In the latest of a string of staggering developments, yesterday afternoon embattled small-cap Globo (LSE: GBO) announced that it had entered administration, little more than a week after the company revealed shocking details of the “falsification of data and the misrepresentation of the Company’s financial situation”.

Prior to last week, Globo was a popular share among British private investors, commanding a market capitalisation of £300m in 2014 — but now it seems doubtful that investors will see a penny.

Globo reported a cash balance of €104m only a couple of months ago. Where did that money go? Was it ever there to begin with? Was Globo a fraud all along?

Angry investors caught up in the scandal are demanding answers.

Globo meltdown

Here’s the statement in full:

It’s been an astonishing ten days for the “mobile application specialist”, and here at the Fool our sympathies go out to the ordinary private investors caught up in the mess. Many of those burned by the Globo scandal — much like the Quindell debacle last year — were everyday investors who saw value in the “high growth, low P/E” share.

But there were plenty of warning signs to take heed of in Globo’s case.

Reported profits were failing to translate into actual cash flow after using the trick of “capitalising” millions in hidden costs into intangible assets on the balance sheet. Despite reporting having €104m in the bank, the company attempted to borrow even more money at high interest rates — another serious “red flag”. I’d like to credit Stockopedia’s Paul Scott for his excellent work in flagging up these concerns on his daily small-cap blog.

No “Hidden Winner”

At The Motley Fool’s small-cap advisory service Hidden Winners, my team and I issued an official warning to our members to “Avoid” Globo back in early October, citing these worries about the company’s accounts. But I’ll be the first to admit that we couldn’t have predicted how rapidly things would deteriorate less than a month later!

I think it goes to show how important it is for investors to focus on “quality” when investing in small-cap ventures. It really is crucial for private investors to be extra cautious when it comes to reviewing small-cap shares, especially when the value on offer seems “too good to be true”. In the case of Globo, that was certainly the case — and with the shares on the verge of being cancelled from AIM, investors are looking at losses of 100%, no matter what price they paid.

At The Motley Fool, and in our Hidden Winners small-cap service, we’re not just interested in reported growth numbers or a “low P/E” — these are simply rule-of-thumb metrics to give a rudimentary snap-shot of value. You really have to dig deeper to ascertain the true value and potential of a long-term investment.

Small-cap investments can offer wonderful opportunities to grow your wealth, but you really do have to focus on the underlying business.

The post GLOBO Plc Enters Administration: Was It A Fraud All Along? appeared first on The Twelfth Magpie.

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The “international provider of Enterprise Mobility Management, mobile solutions and software as a service” was the subject of a damning report from a small US hedge fund published last week by AIM vigilantes ShareProphets.

Yesterday, shareholders awoke to devastating news from Globo itself that chief executive Costis Papadimitrakopoulos had resigned, having “brought to the attention of the Board certain matters regarding the falsification of data and the misrepresentation of the Company’s financial situation”.

I’ve written negatively about Globo in a number of articles over the past year, so here’s my checklist of some of the key warning signs of a potentially dodgy company. I’ll begin with accounting red flags and move on to danger signals that can be spotted by even the most inexperienced investor.

Revenue and profit. Aggressive or fraudulent booking of revenue and profit may be indicated by a high level of ‘trade receivables’, ‘other receivables’ and ‘other current assets’ on the balance sheet. In Globo’s last financial year, these entries totalled €76m, equivalent to 72% of the company’s €106m revenue.

Cash flow. Companies indulging in aggressive accounting or fraud will typically try to push as much negative operating cash flow as possible down into the investing cash flow section of the cash flow statement in order to inflate the operating cash flow number. Under accounting rules, capitalisation of costs is open to abuse. Be wary of high and rising purchases of intangible assets in the investing cash flow section and ballooning intangible assets on the balance sheet (from €5m to €45m between 2007 and 2014 in Globo’s case).

