Wise (FY22 earnings)

Wise (LSE: WISE) is a fintech company that provides a money transfer service. It allows customers to send money abroad and get paid in other currencies. Wise is expected to unveil its FY22 earnings results for the year ending March 2022 on Tuesday 28 June.

Although there’s no previous record to compare with in terms of earnings per share (EPS), the earnings preview indicates that revenue is expected to grow by 32%. This is seen as generally positive as Wise continues to take market share from the likes of PayPal and Western Union. Having declined over 60% since its initial public offering, a better-than-expected number on its top and bottom lines could see the Wise share price recover from its bottom.

Moonpig (FY 22 earnings)

Moonpig (LSE: MOON) is an internet-based business. The company makes its money mainly from selling personalised greeting cards, flowers, and gifts. The FTSE 250 firm is expected to release its FY22 earnings results for the year ending April 2022 on Wednesday 29 June.

Moonpig is expecting to show a slight decline in revenue for the most recent year. This is due to the slowdown in sales after the pandemic. Nonetheless, the online business is still expecting its revenue to come in above pre-pandemic levels, with its bottom line also showing an improvement.

Mulberry (FY 22 earnings)

Mulberry (LSE: MUL) is a British fashion company. It is best known for its luxury leather goods, particularly women’s handbags. The small-cap company is expected to post its FY22 earnings results for the year ending April 2022 on Wednesday 29 June.

The earnings preview points towards a slight growth in revenue despite a slow down in retail sales lately. This is due to its status as a luxury brand. Due to a lack of liquidity in the stock, its share price has largely stayed unmoved this year. Consequently, there’s a lack of coverage on the stock. Nonetheless, higher revenue with a better EPS could have investors jumping for joy, sending the stock higher.

The post Earnings preview: Wise, Moonpig, Mulberry appeared first on The Twelfth Magpie.

More reading

• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Up 10.7% today, this under-the-radar FTSE 250 stock still looks good value to me
• Down 20% in a year, I’ve been loading up on this UK growth share!
• 2 excellent growth ideas for a Stocks and Shares ISA in June 2026
• Below £8, this high-growth UK fintech stock looks like a bargain to me

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended PayPal Holdings. 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.

Today, I’ll take a look at the scale of the damage faced by this small-cap growth stock, and explain why I’d prefer to put my cash into a larger, better-established rival.

£3m hit could get bigger

When House of Fraser went into administration, it gave Sports Direct founder Mike Ashley the opportunity to buy the chain without being required to pay almost £1bn owed to creditors. That may prove to be good news for the department store, but means suppliers will have to take a hit.

Mulberry is one such supplier, with concessions in 21 House of Fraser stores. The company said today that it expected to report a total loss of £3bn as a result of House of Fraser going into administration.

Given that the luxury handbag firm only reported a pre-tax profit of £6.9m last year, that’s a big hit. But things could get worse. In Monday’s statement, Mulberry warned that UK trading has been “challenging” since June. If it doesn’t improve during the remainder of the year, management expect profits to be “materially” lower. This usually means at least 10%.

Catch this falling knife?

Mulberry shares have now fallen by more than 50% this year. It’s tempting to view this as a bargain buying opportunity, but I’m not convinced. Although the balance sheet remains strong, with net cash of £25m, the shares don’t look cheap to me.

If we ignore the £3m loss from House of Fraser as a genuine one-off, then I estimate the shares still trade on about 40 times forecast earnings for 2018. Operating profit margins are still low, at about 4%. Without clear evidence of strong earnings growth, this business seems too expensive to me.

Here’s what I’d buy instead

Luxury goods producers can be a profitable investment. My favoured choice in this sector is Burberry Group (LSE: BRBY).

This 162 year-old fashion house has the same attractive growth profile in Asian markets as Mulberry. But unlike its newer rival, Burberry benefits from much greater scale and heritage. In my view, these factors provide good protection for investors wanting a lower-risk buy.

