of this increase in net debt is the result of aircraft purchases totalling £102m, but the figures suggest to me that Flybe is also operating at a loss, as it did during the first half of the year.

Although I believe that Flybe offers the potential for big gains, there is still a lot that could go wrong. I’m going to wait for the group’s full-year results in June before reviewing the situation again.

Does this P/E of 3.6 demand action?

Outsourcing and construction group Interserve (LSE: IRV) ended last year by suspending its dividend. The group reported a pre-tax loss of £94.1m and incurred a £160m loss on the termination of its Energy From Waste business.

The firm’s average net debt was £390m in 2016 and it’s expected to reach £450m in 2017. Chief executive Adrian Ringrose has handed in his notice and will leave when his successor, Debbie White, starts work in September.

At the time of writing, Interserve trades on a 2017 forecast P/E of 3.6. This ultra-low P/E tells me that the market expects Interserve to deliver earnings per share substantially below current forecasts.

The most likely reason for this, in my view, is that Interserve will be forced to issue new shares in a rights issue, to help reduce its debt levels. Further contract losses are also possible.

We won’t know more until Ms White starts work in September. But if she’s able to deal with Interserve’s problems quickly and effectively, the stock could be quite attractive.

Interserve has got confirmed and probable orders worth £7.6bn, which is roughly two years’ annual revenue. Historically, the group has generated a profit margin of about 2%. If this can be resurrected, then the firm would look cheap at the current valuation.

Buying today is risky, in my view. But this special situation could pay off handsomely.

The post 2 small-cap ISA stocks that could double in 12 months appeared first on The Twelfth Magpie.

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Roland Head 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.

They’re generally considered to be the market’s cheapest stocks, shares that have been dumped by investors who have given up or believe the companies in question have no future. 

However, there’s plenty of research out there that shows buying value stocks can help you beat the market if you’re willing to run against the herd. 

With that in mind, here are three value stocks that could help boost your portfolio’s performance. 

Trying to take off

Shares in Flybe (LSE: FLYB) have been under pressure for some time. The group has struggled to turn around its flagging operations despite numerous CEO changes cost-cutting and a capital raise. 

After years of zero growth, most investors have given up on the company, and the shares now trade at a deeply discounted price-to-tangible book value of 0.6. This low valuation indicates the market believes Flybe is on the verge of collapse and the shares are worth less than the value of the company’s assets. But it looks as if the market is wrong. 

City analysts expect it to report a net profit of £1.3m this year and £8.2m for 2018. Earnings per share of 3.00p are pencilled-in for 2018. Based on these figures, the shares seem severely undervalued. 

Hacking issues 

Investors have been wary of Trinity Mirror (LSE: TNI) ever since the phone hacking scandal broke a few years ago. After years of neglect, shares in the company now look undervalued despite the group’s problems. 

Even though Trinity continues to experience sales declines in its legacy print business, analysts expect net profit to remain steady at around £100m over the next two years. Cash flow is robust and as well as paying down debt, Trinity is also repurchasing its shares. 

Based on City forecasts Trinity’s shares trade at a forward P/E of 3.1, support a dividend yield of 5.6% and trade at a price-to-book value of 0.5. At this low valuation, it looks as if all of Trinity’s problems are baked into the share price, and any good news could drive a sudden re-rating. 

Falling oil price

The falling oil price has weighed heavily on shares of Lamprell (LSE: LAM) during the past two years, but the cash-rich company has what it take to ride out oil’s cyclical downturn. 

Indeed, within Lamprell’s latest trading update management reported that group cash at the end of 2016 is expected to be up year-on-year, despite falling revenue. At the end of 2015, the company reported a cash balance of $200m or about £160m at current exchange rates. For some comparison, at the time of writing Lamprell has a market capitalisation of £325m, so around 50% of the group’s market cap. is cash. Overall, shares in Lamprell are trading at a price-to-book value of 0.6. 

The post 3 cheap value stocks to buy today appeared first on The Twelfth Magpie.

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• 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?
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• 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?

Rupert Hargreaves owns shares of Flybe 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.

For the six months ended 30 September, group revenue increased by 43.4% year-on-year and operating profit after adding back depreciation, amortisation and aircraft rental charges increased 11.1% year-on-year. 

On the flip side, Flybe reported a 13.4% fall in net profit, 15.9% fall in profit before tax and a cash outflow from operations of £0.5m. Further, passenger revenue per seat fell 6.9% as the group’s load factor declined 4.3 percentage points to 72%. 