Cash in the bank. Cash-rich companies may have some borrowings for all sorts of reasons, but Globo has maintained a bizarre balance sheet in this area. At its latest half-year end, Globo reported cash of €104m (on which its was earning minimal interest) and a whopping €57m of borrowings (on which it was paying substantial interest).

Raising cash. Despite that net cash of €47m, Globo announced it was looking to issue expensive junk bonds (to raise $180m), ostensibly to fund acquisitions. This seemed at best an ill-conceived idea and at worst an indication that the strong cash position at the company might not be all it appeared. Companies claiming to be cash-rich, but employing or raising large amounts of expensive debt is not a good sign.

Unbelievable value. Globo’s shares were suspended from trading last week at 28p. The current-year forward price-to-earnings (P/E) ratio was 3.4 and the P/E-to-earnings growth (PEG) ratio was 0.15. On these popular ratios with retail investors Globo appeared to be the steal of the century. However, a company growing earnings as fast as Globo claimed to be simply shouldn’t have these kind of ‘bargain’ ratings. Far from seeing an opportunity to ‘fill your boots’, investors should view patently and extremely inappropriate P/E and PEG ratios as a warning sign. As the saying goes: if something looks too good to be true …

Financial website discussion boards. Beware of company boards with large excitable armies of followers. These are typically either blue-sky ‘story stocks’ that often crash-and-burn, or companies such as Globo where unwary retail investors have been sucked in by those irresistible P/E and PEG ratios I mentioned.

Short sellers. The Financial Conduct Authority has a webpage from which you can access a daily spreadsheet listing stocks in which there are significant short positions. Short sellers, who profit from a falling share price, can be vulnerable to suffering far bigger losses than investors who are long. As a result, short sellers tend to do considerably more due diligence on a company than the average long investor. A heavy and persistent presence of short sellers of a stock should not be overlooked lightly.

Finally, you’ll never have conclusive proof a company is a fraud, because, if you had, its shares would already be worthless. But the more red flags there are, the higher the risk. Why chance your arm when there are so many other companies out there that aren’t festooned in red bunting?

The post Lessons From The Downfall Of Globo Plc appeared first on The Twelfth Magpie.

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But after the release last night of a report from Quintessential Capital Management, which claims that a large portion of Globo’s business has been fabricated, it now looks as if Globo is in serious trouble. 

The company has requested that its shares be suspended following the scathing report as management needs some time to put together a conclusive response to the accusations made.

Quintessential claims that there is:

“…overwhelming evidence suggesting the existence of what appears to us a large-scale conspiracy to deceive investors and creditors through pervasive and systematic accounting manipulation.“

What’s more, analysis suggests that more than half of Globo’s business is spurious:

“While a minor portion of its business is authentic, the results of our investigation strongly suggest that at least 60% of Globo’s turnover is fabricated. The company’s alleged activities, in our view, suggest possible criminal behaviour and to cause its total demise if exposed.”

These are very serious accusations, and shareholders should be extremely concerned. There have been few cases where such damning claims have been made and the company has pulled through. 

Red flags

It seems as if the City has been wary of Globo for some time. The company’s recent failure to find buyers for a high-yield bond was a big red flag.

According to pension fund managers, the demand for high yield bonds has surged recently as the yield on more secure sovereign issues has continued to decline to record lows. With this being the case, it was pretty easy to see through Globo’s excuse that market conditions had prevented the company from selling its high-yield bonds. 

Further, since 2009 Globo’s revenue has grown at a compound annual rate of 35.3%, making it one of the fastest growing companies in London. But despite this growth Globo’s valuation has remained depressed, a strong indication that the City didn’t believe the company’s growth story. 

What’s next? 

Unfortunately for Globo’s existing shareholders, it looks to me as if the company is a value trap. It is rare that a company survives a bear raid like the one that was launched on Globo yesterday. The company’s reputation now lies in tatters, and even if management can prove that Globo isn’t a fraud, it’s going to be difficult for the group to find business partners going forward. 