Like-for-like sales growth rose by 3% during the first quarter, which may seem modest. But last year’s figures showed decent progress, with adjusted earnings up by 10%, excluding currency effects.

A cash machine

Burberry’s profitability also improved last year. Operating profit margin rose from 14.2% to 15%, while return on capital employed climbed from 21.3% to 24.6%.

High returns of this kind usually result in strong free cash flow, and that’s true here. Burberry’s net cash balance rose by £83m to £892m last year. That’s equivalent to around 10% of its market cap. This provides strong support for the group’s dividend. It’s also allowed chief executive Marco Gobbetti to allocate another £150m to share buybacks.

Shares in this luxury goods firm currently trade on about 28 times forecast earnings, with a prospective yield of 1.9%. That may not seem cheap, but I believe the firm’s valuable brand and high profit margins make it a fair price to pay. I’d be happy to buy these shares for a long-term, buy-and-hold portfolio.

The post Why I’d avoid 15%-faller Mulberry and buy this FTSE 100 dividend growth stock appeared first on The Twelfth Magpie.

More reading

• This FTSE 100 share pays no dividends. Could that change?

Roland Head 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.

Mulberry bushed

Today’s report showed reported profit before tax falling from £7.5m in 2017 to just £6.9m, although largely due to start-up costs in Asia. Profit before tax from existing business actually rose 36% to £11.3m, but that was before deducting start-up costs of £2m and net operating expenses of £2.4m.

There was good news in there, with gross margins increasing by 185 basis points to 63.5%, revenue up 1% to £169.7m and retail sales up 3%. The UK was broadly flat but international sales rose 20%. Digital revenues rose 14% and now make up 17% of group revenue (against 15% in 2017). The group’s cash balance stands at £25.1m, up from £21.1m. That is all to the good.

Round and round

CEO Thierry Andretta reported significant progress on its international strategy, creating new Mulberry subsidiaries in China, Hong Kong, Taiwan and Japan, and announcing today a new majority owned venture in South Korea. “Following another period of cash generation, our balance sheet is strong.  Although the UK market remains challenging, we will continue to invest in our strategy to develop Mulberry into a global luxury brand to deliver increased shareholder value.”

So can Mulberry finally show some swagger? I looked at the stock one year ago and said it still has a long way to go. One year on the journey remains market rocky. However, I am encouraged by increased international sales, greater penetration in Asia, and its omnichannel strategy, which is the only way for retailers to survive these days. However, the £465m stock still trades at a whopping 77 times earnings and the dividend yield is low at just 0.65%.

Next Port of call

I are more tempted by another consumer small stock with an outsize international presence, ceramics and cookware firm Portmeirion Group (LSE: PMP), whose brands include Royal Worcester, Spode and Wax Lyrical. My Foolish colleague Paul Summers is also an admirer, noting that although these brands are not big sellers in the UK, they are much more popular in North America.

Big in the States sounds good to me, especially given the strong dollar and weak pound. The stock is up 40% in the last year to 1,280p, and up 450% measured over 10 years. It is a tad expensive as a result, trading at a forecast valuation of 17.6 times earnings, but at least it offers a yield of 2.8%, covered twice.

Warming up

Earnings per share growth forecasts look promising, with 11% expected this year and 7% next. Strong return on capital employed of 23.6% and operating margins of 10.1% strengthen the case for this AIM-traded firm £119m company.

Portmeirion is continuing to grow steadily, in May it reported a 15% rise in total group sales for the first four months of 2018, with group sales up 20% on a constant currency basis over the year. Both stocks have potential, but for me, Portmeirion looks better placed to serve up success.

The post One small-cap growth stock I’d buy and one I’d sell today appeared first on The Twelfth Magpie.

More reading

• 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?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• 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?

harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Portmeirion Group. 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.

Unaffordable luxury

As updates go, this morning’s figures were something of a mixed bag.

