But this time investors have cause to cheer, the stock last 8% higher on the day and above Thursday’s record closing price of 12.5p per share.

Sepura announced that it had ground out an agreement with its lenders to defer covenant tests initially scheduled for today until May 15. The radio builder added that an option exists to extend this deadline until the end of May if required.

Chinese puzzle

Shares in Sepura have continued to shake as uncertainty over the proposed takeover by China’s Hytera Communications persists. Earlier this week Sepura announced that the UK Department for Business, Energy & Industrial Strategy is considering launching a review of the proposed acquisition.

The Cambridge-based techie noted that “the Department has sought representations from Sepura on this possibility which Sepura will be providing expeditiously,” and added that “Sepura continues to evaluate the potential process and implications of such a review if implemented.”

Sepura had advised earlier this week that the takeover does not need to be approved by German competition authorities “as… Sepura’s turnover in Germany for the financial year ending 31 March 2017 will be below the relevant turnover threshold for the acquisition to constitute a notifiable transaction.”

However, Sepura is still awaiting sign-off on the deal from the National Markets and Competition Commission in Spain, it said.

For the time being, I reckon risk-averse investors should give Sepura short shrift. Allied to the possibility that the tie-up with Hytera could hit the buffers, weak market conditions (revenues tanked to €43.3m during April-September from €92.9m a year earlier) and consequent fears over debt negotiations in the months ahead also hang heavy.

A great dip buy

I have no such concern over the long-term health of Dignity (LSE: DTY), even if an initially-scary full-year trading statement this month has sent the share price sharply south. The funeral director has dived 14% since the update of March 8.

Dignity advised this month that revenues grew 3% during 2016, to £313.6m, while profit before tax by a similar percentage to £71.2m.

While the business advised that “the number of deaths has been higher in 2016 than the Group originally anticipated following a significant increase in the number of deaths in 2015,” investors scarpered after Dignity added that “historical data would suggest that deaths in 2017 could be significantly lower than 2015 and 2016.”

I would consider the sharp sell-off to be a gross overreaction, however, particularly as Dignity noted that “trading in the first few weeks of 2017 has… continued to be strong.”

Meanwhile, current City projections suggest now could be the time for eagle-eyed investors to pile in.

Anticipated earnings rises of 5% and 8% in 2017 and 2018 respectively result in P/E ratios of 19.1 times and 17.6 times, great value in my opinion given Dignity’s position as one of the best defensive stocks out there, not to mention the great growth potential offered by ongoing acquisition activity.

The post One turbulent stock I’d buy and one I’d sell appeared first on The Twelfth Magpie.

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

Year-to-date shares in Essentra are down by 54% and shares in Sepura have lost a staggering 89%. Unsurprisingly, these declines have attracted bargain hunters. 

According to TD Direct Investing’s ‘buy/sell’ indicator, which tracks the trading actions by investors using the company’s retail trading platform, the number of investors buying Sepura and Essentra on dips has far outweighed those investors selling during the same periods. 

But is this the right course of action? Buying when there’s blood on the streets can be a profitable strategy. However, the key caveats of investing still apply: you should only invest in companies with a strong business model, robust balance sheet and trustworthy management. 

Running out of cash 

Sepura has continually disappointed its investors this year and the company’s first-half results published today don’t break from form. 

Trading has remained slower than expected. The firm booked a pre-tax loss of €62.1m in the half year to the end of September, compared to a €6.2m interim profit a year prior as revenue halved from €92.9m to €43.4m. Management expects revenue for the full year to fall in the range of €125m to €135m, compared to €189.7m a year before.

Collapsing revenue is the least of Sepura’s problems. The company warned today that it’s reviewing a range of strategic options and will require a waiver of some of its lending covenants from March 2017, based on the bleak outlook for its current financial year. The company is in talks with Hytera Communications Corp about a possible takeover, but if these discussions fail, there’s a very real possibility Sepura could be forced into liquidation at some point over the next year. For this reason, it’s probably best to avoid the company. 

Yet another profit warning 

On Monday, Essentra issued its second profit warning of 2016. Weakness in parts of the group has continued into the second half of the year as management struggles to integrate manufacturing facilities acquired as part of the $455m buyout of Clondalkin Group in 2014. 

Essentra now expects to make an adjusted operating profit of £137m to £142m in 2016, down from its previous guidance of £155m to £165m. Still, these numbers are up significantly year-on-year. The company reported pre-tax profits of only £90m last year. And even on lowered guidance, City analysts expect the company to report earnings per share of  43.4p for the year ending 31 December 2016, which means the shares trade at a forward P/E of 11.4. Furthermore, unlike Sepura, Essentra appears to have no immediate funding concerns. 

So, if management can get Essentra back on track, the group might be an attractive recovery play although investors should bear in mind that profit warnings usually come in threes. I wouldn’t be surprised if the company warned on profits once more before the end of the year. 

The post Should you catch falling knives Essentra plc and Sepura Plc? appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of and 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.

Even though a drop of 20% may suggest that investors across the board were dumping these companies, trading data from TD Direct, one of the UK’s largest retail stock brokers, showed that more investors were actually using declines to increase or initiate positions, rather than selling up. 

