Strategic vision

The November drop came on the back of half-year results and a strategy update from new chief executive Marco Gobbetti. Mr Gobbetti, whose background is in high-end fashion (he was boss of French label Céline from 2008 to 2016), detailed a multi-year plan to reposition Burberry as a super-luxury brand.

Today’s numbers for the three months to 31 December showed retail revenue falling 2% on a reported basis but increasing 1% at constant currency. The performance was not helped by a drop in the number of high-spending visitors to the UK. However, Mr Gobbetti said: “We are making good progress embedding our strategic vision into the organisation and remain on track to meet our full-year profit target.”

Great long-term value?

Burberry’s multi-year plan envisages “broadly stable” revenues and operating margins over the next two years, with cost-saving measures offsetting investment and “the rationalisation of non-luxury points of sale.” Analysts see this translating into modest annual advances in earnings per share (EPS), increasing from fiscal 2021 in line with management’s guidance of accelerating revenue growth and meaningful operating margin improvement.

Does Burberry offer good value for investors at the current share price? Shortly before the November price drop I rated the stock a ‘sell’, viewing the 12-month forward P/E of over 22 as simply too expensive. However, I suggested the shares “offer great long-term value when trading on a forward P/E in the teens.” Today, the P/E stands at 20. As such, Burberry is not yet back into my ‘buy’ territory but is a stock I’ll be keeping a close eye on.

Recovery room

Fellow FTSE 100 company Mediclinic International (LSE: MDC) has experienced a challenging couple of years and has seen its shares fall from a high of comfortably above 1,000p in summer 2016 to nearer 600p today. However, the private hospitals group, which operates in Southern Africa, Switzerland and the United Arab Emirates, is increasing revenues and has implemented cost-saving programmes and productivity initiatives.

Long-term demand for Mediclinic’s services, underpinned by ageing populations and a growing disease burden, bodes well for continuing top-line growth, while the measures taken on costs and productivity are set to deliver a strongly rising bottom line. The 12-month forward P/E is 19 and this falls near to 17 in the subsequent period, with analysts forecasting annual double-digit EPS growth for the foreseeable future.

Mediclinic’s P/E looks attractive to me in light of the outlook for earnings growth over the next few years and the structural story of rising long-term demand for the services the group offers. For these reasons, I rate the stock a ‘buy’.

The post Is Burberry Group plc a top Footsie turnaround buy today? appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry. 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.

 Shares of private hospital operator Mediclinic (LSE: MDC) soared nearly 20% in early Thursday trading after news reports in the UAE showed Abu Dhabi authorities plan to do away with a 20% surcharge for insured citizens seeking treatment at private clinics. This would understandably be a boon for the likes of Mediclinic, but is it reason enough to buy its shares?

First off, the effects of this regulatory roll-back would be beneficial but not game changing. This is because its UAE hospitals accounted for just 15.6% of group revenue in the year to March, far below the 50% contributed by Switzerland or 30% by South Africa and Namibia.

But any positive news for UAE operations is welcome as they have struggled mightily in recent quarters following the merger with Al-Noor hospitals in 2015. This combination failed to pan out financially, leading to high levels of indebtedness and causing many doctors to leave, a situation that has yet to be fully corrected.

The biggest shame is that the company’s operations outside the UAE are performing very well. Its large Swiss operations enjoyed a 3.5% year-on-year rise in revenue and a respectable bump in EBITDA margins to 20%. The South African division also performed well with a 6.8% rise in annual revenue and EBITDA margins of 21%.

However, until the company can turn around its Emirates hospitals good results from other regions will remain obscured. While those regulatory changes may help, we’ve yet to see whether they alone will finally make the Al-Noor tie-up seem reasonable. With the company’s shares valued very highly at 21 times forward earnings and net debt a whopping 4.45 times 2016 EBITDA, I’ll be giving Mediclinic a pass.

Slow and steady wins the race?

The FTSE 100’s newest member, medical supplier Convatec (LSE: CTEC), will be hoping to convince investors it is a more reliable way than Mediclinic to cash in on  ageing Western populations and increased rates of chronic conditions.