Still, if Globo’s accounts are to be believed, the company had over €100m of cash in the bank at the end of June. This cash cushion will give the company some wiggle room, and the financial firepower to mount a comeback. 

The post Is Globo Plc A Value Trap Or Value Play? appeared first on The Twelfth Magpie.

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

You’d have recorded a 35% pre-tax gain if you had followed my advice to consider Globo (LSE: GBO) at 28p a share on 16 September — a “top pick“, as I described it.

The obvious question now is whether its shareholders will enjoy a true value story, or if rapidly rising returns are destined to fade away — let’s delve into its interim results, which were released today. 

Strength

Globo’s stock price has risen 8.2%, to 38p, so far today — and rightly so, in the wake of a solid trading update.

Recent news about its strategy also bodes well for long-term value. 

Strength is in the numbers, and although its growth rate for net income per share is lower than that of other key metrics and may point to a risky investment, you should pay attention to a few other details at this stage of maturity for this tech business. In fact, its most relevant financial metrics indicate that the group is on the right pattern of growth, driven by mobile. 

Its interim results for the years ended on 30 June showed: 

• Revenue up 56% to €72.4m (1H14: €46.5m);
• A 55% rise in EBITDA to €34.2 (1H14: €22m);
• Last twelve months EBITDA at €63.1m;
• Pre-tax profit up 37% to €22 (1H14: €16.1m);
• Net operating cash up €21m (1H14: €16.6m);
• Net cash increased to €47.4m (31 December 2014: €40.4m).

Based on the value of its current assets, its price-to-tangible book value, cash flow and earnings multiples, I don’t see why Globo could not double to 74p, or at least trade closer to its 52-week high of 64p over time.

While it’s true that its lowly earnings per share (EPS increased 14% to €0.049 versus €0.043 in 1H14) could get lower following the issuance of its upcoming high-yield bond, your focus over the next four to six quarters ought to be on its revenues and core cash flow profile, both of which in my view suggest that Globo deserves a valuation some 15p to 25p higher, based on fundamentals. 

Better Value Elsewhere? 

Elsewhere, Findel (LSE: FDL) rose over 15% in early trade today as it emerged that Sports Direct had acquired a stake of almost 19% in the retailer. Strategically, I am not sure this is a great deal for the buyer, although the valuation of Findel is attractive based on earnings and cash flow multiples. 

Findel also said that since completing the strategic review of its sports retailing business, Kitbag, it had “subsequently received an approach for the business from a third party and has agreed terms subject to contract,” adding “However, there can be no certainty that a deal will be reached.“

Its shares look fully priced to me right now. 

Today’s rise to 230p appears obvious, as investors bet on deeper ties between Sports Direct and Findel from now on, but aside from that single element, I really struggle to be bullish about a business that is not expected to grow at a particularly fast pace, whose underlying core margins could come under more pressure and whose balance sheet is not particularly strong, to put it mildly. 

The post Are Globo Plc And Findel plc Set To Double Or Halve In Value? 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.

Today, I’m looking at the likelihood of a big upward or downward move in the shares of Boohoo (LSE: BOO), Globo (LSE: GBO) and Asian Citrus (LSE: ACHL), which all have results just around the corner.

Boohoo

If you’re a long-term investor, looking for a nice kick-start to your investment — as opposed to a short term trader — you’ll want to be convinced that you’re buying into a good business.

I believe fast-fashion etailer Boohoo is a good business, and that the barriers to new entrants to online fashion are higher than many people may think. Boohoo is run by canny rag-trade veterans with long-standing sourcing relationships, which aren’t easy to replicate, and is of a scale to market heavily (essential for success in this type of business), while new entrants typically lack the requisite capital and cash flows.

As the table below shows, Boohoo is highly cash generative, its operating cash flows growing rapidly ahead of the amount of cash it invests.

Boohoo disappointed early investors when the market pumped the shares up to a silly valuation, then sent them crashing when the company had a hiccup with a new warehouse IT system that delayed the launch of last year’s autumn/winter range.

