During such situations, it can be difficult to know whether to buy or sell shares. The reality, though, is that the stock market has always recovered from challenging periods, and so market corrections could be a good time to buy shares, such as Whitbread (LSE: WTB).

The hospitality giant appears to have strong growth potential, having the opportunity to outperform a sector peer that released a trading update on Friday.

Difficult period

The company in question is Millennium & Copthorne (LSE: MLC). The hotel operator’s third quarter showed that it has experienced mixed trading conditions, although like-for-like (LFL) revenue per available room (RevPAR) increased by 1.5% in the first nine months of the year. At constant currency, hotel revenue for the first three quarters of the year was flat.

The company faced challenging trading conditions, with them impacting on the wider hospitality industry. There have been pressures such as rising minimum wage requirements, technological disruption and industry consolidation. Alongside geopolitical risks, they are having a negative impact on the company’s performance. Furthermore, the business is still without a permanent CEO, although it did reappoint its interim CEO on Friday.

Looking ahead, Millennium & Copthorne is expected to post a fall in earnings of 17% this year. This suggests that its share price performance could deteriorate – especially since it trades on a relatively generous price-to-earnings (P/E) ratio of around 16.

Growth potential

In contrast, Whitbread has the potential to deliver improving financial performance. Its position in the UK budget hospitality sector remains strong, and it could benefit from weak consumer confidence. As was the case following the financial crisis, consumers may become increasingly price-conscious as the Brexit process continues. This may lead to them trading down to cheaper options such as the company’s Premier Inn brand.

The sale of Costa means that the business will be focused on its hotel chain. Alongside the potential for expansion in the UK, the company may also be able to offer international growth. It already has a foothold in Germany, where it believes it has the opportunity to become a major player in what is a relatively fragmented industry. And with its business model seemingly sound, the stock may be able to diversify its geographic exposure yet further in future years.

While Whitbread trades on a P/E ratio of 17.2, the company is expected to post positive earnings growth in each of the next two years. It also has a sound long-term growth outlook which could mean that it’s able to deliver share price increases over the long term. As such, now could be the right time to buy it, despite fears surrounding the near-term outlook for the FTSE 100.

The post Have £1,000 to invest? Why I’d buy FTSE 100-member Whitbread despite stock market crash fears appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Whitbread. 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.

A 1% decline may not be headline-worthy, but today’s update is unlikely to give market appetite a much-needed shot in the arm.

Millennium & Copthorne announced that revenues grew 16% between January and June, to £485m, while pre-tax profits advanced 12.5% to £63m. Group REVpar (or revenues per available room) cantered 15.9% higher, the company noted, to £78.69.

But the latest release still detailed weakness in some of the company’s markets. While chairman Kwek Leng Beng said group results improved in the first half of 2017 on both a reported and constant currency basis, he added that “there is continuing pressure on the profitability of our hotel operations, particularly in North Asia and New York.”

While revenues weakness in Singapore appears to be “shallowing,” Kwek said that “RevPAR from Rest of Asia was down more sharply, in part as a result of geopolitical tensions impacting visitor arrivals in our hotels in Taipei and Seoul, especially from China.”

REVpar across the whole of Asia fell 3.7% during the first half. And while revenues per room grew 10% in New York, the company noted that this mainly reflected the increased contribution of ONE UN New York. Without this REVpar would have risen just 1%, and the company is now embarking on management changes in the Big Apple to improve sales and cut costs to halt ongoing underperformance.

In brighter news REVpar in the UK grew 10.7% year-on-year as the weak pound boosted tourist numbers. Still, this could not prevent room revenues across Europe falling 0.7% in the period.

Cheap but risky

The City expects earnings at the hotelier to continue moving higher despite the troubles across some of its territories. Current forecasts suggest a 27% bottom-line rise in 2017, and a 6% advance next year.

And these figures make Millennium & Copthorne something of a bargain on paper. Its forward P/E ratio of 14.8 times falls within the broad value terrain of 15 times or below. And a prospective PEG reading below the widely-regarded bargain benchmark of 1, at 0.5, underlines this assessment.