The company’s ostomy bags, wound dressings and infusion sets for insulin pumps are all items that will be in increasing demand in the coming years as patients live longer with conditions that would have led to significantly shortened lifespans even a few years ago.

But as an investment, Convatec doesn’t look like as much of a sure thing. The company was brought public by private equity owners who left the company saddled with debt, subdued profits and low growth. Thanks to IPO proceeds, net debt of $1.5bn is down to 3x EBITDA from its previous 6.9x EBITDA. But this level of indebtedness is still high considering net cash from operating activities was a meagre $75m in 2016.

Furthermore, year-on-year revenue growth of just 4% on a constant currency basis, and 2.3% on a reported basis, illustrates the problems management will have in growing what is already a massive business with $1.6bn in annual turnover. Designing and selling necessary but low margin medical supplies isn’t a bad business, but it’s certainly not a high growth one. With a mountain of debt, low growth and little cash flow, I’d steer clear of Convatec, especially with shares pricey at 20 times forward earnings.

The post Is Mediclinic International plc a screaming buy as shares surge 20% higher? appeared first on The Twelfth Magpie.

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Ian Pierce 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.

Strong performance

Thursday’s trading update from private healthcare group Mediclinic (LSE: MDC) shows that its current strategy is working well. Its largest platforms in Switzerland and South Africa, as well as its Dubai business, all performed in line with expectations in 2017. While its Abu Dhabi business was negatively impacted by regulatory change as well as operational difficulties, this was already priced into the company’s valuation. As such, its shares moved over 3.5% higher on the day of release.

Mediclinic is rightly focused on stabilising its underperformance in the Middle East. It remains optimistic about the long-term growth opportunities which the region offers. However, the reality is that it may take some time to turn around the disappointing performance in Abu Dhabi. As such, a downgrade to forecasts cannot be ruled out over the next couple of years.

Still, Mediclinic is expected to record a rise in its earnings of 23% in the current year, followed by growth of 14% next year. Since it trades on a price-to-earnings growth (PEG) ratio of 1.1, its shares seem to offer a sufficiently wide margin of safety to merit investment. While risk may be relatively high, the potential rewards on offer could be much higher than those of the FTSE 100.

Improving investor sentiment

Since the start of the year, the share price of specialist behavioural health services company Cambian (LSE: CMBN) has risen by 21%. This indicates that investor sentiment is improving and could continue to do so over the medium term.

Although Cambian is due to report a fall in its bottom line of 53% for the 2016 financial year, its upbeat growth outlook could lead to further capital gains for its investors. For example, its earnings are forecast to rise by 35% this year and by a further 20% next year. This could prompt further improvements to investor sentiment. Despite this positive outlook, the company’s shares trade on a PEG ratio of 0.9, which indicates there is scope for further capital gains over the medium term.

Certainly, Cambian’s track record of growth is relatively unstable. This means that its shares could be volatile over the coming months. However, there appears to be scope for it to outperform the FTSE 100 – especially while it trades at a relatively high level which is close to an all-time high.

The post 2 growth stars set to beat the FTSE 100 appeared first on The Twelfth Magpie.

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Peter Stephens 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.

One year top performers

Over the last 12 months, the best performing stocks have been Fresnillo (+95%), Randgold Resources Limited (+66%), Paddy Power Betfair (+60%), Admiral Group (+46%) and Mediclinic International (+43%).

This is certainly a diverse selection of stocks and there’s every chance that investors who own a portfolio of ‘mainstream’ popular stocks might not own any of these stocks.

Fresnillo and Randgold Resources produce silver and gold, respectively, and their share prices have clearly been boosted by the market uncertainty over the last year. Indeed, on the back of the EU referendum result on Friday, Randgold spiked 28% higher, while Fresnillo jumped 12%.

Paddy Power Betfair has steamed ahead after the merger, while Admiral Group has enjoyed strong momentum after lifting its dividend by 16% for FY2015.

Mediclinic International has likely gone under the radar for many investors since joining the FTSE 100 in March. But with revenues forecast to power ahead over the next two years, it’s no surprise this stock is on the top performer’s list.