The shares currently look good value at 30.75p, with cash on the balance sheet of over 5p a share. The forecast cash-adjusted price-to-earnings (P/E) ratio for the current year is 24, falling to 19 next year, which appears generous for the growth on offer.

Boohoo last updated the market in June, and I think the company has potential to surprise on the upside in its half-year results next Tuesday. My impression is that there’s been some intense marketing during the period and I suspect there’ll also be good news on the early performance of the company’s recently-launched app. All in all, I would rate Boohoo as a buy today.

Globo

Mobile solutions firm Globo is also scheduled to release its half-year results next Tuesday. My fellow Foolish writers are resoundingly bullish on this stock, marking it down as a top pick, and pointing to a P/E ratio of 3.2 and a PEG ratio of 0.2, among other things. You may want to have a look at those articles for some positive balance to my rather more negative take on Globo.

My first concern is that those bargain ratios are simply way too low for a high-growth company. The market is effectively saying that there is something wrong with the business. I think it’s instructive to look at the same cash flow measures that I looked at for Boohoo.

As you can see, Globo’s profile is the mirror opposite of Boohoo’s virtuous habit of funding its investing activities from its operating cash flows. Can Globo only grow by spending more cash on investing than it brings in from its operations? Globo has today announced that another acquisition (for €14m) is in the offing. The company is also currently trying to raise $180m by issuing high-yield bonds for yet further acquisitions.

I’m unconvinced by Globo’s business, but, if you’re positive about the company, should you invest ahead of the results? Well, if Globo really is the bees knees, the trading multiples won’t stay as low as they are now forever!

Asian Citrus

Asian Citrus is due to release its annual results on Friday. This is an AIM-listed Bermuda-registered holding company that owns, through its subsidiaries, fruit plantations in the People’s Republic of China (PRC).

Asian Citrus was admitted to AIM just over 10 years ago, and so has lasted longer than many holding companies of PRC businesses that have come and gone from AIM, leaving investors with little or nothing. Concerns have been expressed about Asian Citrus’s related party transactions and asset valuations, while weather problems and crop diseases seem to regularly blight performance.

I don’t consider Asian Citrus to be investment grade material. The company warned earlier this month that it expects to report lower turnover and “significantly higher” losses than last year. I suspect results-day risk for the shares may be on the downside, because “The audit now being conducted by the auditor of the Company on the management accounts has not yet been completed and the management accounts may still be subject to adjustments”.

The post Should You Buy Boohoo.Com PLC, Globo Plc & Asian Citrus Holdings Limited Ahead Of Results? appeared first on The Twelfth Magpie.

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G A Chester 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.

This, though, should be viewed as an opportunity to buy a slice of a great business, rather than view Boohoo.Com as a failure. Certainly, investor sentiment may be weak, but Boohoo.Com’s financial performance is expected to be very impressive in future.

For example, it is forecast to post a rise in earnings of 42% in the current year, followed by a further increase of 25% next year. Such strong growth numbers have the potential to positively catalyse the market’s view of the company, which is performing well and has the scope to continue expanding outside of the UK. And, with its shares trading on a price to earnings (P/E) ratio of 31.3, Boohoo.Com has a price to earnings growth (PEG) ratio of just 1, which indicates that its shares could continue to close the gap to their IPO price over the medium term.

Similarly, mobile apps specialist Globo (LSE: GBO) also has huge potential. It focuses on creating efficiencies for companies using mobile devices and, in the last five years, has increased profit at an annualised rate of 36%. Furthermore, Globo has increased its bottom line in each one of those years, indicating that it is a very consistent performer.

Looking ahead, Globo is forecast to continue its strong performance by posting a rise in net profit of 21% in the current year, followed by further growth of 17% next year. And, with its share price having fallen by 20% since the turn of the year, Globo has a PEG ratio of only 0.2. This indicates that it has a very wide margin of safety, thereby moving the risk/reward ratio further in the investor’s favour.