Unfortunately, the outlook the company provided within the results shows more of the same going forward. Flybe UK’s current forward booking profile for Q3 shows seat capacity up 16% year-on-year but the number of seats sold is down to 49% from 52% in the same period last year. Passenger yield is down 5% and revenue per seat is down 9%. 

Turbulence ahead 

These figures are disappointing. Flybe’s turnaround has been in progress for some years now, and the City was expecting it to come to a completion this year. But it appears as if there’s more turbulence ahead for Flybe. Indeed, within today’s release management warns, “the aviation market is a turbulent one at the moment and there is limited forward visibility. Excess seat capacity in the European short-haul market coupled with a weaker pound, and both business and consumer uncertainty are impacting all airlines.” 

However, Flybe is well positioned to weather an uncertain market environment. At the end of September, the group had net debt of £24.8m, compared to net assets of £167m. What’s more, going forward Flybe will be able to control its own capacity growth. With no new aircraft deliveries planned, according to management, business will be able to move from being supply-driven to demand-driven and capacity will peak in the coming year. This will give the company an advantage over peers such as easyJet (LSE: EZJ), which is quickly discovering how damaging excess capacity can be. 

Excess capacity 

Easyjet placed a deal to buy 135 new aircraft at a list price of £8bn in 2013, despite Sir Stelios, whose easyGroup owns just over a third of the airline, voting against the purchase. As these aircraft come online, easyJet is grabbing more customers, but excess capacity is making it difficult to set prices. In the company’s October trading update management warned that revenue per seat would fall 8.7% during the fourth quarter, although passenger numbers are set to increase by around 6% during the second half of 2016. 

These numbers are somewhat similar to those of Flybe. However, shares in Flybe are trading at an enterprise value-to-EBITDA ratio of 0.5 and a price-to-book ratio of 0.5 compared to easyJet’s EV/EBITDA ratio of 4.6 and P/B of 2.2. 

So overall, while Flybe is struggling, the company is better positioned than its larger peer easyJet for the current environment. Moreover, Flybe’s valuation looks too hard to pass up. 

The post Why are shares in Flybe Group plc nosediving today? appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares of Flybe 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.

Outsourcing bargain?

Shares of FTSE 100 outsourcing giant Capita (LSE: CPI) plunged 27% on a profit warning on 29 September. They’ve gone on to lose further ground during October, being 12% down for the month.

As a result of a “slowdown” in some businesses, “one-off costs” on one large contract and “delays” in client decision-making, Capita reset pre-tax profit expectations for the current year to between £535m and £555m — 10%-13% below the City consensus and 5%-9% below last year’s level.

The shares are now down a disproportionate 38% from their price immediately prior to the profit warning, which suggests that the market may have overreacted. Capita trades on just 9.7 times this year’s forecast earnings, with a prospective dividend yield of 5.4%.

Renowned fund manager Neil Woodford came away from a post-profit-warning meeting with Capita’s management “reassured” and “confident that the dividend is safe.” So, I’d say Capita could prove to be a rewarding buy for patient, long-term investors.

Tech opportunity?

Moving from the FTSE 100 down to the second-tier FTSE 250, electronic components maker Laird (LSE: LRD) issued a profit warning on 19 October. The company, which supplies tech giants including Apple and Samsung, said it has “poor” visibility on volumes for mobile devices, is experiencing “unprecedented” pricing pressures and “some” operational issues.

As a result, management now expects pre-tax profit for the year to be about £50m — 32% below last year’s level of £73m. The shares have lost 52% of their value since the start of October, but this appears less disproportionate than Capita’s decline.

At a share price of 151p, Laird also trades on a sub-10 earnings multiple, but the dividend (yielding 8.6% at last year’s level) is poorly covered by prospective earnings and looks vulnerable to being cut. The “unprecedented” pricing pressure the company’s facing also gives me cause for concern, as the erosion of a business’s margins can be an insidious disease.

Laird’s management sounds upbeat on the outlook for next year, but this is a stock I’d rather watch than invest in at this time.

Does this airline appeal?

Shares of Exeter-based airline Flybe (LSE: FLYB) have fallen 25% during October. There was no profit warning in the case of this FTSE SmallCap firm, merely the continuation of a long decline.

The sacking of the company’s chief executive last Wednesday didn’t perk the shares up. I’d say that in the eyes of investors, management ranks as a secondary issue to a simple lack of enthusiasm for a sometimes profitable/sometimes lossmaking airline that flies people on turboprops from secondary and tertiary airports.

At a share price of 37.75p, Flybe is trading on 13.9 times forecast earnings for its financial year to March 2017, with no dividend expected (as usual). This isn’t a business that appeals to me.

The post Should you snap up October’s big fallers Capita, Laird and Flybe Group? appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.