Three year stars

On a three year view, the best performing stocks on an annualised basis have been Hikma Pharmaceuticals (+37%pa) , DCC (+37%pa), Mediclinic International (+35%pa), London Stock Exchange Group (+30%pa) and Shire (+28%pa).

Once again, several of these stocks are not mainstream ones. Furthermore, many have been promoted into the FTSE 100 quite recently, which illustrates the importance of looking outside the FTSE 100 when looking for growth opportunities.

Headquartered in Jordan, Hikma joined the FTSE 100 for the first time last year, before being demoted from the index in March and then re-entering the index earlier this month. The company has an excellent record of generating strong shareholder returns and could certainly provide an alternative to the larger slow-burning healthcare stocks such as GlaxoSmithKline.

International sales, marketing, distribution and business support services group DCC has seen strong earnings growth in the last few years and the company’s promotion to the FTSE 100 in December last year has clearly generated extra interest in the stock.

London Stock Exchange Group jumped after acquisition interest from Deutsche Bourse earlier this year, although this merger may clearly face challenges after the recent Brexit vote.

Shire makes the ‘three year best performing’ list despite the company’s share price falling from over 5,700p in August last year to 4,100p today.

Five years champions

Lastly, over a five year period, the top performing stocks on an annualised basis are Ashtead Group (+47%pa), Barratt Developments (+34%pa), easyJet (+34%pa), Taylor Wimpey (+34%) and Persimmon (+33%pa).

There’s a clear theme here, with property development stocks taking three of the top five positions, even after all three companies were hit heavily on Friday after the EU referendum result.

International equipment rental group Ashtead claims the top spot after enjoying fantastic growth in earnings over the last five years, although it was starting from a low base after the Global Financial Crisis.

EasyJet joins makes the top five after seeing earnings rise dramatically in the last five years.  

The post Do you own the FTSE 100’s best performing stocks? appeared first on The Twelfth Magpie.

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

Global star

Thanks to its broad geographical spread, I reckon household goods maker Unilever (LSE: ULVR) is one of the best stocks out there for investors terrified by a possible British economic implosion.

Unilever sources around six-tenths of all its revenues from developing markets — territories that should deliver splendid gains in the years ahead, as wealth there levels take off.

And helped by a conveyor belt of product innovations on hot labels like Flora margarine and Lynx deodorant, I expect revenues to keep on exploding across all of its global markets.

This view is shared by the City, and earni,ngs are expected to head 5% and 8% higher in 2016 and 2017 respectively. And I reckon consequent P/E ratios of 20.9 times and 19.4 times are fair value for a stock with Unilever’s exceptional growth potential.

Togs titan

Like Unilever, I reckon Supergroup (LSE: SGP) should keep on churning out terrific earnings growth thanks to its ambitious expansion drive on foreign shores.

The Superdry manufacturer is carrying out a massive store ramp-up in Europe. And its plans for further afield are equally exciting — the company started selling its wares in China last year, while the acquisition of distribution rights in North America also throws up plenty of top-line potential.

Accordingly  the number crunchers expect Supergroup to record earnings growth of 14% and 13% in the years to April 2017 and 2018, respectively, resulting in very-attractive P/E ratios of 17.9 times and 15.6 times.

Invest in peace

Funeral director Dignity (LSE: DTY) is arguably the ultimate defensive stock for volatile times, the inevitability of death providing it with almost-unrivalled earnings visibility.

The company has already proved a terrific pick for those seeking chunky bottom-line growth year after year. And while a 2% decline is pencilled in for 2016, this is due to last year’s abnormally-high death rate.

Indeed, helped by a steady stream of acquisitions — the company snapped up five crematoria last month alone — Dignity is expected to bounce back with an 8% earnings rise next year.

Sure, these figures may make the business appear expensive on earnings multiples of 21.1 times and 19.4 times respectively. But many investors will be happy to pay such a premium in the current uncertain environment.

In rude health

Healthcare giant Mediclinic International (LSE: MDC) is one of the few London stocks to be ‘in the green’ in post-Brexit trading, and with good reason.

Investors are latching onto Mediclinic’s terrific international presence, such as its operations in the United Arab Emirates and Australia, where is it is the first and third-largest private healthcare provider respectively.