Despite the “uncertain” economic and political climate, a “steady performance” was seen in the UK thanks to increased spending by tourists in the capital. New products have been well received, with the company’s Amberley bag — released in June — becoming “an instant bestseller“. Progress has also been made overseas with its agreement with Onward Global Fashion allowing Mulberry to build a presence in Japan where it now has five stores.

As a result of these developments, total revenue for the six months to the end of September came in at £74.5m with retail sales growing 2%. Gross margin increased by £1.9m, thanks partly to lower markdown sales.

On the downside, like-for-like sales declined by 1% (although this appears to have reversed since the end of the reporting period). Thanks to increased investment in marketing and the company’s retail network, a pre-tax loss of £600,000 was also recorded.

While these numbers aren’t awful, my biggest issue with Mulberry remains its obscenely high valuation. A forecast price-to-earnings ratio of 99 for the current year looks absurd when you consider that even ‘expensive’, fast-growing online fashion giants Boohoo and ASOS trade on 65 and 62 times forecast earnings respectively. As a result, it’s hardly surprising that Mulberry has a PEG ratio of 6, suggesting that the shares represent very poor value based on the amount of earnings growth expected.

Factor-in negligible (and stagnant) dividends and stubbornly low returns on capital employed and I suggest those wanting to make money from this business may be better off investing in its products rather than its stock. 

A ‘cheaper’ alternative

FTSE 100 behemoth Burberry (LSE: BRBY) is, in my view, a far better buy than Mulberry.

In what must surely be regarded as yet another example of a nervous market overreacting, shares in the retailer tumbled in early November following the announcement by new CEO Marco Gobbetti that he would be taking the brand further upmarket and cutting sales to not-luxury-enough stores in the US. 

As strategies go, I think this is a sound decision for a company whose appeal depends on the exclusivity of its products. By restricting availability, you increase desirability.

Aside from this, the company’s interim numbers (also revealed in November) were better than the market was expecting with adjusted operating profit of £185m being far higher than the predicted £167m. 

Trading at 22 times forecast earnings for the current year, Burberry is clearly still an expensive stock to buy. Compared to Mulberry, however, it looks a steal. 

Thanks to its sizeable net cash position, the company is in robust financial shape and generates consistently high returns on sales and the capital it invests. While unlikely to appeal to income investors, the stock also comes with a forecast 2.4% yield, fully covered by expected profits.

Although some investors may still be concerned by the forthcoming departure of creative chief Christopher Bailey,  I think Burberry remains a solid pick for those willing to hold for the long term.

The post Why I’d dump this expensive mid-cap stock for this FTSE 100 giant appeared first on The Twelfth Magpie.

More reading

• This FTSE 100 share pays no dividends. Could that change?

Paul Summers 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.

Let it go

Charles Stanley is flying even higher after today’s final results, with the share price up 3.94% in early trading. Its current share price is 361p, up nearly 24% year-to-date, delighting wise investors who stayed the course. Today it reported profit before tax of £8.8m, turning around a £300,000 loss in 2016. Full-year reported revenue was exactly the same as the previous year at £141.6m, despite disposal of non-core activities. Its balance sheet has been strengthened, with group cash balance of £58.4m against £48.4m before.

In further good news, funds under management and administration rose 17.1% to £24bn, while core business operating margins more than doubled from 3.1% to 7.1%. The company management is aiming for 15% by 2020. The icing on the cake was a 20% increase in the total 2017 dividend to 6p a share, up from 5p in 2016.

Charles Stanley, I presume

Chief executive Paul Abberley thanked the company’s transformation programme for delivering “increased profitability, more satisfied clients and improved staff engagement”, and said the company is now focusing on improved governance, better cost control and a revised remuneration policy. This should make it more streamlined and focused, boosting profitability.

Charles Stanley’s aim to become the UK’s leading wealth manager by 2020 does sound somewhat ambitious and Brexit is clearly a concern, but with City forecasters predicting 54% earnings per share growth in 2018 and 38% in 2019 the outlook is bright (painfully so, given my recent sale). A forecast valuation of 17.1 times earnings is therefore undemanding, and today’s 1.5% yield is forecast to hit 3.9% in 2019. A stock market meltdown could offer a short-term setback, or conversely, an even more exciting buying opportunity. I should never have sold.