In addition, with Globo having only a modest amount of debt on its balance sheet (its debt to equity ratio stands at just 24%), it seems to be sensibly financed and all set to post stunning share price gains over the long term.

Meanwhile, mobile payments solutions specialist Monitise (LSE: MONI) continues to struggle. Its recent results were disappointing, with revenue falling and the company reducing its guidance for the next financial year. Furthermore, the company’s CEO announced her decision to leave for personal reasons and, as a result, things seem to be going from bad to worse for the business. And, with its share price falling from 80p at the start of 2014 to less than 3p, investors seem to have lost patience with the company.

That’s disappointing, since Monitise undoubtedly has a great product and has been able to sign-up major blue-chip clients. Furthermore, the mobile payments business has huge growth potential. The problem, though, is a lack of profitability and, until Monitise can turn its bottom line into a black one, it seems prudent for investors to watch, rather than buy, a slice of the business.

The post Are These 3 AIM Stocks Set To Soar? Boohoo.Com PLC, Monitise Plc And Globo Plc appeared first on The Twelfth Magpie.

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

You see, most money is made in bear markets, not bull markets. You just don’t realise it at the time. With share prices as low as they have been since the Eurozone crisis, this is the time to pick up a bargain. When confidence returns to equities, you could be sitting on a tidy profit. So here are the three shares I would buy right now.

Globo

Just look at these figures: a 2015 P/E ratio of 3.21. A 2016 P/E ratio of 2.72. An earnings per share progression between 2012 and 2016 of 4.22p, 6.20p, 7.35p, 7.87p and 9.30p. Hardly any debt. A share price that has been plumbing the depths, despite a surfeit of good news.

Globo (LSE: GBO) is not some basket case. On the contrary, this is one of the fastest growing companies in the UK stock market.

Bear markets can be brutal. I have learnt from bitter experience that it is better to stay uninvested until it draws to a close (which is round about now, I believe). But they can throw up the most astonishing bargains. Globo is perhaps the pick of them.

Globo’s business is one that is buzzing. It sells mobile apps for enterprises. Salesmen and managers are increasingly using smartphones and tablets to work and collaborate. The amount of media coverage of Apple‘s iPhone 6S illustrates what a growth area this is. For me, this is a cast-iron buy.

Lloyds Banking Group

It’s been a long road to recovery for the banks since the Credit Crunch. But, now that the Great Recession is well and truly over, interest in the banks is beginning to warm up.

I don’t think Lloyds (LSE: LLOY) will ever return to its pre-crisis profit levels. Interest rates will, I suspect, remain permanently low. But Britain is booming once again, with record numbers of entrepreneurs starting their businesses. Consumers are spending, and the housing market has recovered strongly. This means Lloyds’ core businesses of retail and business banking and mortgage lending will get a boost.

Lloyds is starting to become more profitable, and is resuming dividend payments. This is not as clear cut a buy as Globo for me, and it will take time for confidence to seep back into the UK banks, but this is one for the long term.

Bank of Georgia

So I have picked a small cap and a blue chip, so I’ll round off with an emerging-market play. Bank of Georgia (LSE: BGEO) has avoided the troubles encountered by UK banks, and is a leading player in the fastest growing of the former Soviet states.

Earnings have been rising strongly, and the fundamentals make this financial an attractive prospect. The 2015 P/E ratio is 8.91, falling to just 6.74 in 2016. The dividend yield is 3.86%, rising to 4.71%.

For a growing financial based in an emerging market with little in the way of debt, that is a real bargain. I rate this a strong buy.

The post 3 Shares I Would Buy Now: Globo plc, Lloyds Banking Group plc & Bank of Georgia Holdings plc appeared first on The Twelfth Magpie.

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Prabhat Sakya owns shares in Globo and Bank of Georgia. 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.