And with healthcare in these regions shooting higher, I expect Mediclinic’s bottom line to similarly take off.

Indeed, earnings growth of 19% and 13% is chalked in for 2016 and 2017. Consequently this year’s P/E ratio of 19.6 times slips to just 17.3 times in the following period.

The post ‘Brexit-proof’ your portfolio with Unilever plc, Supergroup plc, Dignity plc and Mediclinic International plc! appeared first on The Twelfth Magpie.

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

Strong growth drivers

Mediclinic reported increased patient volumes leading to a 7% rise in revenue to £2.1bn from its 73 hospitals and 45 clinics in South Africa, Namibia, Switzerland and the UAE. Underlying earnings per share increased 3% to 36.7p.

The company, which also has a 29.9% stake in UK firm Spire Healthcare, said: “We anticipate continued capacity and footprint expansion at attractive returns across all of our operating platforms. The Group is well positioned to deliver long-term value to our shareholders”.

The results and generally upbeat outlook saw the shares head 2% higher in early trading, although management did note a continuing impact on the business of “on-going regulatory initiatives and increasing competition”.

However, the long-term growth drivers for the industry are strong, and Mediclinic’s earnings should also get a short-term shot in the arm from the immediate synergies and cost efficiencies of its enlarged scale. As such, I would say the company merits its premium trailing price-to-earnings (P/E) ratio of 23.6.

Income appetiser

Shareholders of pharmaceuticals firm AstraZeneca (LSE: AZN) have endured a long period of frustration, as expiring patents have hit the company’s top and bottom lines. With the shares currently trading below 4,000p, some shareholders probably now wish the board had accepted a 5,500p offer from US group Pfizer two years ago.

However, while Astra isn’t quite out of the woods yet, the future looks bright, with chief executive Pascal Soriot having refocused the business and the drugs pipeline now looking very strong. The long period of revenue and earnings declines appears set to bottom out next year, and management’s medium-term outlook suggests we’ll see impressive growth thereafter.

Trading on 15 times next year’s bottom-of-the-trough forecast earnings, Astra looks an appealing investment with a 5% dividend yield as a nice appetiser ahead of the prospect of strong capital and income increases in the medium term.

Consistent performer

Smith & Nephew (LSE: SN) offers exposure to a third area of the broadly attractive healthcare sector. With its sports medicine, knee and hip implants and advanced wound management divisions, the group is well placed to benefit from such trends as healthier lifestyles and ageing populations are keen to enjoy an active retirement.

S&N has delivered consistent earnings and dividend growth over many years and the pattern is set to continue. Current-year forecasts put the company on a P/E of 19.5, falling to 17.5 for 2017 on the back of 12% forecast earnings growth. The stock looks very buyable to me, with the rating appearing more than reasonable for such a consistent performer in an industry with attractive long-term dynamics.

The post Are Mediclinic International plc, AstraZeneca plc and Smith & Nephew plc the best FTSE 100 healthcare picks? appeared first on The Twelfth Magpie.

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In terms of its growth potential, Whitbread is facing a rather uncertain future. That’s because its cost base is rapidly rising as the living wage causes staff costs to increase and while Whitbread apparently intends to pass such increased costs onto consumers, this could hurt its sales and profitability. Regarding its valuation, Whitbread now trades on a price-to-earnings (P/E) ratio of 15.8 which, given its forecast growth in earnings of 4% for the current year, may appear to be somewhat high.

However, with Whitbread’s earnings growth due to return to a much more encouraging 10% next year, it trades on a price-to-earnings-growth (PEG) ratio of only 1.5. This indicates that while its future is somewhat uncertain, Whitbread has a sufficiently wide margin of safety to merit investment at the present time.

The uncertainty principle

Similarly, the outlook for Berkeley (LSE: BKG) is also uncertain. The UK housing market appears to be expensive compared to historical levels, with the price-to-buyer income ratio being close to its highest-ever level. And with there being the potential for a Brexit next month, Berkeley’s sales could come under pressure as foreign investors look for better value and potentially more security elsewhere.