Here we go round again

Fashion house Mulberry Group (LSE: MUL) specialises in timeless British luxury and recent share price performance has been stylish, with the stock up 57% in the last three years. However, it is down 2% this morning after its preliminary results for the year to 31 March disappointed.

There are some handsome numbers in there, with total revenue up 8% to £168.1m, profit before tax up 21% to £7.5m and cash rising from £14m to £21.1m. However, investors were scared away by the slowing sales growth in recent weeks. Although full-year sales rose 8% to £128.3m, with like-for-likes up 5%, over the 10 weeks to 3 June retail like-for-likes (including digital) pipped up just 1%.

Retail fail

Gross margins also dipped slightly from 62% to 61.6%, due to a large number of new designs introduced during the first six months, although management noted that production efficiencies returned to normal levels during the second half of the year

Today’s statement also showcased a 6.6% increase in operating expenses to £96.5m, primarily due to higher retail store costs of £3.7m and increased marketing, advertising and promotion costs of £1.6m. Mulberry’s turnaround clearly has a little further to go.

The post One turnaround stock I would buy today, and one I would avoid appeared first on The Twelfth Magpie.

More reading

• 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?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• 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?

Harvey Jones doesn't hold shares in any company mentioned in this article. 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 group’s underlying sales fell by 1.4% to £790.5m last year, pushing adjusted pre-tax profit down by 11.8% to £74.2m. Adjusted earnings per share for the year ending 1 April 2017 fell by 12.2% to 7.2p. The group said the fall was the result of the rising price of commodities such as sugar and cocoa, along with the weaker pound.

Premier’s biggest problem is debt. The firm only managed to reduce its net debt by £11m to £523.2m last year. This means that it s still 3.9 times earnings before interest, tax, depreciation and amortisation (EBITDA). That’s uncomfortably high.

Most companies target a net debt-to-EBITDA ratio of no more than two times. Premier Foods hopes to bring its ratio below three times “in the next three to four years”. To help this process, a £20m cost-cutting programme is planned for the next two years.

Many shareholders will think that the firm’s board should have accepted last April’s possible offer of 65p per share from US group McCormick & Company. At 42p, the firm’s shares are worth 35% less than McCormick’s bid. It’s not obvious to me why the board thought the offer was too low.

Premier stock has a forecast P/E of six for 2017/18. That may seem tempting, but I believe the group’s debt burden means that the share price is likely to remain under pressure for the foreseeable future. I’d look elsewhere.

Does this sky-high price make sense?

AIM-listed luxury handbag designer Mulberry Group (LSE: MUL) doesn’t have debt worries — the group had net cash of £11.3m at the end of September. But this financial security comes at a steep price for shareholders.

Mulberry’s annual profits peaked at £25.3m in 2012. Performance since then has been disappointing. The group reported a loss of £1.4m in 2015 and is expected to report a full-year profit for the year which ended on 31 March.

My concern is that a far greater recovery already appears to have been factored-into Mulberry’s share price. At 1,086p, the stock trades on a forecast P/E of 130 for the year just ended, falling to a P/E of 100 for the current year.

In my view, the only way this valuation might make sense is if Mulberry starts to deliver strong sales growth and rising margins. It’s not clear to me if this is likely.

Although Mulberry does have a new creative director — ex-Louis Vuitton designer Johnny Coca — the group’s sales have yet to break through the high of £168.5m seen in 2012. Profit margins also have a long way to go to reach previous highs. The company reported an operating margin of 3.9% last year, down from 21% in 2012.

This stock already seems to be priced for perfection. Although Mulberry’s future performance might justify this valuation, I’m afraid that any slight disappointment could cause the shares to crash. On that basis, I’m not interested at current levels.

The post 2 high-risk stocks I’d probably avoid appeared first on The Twelfth Magpie.