While these numbers may appeal to many value investors, the troubles Millennium & Copthorne faces to improve its fortunes in Asia and the US are considerable. I reckon risk-averse stock-pickers should perhaps shop around.

Wizzing higher

I am far more optimistic concerning the earnings outlook over at Wizz Air (LSE: WIZZ).

The cut-price flyer, which concentrates on the markets of Eastern Europe, saw revenues detonate 28.6% in January-June to reach €469.3m as passenger numbers kept on soaring. The company shifted 7.2m people in the first half, up 25.2%. And I expect these numbers to keep rising as Wizz Air’s route expansion programme continues.

City analysts expect the Hungarian carrier to report earnings expansion of 19% and 16% in the years to March 2018 and 2019 respectively. And these figures provide plenty of bang for your buck — the airline carries a forward P/E ratio of just 14.5 times and a PEG rating of 0.8.

Wizz Air’s share price keeps on soaring, and touched new record highs just below £28 late last week. I believe the flyer has what it takes to keep on ascending.

The post One high-growth value stock I’d buy, and one I’d avoid 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.

High valuation

Reporting on Friday was global hospitality company Millennium & Copthorne (LSE: MLC). Its first quarter of the year was relatively positive, with revenue per available room (RevPAR) growing by 4.6%. It was driven higher by an increase in occupancy of 2.9% and an average room rate which was 0.3% up on the same period of the prior year. The company also gained a boost from currency translation, with RevPAR up 17.7% on a reported basis.

In terms of its geographic performance, London and New York continued to perform well. A weak pound boosted tourism in the UK, while in New York the completion of the refurbishment of ONE UN New York pushed sales higher. However, in Singapore, RevPAR declined by 0.9% as the average room rate dropped by 6.3%.

Looking ahead, Millennium & Copthorne is expected to record a rise in its bottom line of 9% in the current year. It is due to follow this up with growth of 7% next year. While this is slightly above the index average, the company’s shares trade on a price-to-earnings growth (PEG) ratio of 2.4. This suggests that while its performance is improving, the market has already priced-in its medium-term forecasts.

Disappointing outlook

The performance of the defence sector has been rather disappointing in recent years. A combination of austerity and an uncertain economic outlook has meant that defence companies such as QinetiQ (LSE: QQ) have struggled to grow their top and bottom lines.

Now though, the future for the industry is becoming increasingly bright. The Trump administration seems intent on increasing spending on defence, while austerity is gradually being eased across the developed world. This means that the outlook for defence companies is improving. Therefore, investing in the industry could prove to be a sound long-term move.

Despite this, QinetiQ seems to be overpriced and struggling to deliver meaningful earnings growth. For example, in the current year it is expected to record a rise in earnings of just 3%. This is due to be followed by a fall in net profit of 2% next year, which means its bottom line is not due to make any significant gains over the next couple of years. As such, it is difficult to foresee a possible catalyst to push its share price higher.

While the company has a rather downbeat outlook, its shares trade on a high valuation. They currently have a price-to-earnings (P/E) ratio of 18, which suggests they offer little upside over the medium term.

The post Two ‘overvalued’ stocks I’d sell in May 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.

Millennium & Copthorne

Today’s update from Millennium & Copthorne (LSE: MLC) shows that the hotel company has benefitted from sterling’s slump. It added £43m to its revenue of £615m and £7m to its £98m pre-tax profit for the first nine months of 2016. And with sterling likely to weaken even further over the coming months as Brexit discussions begin and US interest rates rise, Millennium & Copthorne’s financial performance could continue to improve further.

However, the underlying performance of the company was far less impressive. When the impact of sterling was excluded from the results, Millennium & Copthorne’s revenue for the first nine months of the year fell by 3.2% and its pre-tax profit was 2.9% lower than the same period of the previous year. That’s partly because of challenging trading conditions in its New York and Singapore hotels, with margins in particular being disappointing.

Looking ahead, Millennium & Copthorne is forecast to grow its earnings by 33% in the current year, but then they’re due to flatline next year. Taking into account the current year’s impressive growth (which is due considerably to weaker sterling and would be dented significantly if and when sterling eventually rises), Millennium & Copthorne trades on a price-to-earnings (P/E) ratio of 16.8. Given its difficult outlook, this means that it lacks appeal at the present time.