However, with Berkeley forecast to increase its bottom line by as much as 51% in the current financial year, investor sentiment could rapidly improve in the coming months. That’s especially the case since Berkeley trades on a P/E ratio of just 11.2, which indicates that its shares could deliver a major upward rerating in the medium-to-long term. So, while Berkeley isn’t risk-free, its potential rewards appear to outweigh its risks and this makes it a sound long-term buy.

The diversity dividend

Meanwhile, Mediclinic (LSE: MDC) offers excellent long-term growth prospects, with its operations in Southern Africa and the Middle East in particular having the potential to boost its top and bottom lines. In addition, Mediclinic’s Swiss exposure provides it with additional diversity that could be a useful ally during a period of uncertainty for the world economy.

Looking ahead, Mediclinic is forecast to increase its bottom line by 30% in the current year and by a further 12% next year. This puts it on a PEG ratio of just 0.7 and this shows that while the company’s shares have fallen by 21% since the start of the year, there’s plenty of scope for a reversal of this performance over the medium-to-long term. And with Mediclinic having a beta of just 0.7, it offers a potentially less volatile shareholder experience, too.

The post Are Berkeley Group Holdings plc, Whitbread plc and Mediclinic International plc the 3 hottest stocks on the FTSE 100? appeared first on The Twelfth Magpie.

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Power player

Irish bookie Paddy Power completed a merger with peer-to-peer betting exchange Betfair on 2 February. The shares ended last week at £107.70, giving the combined group a market capitalisation of £9bn, which would catapult it into the FTSE 100 at number 44 as things stand.

Analyst earnings forecasts for 2016 give Paddy Power Betfair a lofty price-to-earnings (P/E) ratio of 33.3. Nevertheless, industry analysts are generally positive on the company’s prospects, with strong earnings growth forecast in the coming years, although one top US hedge fund has a £62m short position in the stock.

Healthcare specialist

Abu Dhabi-based Al Noor Hospitals (a FTSE 250 firm) completed a reverse takeover of larger South African firm Mediclinic on 15 February. The combined private healthcare group will have operations in Southern Africa, Switzerland and the UAE, and exposure to the UK through a minority stake in Spire Healthcare.

At last week’s closing share price of 846.5p, Mediclinic International has a market capitalisation of £6.2bn, which would put it at number 61 in the FTSE 100. The group’s P/E isn’t quite as elevated as Paddy Power Betfair’s, but is still relatively high at 26.7. Again though, the City is generally positive about the company on the basis of strong earnings growth prospects.

Knocking on the door

Supermarket Morrisons (which was kicked out of the FTSE 100 at the last quarterly review) and media group Informa are both currently hovering just below the entry level to the top index. The FTSE committee’s changes will be based on valuations at the market close on Tuesday, so if Morrisons and Informa put on a bit of a spurt in the remaining trading sessions, either company, or both, could qualify for promotion.

For the drop

Troubled retailer Sports Direct and fund manager Aberdeen Asset Management are set to be FTSE 100 casualties, with both heading for demotion to the second-tier FTSE 250.

Sports Direct had entered the FTSE 100 in September 2013 after a storming performance from its shares that year. However, the value of the company has almost halved over the past six months, as profit warnings have taken their toll. Ejection from the FTSE 100 could be the first leg of an unwelcome double relegation for founder Mike Ashley, whose Newcastle United football club is currently sitting in the bottom three of the Premier League.

Aberdeen Asset Management’s shares have been in decline for almost a year and have fallen around 30% since the December FTSE review. Acquisitions and the recovery of world stock markets after the financial crisis had taken Aberdeen into the FTSE 100 in March 2012, but the company has suffered from weak investor sentiment toward Asia and emerging markets of late.

Hikma Pharmaceuticals and Smiths Group are current favourites for also getting the boot from the FTSE 100 should Morrisons and Informa sneak into the top index.

All the changes announced on Wednesday will take effect from the start of trading on Monday 21 March.

The post Paddy Power Betfair PLC Ord Eur0.09 & Mediclinic International PLC Set To Storm The FTSE 100 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 recommended Paddy Power Betfair. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.