More reading

• Here’s 1 of my favourite beginner UK stocks to consider buying now with £1,000
• I’m hunting for the FTSE 100’s best value stocks to buy now. Have I found one?

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.

Challenges remain

Famous for its signature check, Burberry (LSE: BRBY) is also known for its trench coats, cashmere scarves, other accessories and, more recently, its high-margin handbags. The retailer has enjoyed relentless growth for over a decade as overseas markets have been lured by the brand’s British heritage. But full-year results to the end of March revealed a drop in pre-tax profits coupled with lower revenues as the slowdown in the key Asian market continued to take its toll. The disappointing results have led to the firm announcing a three-year investment and cost-saving strategy, as well as management changes with a new CEO set to join.

But the challenge facing the luxury market, particularly in China remains a concern, and the City doesn’t expect Burberry to return to growth until at least 2018. The shares have lost a fifth of their value this year, and are trading well below all-time highs of £19 reached in 2015. Currently trading at around £13 with a forward price-to-earnings ratio of 19, I believe this luxury brand is still too expensive, despite the heavily discounted price-tag.

Too risky

Mulberry (LSE: MUL) is another London-listed fashion brand catering for customers with more exclusive tastes. The upmarket retailer designs and sells a whole host of clothing and footwear, but continues to be best known for its luxe leather handbags.

Unlike its much bigger rival Burberry, AIM-listed Mulberry pleased investors with strong results for fiscal 2016. A sharp rise in pre-tax profits to £6.22m, compared to just £1.86m reported a year earlier, and revenues also up from £148.7m to £155.9m came after it introduced more ‘affordable’ luxury products.

After three year of decline, the Bath-based business looks to have turned a corner with brokers expecting a strong rise in earnings this year and next. But the shares are trading at 12 month highs after gaining more than a fifth this year, and I would say that the predicted growth is well-and-truly-priced-in with premium earnings multiples of 110 for this year, falling to a still-expensive 78 for the year to March 2018. The risk remains that the shares could tumble if the company fails to deliver on the ambitious growth forecasts.

Successful growth strategy

Jimmy Choo (LSE: CHOO) is a luxury British fashion house synonymous with designer shoes. The London-listed small-cap remains upbeat about its prospects saying it has enjoyed a good start to 2016 while it continues to deliver its successful growth strategy and remains focused on controlled expansion. Brand awareness continues to grow strongly, particularly in China where the label is under-penetrated.

City analysts are also positive about the company’s prospects, predicting strong double-digit earnings growth over the medium term, with underlying profits expected to reach to almost £30m by the end of next year. Not bad for a company that reported a pre-tax loss of £8.3m as recently as 2014. The shares look good value at 14 times earnings for 2017 given the strong growth outlook, and in my opinion now could be a good time to buy ahead of interim results due on 25 August.

The post Time to invest in Burberry Group plc, Mulberry Group plc and Jimmy Choo plc? appeared first on The Twelfth Magpie.

More reading

• This FTSE 100 share pays no dividends. Could that change?

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

Bag a beauty

Shares in fashion play Mulberry Group (LSE: MUL) were static on Thursday trade despite the release of blockbuster trading numbers.

Mulberry saw retail sales trot 8% higher during the 12 months to March 2016, to £118.7m, or 4% on a like-for-like basis. These results helped pre-tax profit surge to £6.2m from £1.9m a year earlier.

The huge investment to improve Mulberry’s multi-channel presence is clearly delivering, and digital sales at the bag maker jumped 19% year-on-year. And Mulberry is confident that these moves — allied with huge product development — should continue to drive the top line.

This view is shared by the City, and Mulberry is expected to see earnings double in 2017 before rising a further 57% next year.

Subsequent P/E ratings of 93.5 times for the current period and 52.9 times may be too heady for many investors. But I expect the multiple to keep tumbling as demand for Mulberry’s goods accelerates across the globe.

Business booms

Financial giant Liontrust Asset Management (LSE: LIO) also greeted the market with bubbly trading numbers on Thursday. And investors have responded by sending the stock 6% higher.