Tern (LSE: TERN) fell almost 14% from its intra-day high on Tuesday, but Globo (LSE: GBO) fared even worse yesterday, when its shares lost 16% of value during the trading session. Glencore (LSE: GLEN), meanwhile, is down 10% since it bounced back to 144p last week on the back of a new restructuring plan.

Here’s my quick take on these three very different companies. 

Top Pick 

Globo’s downbeat performance since mid-June has surprised me. Its shares roared back today, and were up 15% at the time of writing, but I am puzzled. It is really hard to say why they have fallen and risen so much during the last couple of days, given that aside from an update on its high-yield bond fundraising, there’s not been much to report this week. 

“This process has been delayed by market events through the summer of 2015,” the tech company said on Monday, and it’s possible that investors were not pleased with that. Still, it also said that its financing plans have received “strong interest from numerous investors“, and frankly its balance sheet doesn’t strike me as being particularly stretched, while its core cash flow profile is sound. Trading multiples also point to value. 

It has succumbed to broader market volatility in the third quarter, but its first-half trading update was decent and personally I think its stock remains a good buy at 28p. 

Trust

I wouldn’t blame you if you are reluctant to invest in Glencore.

On the one hand its update on 7 September was good news, as it signalled that management is ready to take drastic action to preserve cash flows in order to ride out a very difficult economic juncture for all the major minors. On the other, it will take time to determine whether the “New Glencore” will be any better than the “Old Glencore”, and several elements of its radical restructuring deserve attention.

At 131p, the shares hover around their all-time low of 118p, yet before a sustained rally takes place, investors must regain trust in the company as well as in the global economy.

Risk 

Tern is up 10% today, and currently trades at 21p. This is a tiny firm that invests in the tech world, and as such I would expect it to have a relatively weak balance sheet, negative operating cash flows and funding needs that are essentially backed by investors who are willing to embrace risk.

That’s precisely what you’d be buying today, which is not necessarily a big problem given that its investment portfolio could indeed deliver rapidly rising returns.

The biggest risk is represented by possible dilution stemming from several rounds of equity financing that may be needed to support its cost base as well as its ambitious expansion plans. 

Until higher revenues are generated, though, personally I’d leave it to opportunistic traders.

The post Why Have Glencore PLC, Globo Plc & Tern PLC Been So Volatile In Recent Days? 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.

Ocado

Ocado, the online grocer whose shopping technology also runs the web stores of supermarkets Waitrose and Morrisons, released what is — on the face of it — a fairly unremarkable news announcement this morning.

The company said it has appointed The Bank of New York Mellon as depositary bank for an American Depository Receipt (ADR) programme. ADRs are denominated in US dollars, and essentially allow US investors to trade in a non-US company’s shares on home turf.

Many UK technology companies look with envy at the high ratings given to tech stocks across the pond. Clearly, there’s an attraction to having your shares accessible in a market where enthusiastic investors can drive up the valuation. However, that can hardly be the motive for Ocado. The company already has a sky-high valuation in the UK market: namely, a price-to-earnings (P/E) ratio of 250!

There is an intriguing possibility, though, for why Ocado might feel it desirable to have its shares tradeable in the US. The company is seeking contracts for its technology platform with customers beyond the shores of the UK. Indeed, management has been saying for months that it is “in discussions with multiple potential international partners”. Could one of these potential deals finally be about to happen — and could it be with a US partner?

Time will tell but, as things stand, Ocado’s current valuation seems nuts to me.

Globo

Globo, which does enterprise mobility management, mobile solutions and software as a service, is expanding in North America. I can quite understand why Globo might want to get enthusiastic US tech investors on board. In contrast to Ocado, Globo has an extraordinarily low P/E of 4.9 — despite earnings having grown at an average 36% a year for the last five years! UK investors just don’t seem to be impressed.

Globo announced an ADR listing last month. The company also announced that it is looking to raise US$150m by issuing high yield bonds. As Globo’s lowly P/E might suggest, many investors have their doubts about the company — indeed, Globo is one of the most heavily shorted stocks on the AIM market.