Considering this data, it would appear that most investors have heeded Warren Buffett’s advice to “be greedy when others are fearful“, but is this really the best course of action for every scenario? 

Should you be greedy when others are fearful? 

Buffett also said that it’s wise to “be fearful when others are greedy“. Essentially, what Buffett is trying to get at here is that if everyone is jumping on the bandwagon, you should hesitate because in most cases when something looks too good to be true, it usually is. 

This applies just as much to profit warnings as it does bull markets. 

As noted above, data from TD shows that when Devro and Sepura warned on profits, investors rushed to buy, jumping on the profit warning bandwagon. Does this mean investors are falling into a trap by trying to follow some of Buffett’s advice, but instead succumbing to exactly what he’s also warning about?

Look at the fundamentals 

Warren Buffett is a business-orientated value investor. In plain English, this means he’s not just interested in companies because they’re cheap. Buffett is looking for good businesses trading at attractive prices, and he never buys on impulse. It’s likely any company that Buffett buys for his portfolio has been subject to months of scrutiny, and he has been waiting for months or even years to buy at a price he likes. 

Sometimes, these opportunities may come after a profit warning, but if shares in a company lose a fifth of their value in a single day, it’s likely deeper fundamental issues are going on. That said, not all profit warnings are the same, so ultimately it depends on the company in question and the scale of the warning.  

So, before you start to “be greedy when others are fearful”, you need to do your research. Jumping into a position just because the shares are falling is tantamount to investment suicide. However, if you do your research and wait for the perfect time to buy, a profit warning could offer you the perfect price, and one that’s too hard to pass up. 

The post Are profit warnings the perfect opportunities to buy? 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?

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

It now seems as if Sepura’s story and spectacular fall from grace is about to come to an end. Yesterday management published a news release informing shareholders that it’s in preliminary talks with Hytera Communications Corporation Limited regarding a possible offer for the entire issued and to be issued share capital of the company. The press release went on to say Hytera has confirmed to the board of Sepura that any offer if made, is likely to be solely in cash. However, as of yet, there can be no certainty that any offer will be made. 

Hytera is required to make a formal offer for the company by 17:00 on 2 December or walk away. 

Take the money and run

A takeover may be the best option for Sepura and the company’s investors. After the setbacks of the past few months, City analysts aren’t predicting anything spectacular from the enterprise any time soon. The City has pencilled-in earnings per share of 0.09p for the year ending 31 March 2017, a fall of 98% from last year’s figure. For the year to 31 March 2018, analysts are forecasting earnings per share of 2.8p, which is a drastic year-on-year improvement but still far below the 7.3p per share reported at the company’s peak. 

Lower earnings expectations aren’t the only problems Sepura faces. In a trading update issued on September 14 the company stated that while it had sufficient liquidity for its forecast needs, revised revenue expectations may require it to “discuss with its lenders a possible waiver of certain of its covenants from March 2017.” So, there’s also the risk that the company may find itself struggling to keep the lights on if trading doesn’t improve significantly during the next 12 months. 

Time to buy? 

Generally speaking, you should never buy a stock in the hopes that the company will be acquired at some point in the future, unless an offer has already been made. Nine times out of 10 an offer will never emerge and the trade will cost you money. 

With Sepura it’s no different. It’s clear that it’s struggling and the company faces an uncertain future. Therefore, if no deal emerges, the company’s shareholders could be left holding the baby. If there’s no progress on debt reduction, a rights issue may be on the cards or even bankruptcy, neither of which is a desirable outcome for investors. 

So overall, it doesn’t look as if Sepura is a buy on takeover speculation right now. 

The post Is Sepura plc a buy on takeover speculation? 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?

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.

Frantic Friday

Sepura’s shares were near to 200p in the spring. They opened on Friday at 15p. However, the price began to rise sharply in the afternoon and ended the day at 18.5p.

At 17:14 came an announcement that Sepura is “in preliminary talks with Hytera Communications … regarding a possible offer for the entire issued and to be issued share capital of the company.” The announcement continued: “Hytera has confirmed to the Board of Sepura that any offer, if made, is likely to be solely in cash. There can be no certainty that any offer will be made, nor as to the terms of any such offer.”

The problem for investors looking to profit from this situation is that Sepura’s current financials and trading can only be guessed at — its half-year results are due in two weeks. So, valuing the business is nigh on impossible. Buying blind, after the rise on Friday and at a likely higher opening price today, simply in the hope that Hytera will make an offer and that the offer will be at an even higher price, seems an unattractive proposition to me.

I’m tempted

Watchstone (LSE: WTG) is a special situation that continues to tempt me. This company is the renamed rump of scandalous Quindell, which saved itself from insolvency by selling nearly all its assets to Slater & Gordon (S&G).

At Watchstone’s last balance sheet date (30 June) net assets were £130.6m (284p a share). I believe the balance sheet is now clean and that book value fairly reflects the worth of the company. The shares are trading at 187p.