Liontrust saw adjusted pre-tax profit leapt 21% during the 12 months to March 2016, to £14.6m, the asset manager benefitting from electric activity at its UK Retail arm.

Indeed, net inflows of £223m at the division helped drive total assets under management 7% higher from 2015 levels, to £4.8bn. Liontrust’s ambitious in-house expansion has helped drive inflows despite challenging market conditions, and the City expects these moves to pay off in the long-term.

Sure, earnings may be expected to slip 2% in 2017. But a 17% rebound is predicted for 2018. And these numbers result in mega-low P/E ratios of 10.5 times and 8.9 times respectively.

When you throw in dividend yields of 4.6% and 5.5% for these years, I reckon Liontrust is a great stock pick at present.

Construction corker

Housebuilder Taylor Wimpey (LSE: TW) has seen its share price collapse in recent weeks as fears of sinking buy-to-let demand have worsened.

Indeed, the Taylor Wimpey’s value has slipped almost a fifth from record highs above 210p punched just last month. And latest data from the Council of Mortgage Lenders would have done little to assuage market concerns.

The body advised that mortgage borrowing from landlords collapsed by 51% year-on-year in April, to 4,200 loans, as the impact of stamp duty hikes came into effect.

While a cooling buy-to-let segment takes the shine off the housebuilding sector, I believe the industry’s major players remain in rude health — demand from first-time buyers remains robust, and Britain’s chronic homes shortage looks set to persist.

As a consequence, Taylor Wimpey is predicted to see earnings shoot 17% and 9% higher in 2016 and 2017 respectively.

These figures create very-attractive P/E ratings of 10.5 times and 9.7 times. And when you throw in dividend yields of 5.9% and 7.4%, I reckon Taylor Wimpey is a steal at current prices.

The post Should you buy Mulberry Group plc, Liontrust Asset Management plc and Taylor Wimpey plc on today’s news? appeared first on The Twelfth Magpie.

More reading

• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?
• This 7.7% yielding dividend stock trades at a 13-year low – time to consider buying?
• £10,000 in these 3 FTSE 250 stocks could generate £982 of passive income over the next 12 months!
• How much would you need in a Stocks and Shares ISA to earn £33,814 a year in dividend income?

Royston Wild 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.

With smoking regulations becoming increasingly stringent across the developed world, buying tobacco stocks such as Imperial Brands (LSE: IMB) may seem foolhardy. After all, the health risks of smoking are becoming increasingly relevant to a more health-conscious consumer and with cigarette volumes falling year in, year out, now could be the time to sell tobacco shares rather than buy them.

However, this ignores two facts. Firstly, the world population is rising at a rapid rate. While there are over 7bn people globally today, there are expected to be almost 10bn by 2050. And while the proportion who smoke tobacco may fall in that time, this is likely to be more than offset by the overall population growth.

Major growth in e-cigarettes

The second factor is that while tobacco is becoming less popular, e-cigarettes are a major growth area for companies such as Imperial Brands and could boost earnings over a sustained period. That’s because fewer people may kick their nicotine addiction and will instead use e-cigarettes as a substitute for tobacco. As such, now could be a great time to buy into Imperial Brands rather than selling.

Also appearing to offer a rather challenging outlook is Unilever (LSE: ULVR). The home products giant relies on emerging markets for the majority of its sales and with the largest of them all, China, seeing its growth rate slow, it could be argued that now is not the right time to buy Unilever.

However, this ignores the fact that China’s economy is transitioning towards a consumer-focused outlook. This means that Unilever could benefit from higher wages for workers in China which should increase demand for consumer-discretionary items.

While China is a key market for Unilever, the company remains geographically well-diversified so even if China disappoints, its other markets should be able to pick up the slack. Therefore, with excellent long-term growth prospects and less risk than many of its peers, Unilever could prove to be a sound buy.