Asos

Online fashion retailer Asos (LSE: ASC) is also benefitting from weaker sterling. Its US sales increased by an extra 10% (50% versus 40%) because of the impact of sterling in the most recent financial year. Although the firm is winding down its China operations, the EU, America and rest of the world remain key growth markets for its fashion offer. If sterling weakens further, its top and bottom lines should receive a positive catalyst in the near term.

In fact, Asos has a bright growth outlook. Its bottom line is forecast to rise by 22% in the current year, which is a much higher rate than that of the wider market. However, much of this growth appears to already be priced-in, since it trades on a price-to-earnings growth (PEG) ratio of 3.1. This indicates that there really is little upside potential, while its downside risk is high should its sales performance come in below guidance.

Although this is undeniably a high quality company with a sound strategy and business model, its valuation is simply too high to merit investment. That’s the case even if the pound continues its downward slide.

The post 2 stocks I’d avoid despite profiting from sterling’s slump 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 and has recommended ASOS. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

An oil comeback?

Back when Soco International (LSE: SIA) released full-year results in March 2015, the Vietnam-focused explorer’s share price was already being hit by the falling price of oil — but it plummeted further on the day and has remained low ever since.

Today we’ve had the latest first-half figures, revealing a net loss of $12.2m (from a $5.9m profit at the same stage last year). The shares have dipped a modest 1% to 150p as a result, but we’re still looking at a 29% gain since the beginning of June. Soco’s key strength is its very low cash operating costs of only $10 per barrel, so oil falling back to $40 levels is nowhere near the headache it is for some other oil explorers.

Chief executive Ed Story described the company as “operationally and financially robust throughout the first half of 2016,” and reckons Soco’s debt-free balance sheet and steady cash flows, coupled with those low costs, bode for a “confident and positive outlook” for the second half. There’s likely to be only modest earnings per share this year, but a big rise forecast for 2017 could make Soco one of the safer buys among smaller oilies today.

Iron upswing

Shares in iron ore pellet producer Ferrexpo (LSE: FXPO) have fallen heavily in recent years, but they’re up 4.5% today to 54p on the back of an upbeat first-half report — and the price has more than trebled since 2016’s low point in January.

Chairman Michael Abrahams spoke of “a good set of financial results given the challenging circumstances in the iron ore industry.” Sales volumes rose by 6% to 6m tonnes, although pre-tax profit (excluding exceptionals) dropped 11% to $92m. A 61% rise in net cash flow led to a 15% fall in net debt, to $753m.

Depressed iron ore prices are expected to contribute to a 22% fall in earnings per share this year with a larger 45% fall on the cards for 2017. But that’s already included in very low P/E multiples, of just 3.7 for this year and 6.7 next, which suggest Ferrexpo could be a nice earner should commodity prices see any kind of serious recovery.

Hotel slump

Millennium & Copthorne Hotels (LSE: MLC) saw its shares drop 1.7% to 414p after chairman Kwek Leng Beng said the company is “disappointed by our hotel operating performance during the first half of 2016,” adding that the Brexit vote together with recent terrorist activity has also contributed to economic uncertainty.

First-half revenue per available room fell by 0.5% (4.2% at constant currency) to £67.91, with overall hotel revenue down 1.4% to £360m. Earnings per share dropped 17% to 9.3p, but the interim dividend was maintained at 2.08p per share.

After a couple of years of falling earnings, analysts had been forecasting a 20% recovery this year, valuing the shares at 17.4 times expected EPS. In the light of today’s figures, I wouldn’t be surprised to see forecasts adjusted downwards. Millennium & Copthorne doesn’t look like a bargain to me.

The post 3 hot shares to buy on today’s results? appeared first on The Twelfth Magpie.

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Alan Oscroft 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.