Sceptics have highlighted — among other things — the company’s cash flow. Globo’s proposed junk bond issue has raised eyebrows still further. With €83m of cash on the balance sheet at the year end, and banks previously willing to lend to the company at about 4% interest, why would Globo want to borrow US$150m at 10%?

The shares have been sinking, and management felt obliged to put out a statement late yesterday afternoon noting: “Globo is not aware of any material reason for the decline in its share price”. The company also expanded on the bond issue, saying “the proceeds [are] expected to be used within two years, mainly for future acquisitions of an anticipated value in excess of US$150 million. These acquisitions will help transform the Group into one of the pure-play leaders in the Mobile Enterprise market”.

The statement didn’t prevent the shares from falling 10% on the day. There’s been a modest bounce today, but — despite the low P/E — this is a company with too many question marks hanging over it for my liking.

The post Why Are Ocado Group PLC And Globo Plc Looking To America? appeared first on The Twelfth Magpie.

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G A Chester 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.

Globo announced that its performance during the first half of 2015 was ahead of market expectations. Revenue expanded 56% year on year and earnings before interest, tax, depreciation and amortisation rose 55% to €34.2m. 

On the other hand, Royal Mail announced that its revenue for its first quarter was unchanged from the previous year. The group’s core UK parcel, international and letters business division recorded a 2% decline in revenue. This division accounts for 80% of revenue and 60% of operating profits.

However, Royal Mail did report that its earnings guidance for the full-year remains unchanged from that set out in fiscal 2015 results. City analysts are expecting the company to report a pre-tax profit of £501m for 2015, earnings per share of 42.8p. 

Powering ahead 

Globo’s management expects the company’s impressive first-half performance to continue on into the second half of the year. So, shareholders have plenty to look forward to. 

Alongside a 56% increase in revenue, Globo’s gross profit margin increased to 59.2% from 58% during the period, thanks to an increased proportion of direct sales. What’s more, along with rising sales at all of the company’s divisions, Globo’s cash generated from operations during the period increased by a third, and free cash flow increased by 70%. At the end of the period, Globo’s net cash position had increased to €47.4m.

City analysts currently expect Globo to report earnings per share of 8.33p and a pre-tax profit of £36.4m for full-year 2015. After reading through today’s trading update, it’s easy to conclude that the company is well on the way to achieving this target. Based on current City forecasts, Globo is trading at a forward P/E of 5.9. 

Cutting the fat 

In today’s trading update, Royal Mail’s management tries to put a positive spin on what is becoming a worrying trend for the company.

Royal Mail’s sales seem to be stuck on a permanent downward trajectory and the company is struggling to maintain its current level of profitability. 

The one bright spot in the company’s trading update was the fact that UK parcel revenues expanded by 2% in the three months to June.

Nevertheless, the “trading environment remains challenging” for Royal Mail, and as a result, the company is accelerating its “pace of change to drive efficiency, growth and innovation, while maintaining a tight focus on costs“. In other words, Royal Mail is struggling to cut costs fast enough to offset sales declines. 

Struggling to adapt 

Unfortunately, some City analysts aren’t convinced that Royal Mail can adapt fast enough to maintain its position in the UK postal market. Competitors such as DPD, DHL, Hermes and Amazon are all powering ahead with a modern delivery network and new infrastructure. Royal Mail is grappling with higher costs and a less flexible workforce than rivals.

And the consensus appears to be that Royal Mail has a long way to go before it catches up to rivals in terms of margins and efficiency.

City analysts expect the company’s earnings per share to slump 18% next year before rebounding by 5% during 2017. The company is currently trading at a forward P/E of 11.9 and supports a dividend yield of 4.1%. 

The post Today’s Winners & Losers: Royal Mail PLC Struggles, As Globo Plc Powers Ahead appeared first on The Twelfth Magpie.

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