Stunning growth forecast

Meanwhile, shares in luxury accessories brand Mulberry (LSE: MUL) have been strong of late, rising 8% in the last three months alone. A key reason is a stunning growth forecast with Mulberry expected to increase its bottom line by 120% in the current year, and by a further 82% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.6, which indicates it offers a wide margin of safety.

Mulberry endured a tough period in recent years when its ambitious move to a higher pricing structure proved unpopular with existing customers and failed to win over sufficient new ones. However, it now seems to have the strategy to record upbeat capital gains over the medium to long term.

The post Are Unilever plc, Imperial Brands plc and Mulberry Group plc the worst stock tips of all-time? appeared first on The Twelfth Magpie.

More reading

• 3,566 shares in this FTSE 100 stalwart earns a £1,443 second income
• How much do you need in an ISA to target a £9,999 second income that rises every year?
• 6.7% yield! Is Imperial Brands an irresistible FTSE 100 share to consider?
• Here are the stunning returns I’m targeting from £20,000 in this high-income FTSE star
• State Pension of £12,548 not enough? How much would be needed in an ISA to match it?

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

Furthermore, the incident is likely to have caused a drop in customer loyalty and in the prospects for sales growth in the short run. Although the impact of the incident in this regard is impossible to accurately measure, competition within the quad play space is high and it’s relatively straightforward to switch supplier. As such, Talktalk may have lost some of the momentum it had enjoyed from it stealing a march on rivals regarding the diversity of the products it offered.

Looking ahead, Talktalk is forecast to increase its bottom line by 44% in the next financial year. Certainly, there’s scope for a downgrade due to the potential impact of reduced customer loyalty. But with the company’s shares trading on a price-to-earnings growth (PEG) ratio of only 0.3, the risk/reward ratio remains appealing. Due to this wide economic moat, Talktalk appears to be a strong buy despite the relatively high degree of uncertainty regarding its near-term future.

Mulberry – set for growth

Also struggling in recent years has been luxury brand Mulberry (LSE: MUL). It has suffered from implementing price increases that priced out its traditional customer base and now that it has returned to a less ambitious pricing structure, its bottom line is set to reap the rewards.

In fact, Mulberry’s earnings are due to rise by 74% in the current financial year, followed by further growth of 111% in the next financial year. As such, Mulberry trades on a rather appealing PEG ratio of 1.1, which indicates that its shares could be worth buying at the present time.

And with the company’s new Creative Director set to show his first Mulberry collection at London Fashion Week in February, investor sentiment could improve during the year and push the company’s shares higher following their 14% rise over the last year.

On your shopping list?

Meanwhile, the outlook for Tesco (LSE: TSCO) is also upbeat. Clearly, the pending Christmas update could have a significant impact on the company’s short-term share price movement, but looking further ahead Tesco is expected to increase its net profit by 78% in the current year. This puts it on a PEG ratio of 0.2 and indicates that share price growth is likely.

Undoubtedly, Tesco is set to benefit from an improved outlook for UK consumers who are enjoying wage rises in real-terms for the first time in a handful of years. However, the company’s refreshed strategy, which focuses on efficiencies, customer service and a simplified business structure, is also likely to have a positive impact on its financial performance.

With Tesco having a yield of 1.2%, it lacks income appeal at the present time. But with a payout ratio of only 18%, there’s scope for a rapid rise in shareholder payouts in the medium-to-long term – especially if Tesco’s earnings can continue to increase at a fast pace.

The post Tesco PLC, Talktalk Telecom Group PLC And Mulberry Group PLC: Are They On The Cusp Of Stunning Returns? appeared first on The Twelfth Magpie.

More reading

• Here’s what a surging Tesco share price has done to £10,000 invested 5 years ago
• Are Tesco shares losing their momentum?
• Tesco’s share price drops 2% on Q1 trading miss. What’s gone wrong?
• As Tesco shares dip on Q1 results, is this a brilliant time to buy?
• How much might £19,999 in a Cash ISA be worth in 2036?

Peter Stephens owns shares of TalkTalk Telecom Group plc and Tesco. 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.