Despite this, Trinity Mirror is on track to meet full-year guidance, although it continues to operate in a very volatile environment. The publisher is forecast to increase its bottom line by 4% this year and by a further 1% next year. While such performance is rather lacklustre, Trinity Mirror’s price-to-earnings (P/E) ratio of just 3.4 indicates that it has an exceptionally wide margin of safety. Therefore, for long-term investors it could prove to be a very profitable buy.

Bright future

Also reporting today was Sage (LSE: GGE), with the company’s transformation project delivering improved financial performance. Organic revenue increased by over 6%, while recurring revenue growth of 10% was recorded during the first half of the current financial year. Furthermore, Sage experienced a 50% rise in subscription contracts, which shows that its customers are embracing closer relationships. And while the company’s performance in Asia was somewhat disappointing, its diversified business model meant that performance elsewhere helped to offset this.

With Sage forecast to increase its earnings by 7% this year and by 9% next year, it appears to have a bright future. Certainly, it’s a high quality business that seems to have a sound strategy through which to deliver improving financial performance. However, Sage’s valuation appears to offer a narrow margin of safety and prices-in its upbeat growth prospects. For example, it has a price-to-earnings-growth (PEG) ratio of 2.2 and this indicates that there may be better options for investment available elsewhere.

Disappointing update

Meanwhile, Millennium & Copthorne Hotels (LSE: MLC) has today released a rather disappointing first quarter trading update. Revenue per available room (RevPAR) fell by 2.6% compared to the same quarter of last year as trading conditions continued to be challenging. Furthermore, Millennium & Copthorne experienced lower occupancy and room rates in most regions, including in key gateway cities such as New York and London.

Looking ahead, the company expects trading conditions to remain volatile and with Millennium & Copthorne trading on a PEG ratio of 3, it seems to offer a relatively unfavourable risk/reward ratio at the present time. Certainly, the strategy it’s following and new management appointments could help to improve its performance, but with a number of other stocks trading on lower valuations and having superior growth prospects, there seem to be better buys elsewhere.

The post Are The Sage Group plc, Trinity Mirror plc and Millennium & Copthorne Hotels plc star buys after today’s updates? 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. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In fact, Essentra posted revenue of over £1bn for the first time in its history. This is a major achievement since its specialist technologies division was hit by the downturn in spending in the oil and gas industry, while the acquisition of Clondalkin Specialist Packaging and subsequent site rationalisation measures hurt the company’s margins.

Looking ahead, Essentra is forecast to increase its bottom line by around 15% in 2016. This puts it on a price-to-earnings growth (PEG) ratio of just 1.1, which indicates that even though challenges in some of its divisions seem likely to remain, it could prove to be a sound long-term buy.

Expensive hotels?

Also reporting today was Millennium & Copthorne Hotels (LSE: MLC). Its shares are down by around 5% after it recorded a fall in profit and reduced its dividend. In fact, its pre-tax profit fell by 42% versus the prior year, due in part to an impairment charge of £76m on four of the company’s properties. And with Millennium & Copthorne reporting that trading conditions are expected to remain uncertain, it would be of little surprise for investor sentiment to worsen in the short run.

With the company’s shares trading on a price-to-earnings (P/E) ratio of around 18, they appear to be rather fully valued even after today’s price fall. Certainly, Millennium & Copthorne continues to offer long-term growth potential, but it could be worth waiting for a significantly lower share price before piling-in.

Power play

One stock that does appear to be worth buying right now though is National Grid (LSE: NG). It seems likely to gain in popularity for three main reasons. Firstly, it offers supreme defensive qualities during what is undoubtedly a highly uncertain period for the stock market. As such, the company’s valuation could be bid up by fearful investors.

Secondly, National Grid is likely to increase in popularity as a result of a reduced chance of interest rates rising over the medium term. As a highly indebted company, borrowing costs are always a major concern for the company’s investors. With them set to remain low, National Grid’s profitability could hold up better than expected.

Finally, National Grid’s dividend remains relatively high, with it standing at 4.7%. With a loose monetary policy causing income shares to remain in vogue, National Grid’s income potential could cause its share price to rise substantially in the coming months and years.

The post 3 Stocks To Pile Into? National Grid plc, Essentra PLC And Millennium & Copthorne Hotels plc appeared first on The Twelfth Magpie.

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