Why the big discount? Well, £50m (109p a share) of assets — booked under trade and other receivables — is cash in an escrow account relating to the S&G deal. This is due to be released to Watchstone on 29 November. However, in September, S&G announced an intention to bring a claim against Watchstone.

Watchstone believes there are no grounds for a claim, and I share that view. I reckon the £50m is safe. I also reckon that potential compensation claims by ex-Quindell shareholders (currently amounting to less than £10m) can be discounted and that former Quindell directors will bear the brunt of any financial penalties resulting from a Serious Fraud Office investigation into past events at the company.

Deutsche Bank back in

I’ve taken a view on Watchstone based on experience, history and precedent. But as I said, I haven’t quite been tempted yet to back my judgement with hard cash. However, some people have.

Another late announcement on Friday — at 17:27 — revealed that Deutsche Bank now owns 7.54% of Watchstone’s shares. Deutsche initially sold down its stake after the S&G claim was announced. So, it has bought back in (and a few more shares than before). US hedge fund Beach Point Capital has also recently increased its stake a little, from 11.96% to 12.04%.

I don’t expect Friday’s Deutsche holding news to put a rocket under Watchstone’s shares , but it does bolster my confidence that there’s value here.

The post Did you miss Friday’s after-hours news that may put a rocket under Sepura plc and Watchstone Group plc? appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Swallowfield

Swallowfield’s shares have moved higher today despite the company not releasing any significant news. The most recent update from the company was in September when it reported an upbeat set of results. Its sales moved over 10% higher following a year of major product launches for global brands, as well as significant product innovation and new business contract wins.

Looking ahead, Swallowfield’s growth prospects are very bright. It will make use of its expertise in areas such as aerosols and hot pour technology to boost volume and reputational value in delivering major products for household name global brands. Additional new business wins are also on the cards.

This is expected to produce a rise in earnings of 17% in the current financial year. Despite this strong growth outlook, Swallowfield continues to offer excellent value for money. For example, it trades on a price-to-earnings growth (PEG) ratio of 0.7. This shows that further gains could lie ahead.

Additionally, Swallowfield offers bright income prospects. Although it currently yields just 1.8%, dividends are covered four times by profit and this shows that rapid dividend increases may be on the horizon.

Sepura

Sepura’s shares are up after the company announced a major new contract win. Sepura has been selected by a large continental European public safety organisation to provide 19,000 SC20 series hand-portable radios. The contract builds on Sepura’s strength in the public safety market and shows that its current strategy is improving the company’s overall performance.

Sepura’s outlook is rather mixed. Although its profitability is due to fall significantly in the current year, next year is expected to represent a major step forward for the business. Sepura is forecast to increase its pre-tax profit from £0.4m in the current year to £11.6m in the next financial year. This step change in profitability has the potential to boost investor sentiment in Sepura and could cause its share price to rise.

Furthermore, Sepura offers excellent value for money. It trades on a forward price-to-earnings (P/E) ratio of just 6.1. This shows that even if its bottom line performance is lower than that currently anticipated by the market, Sepura has a sufficiently wide margin of safety to merit investment for the long term.

In terms of dividends, Sepura isn’t expected to make any shareholder payouts in either the current year or next year. However, for growth investors Sepura has real appeal and alongside Swallowfield, the gains made thus far today could continue over the coming months and years.

The post Should you buy these two 10%+ movers? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• 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?

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.

Radio star

Digital radio maker Sepura (LSE: SEPU) has endured a nightmare start to the current quarter after hitting the market with disappointing trading news. Sepura advised in early April that “two significant opportunities” had not been inked in time for the period ending March 2016, providing a hefty knock to full-year earnings.

 The business confirmed this news late last month by advising that full-year adjusted EBITDA will clock in at €17m. To rub salt in the wounds, Sepura went on to announce that it needs to enter talks with its lenders, and raise £50m via a share issuance, to mitigate the delayed contracts.   

But despite Sepura’s near-term financial travails, I believe soaring demand for its products should make growth seekers sit up and take notice. Indeed, the firm is expected to print record revenues of €191m for 2016, up 45% on an annualised basis.

Given the strength of its core markets, the City expects the manufacturer to recover from a predicted 67% earnings decline for fiscal 2016 with a 225% bounce in the current period.

Consequently Sepura changes hands on an ultra-low P/E rating of 6.8 times for 2017. Given the long-term potential created by its high-tech products, I reckon the business could prove a wise purchase for long-term investors at current prices.

Diggers dented

I am not so optimistic concerning the earnings prospects of commodities plays Glencore (LSE: GLEN) and Antofagasta (LSE: ANTO), however. Both companies have endured double-digit percentage share price declines since the start of April thanks to washy supply and demand indicators. 

And latest trade data from China is unlikely to soothe investor concerns for the weeks and months ahead. Copper play Antofagasta, for example, will have been perturbed by news that Chinese red metal imports slumped 21% month-on-month in April.

All in all, demand signals from the Asian giant remains mixed — indeed, Chinese demand for many resources hit record levels just in March. This has left the investment community perplexed as to whether underlying materials demand remains strong, or whether Beijing is simply embarking on significant inventory building.

And while the People’s Bank of China remains locked on a course of monetary easing to boost the economy, the jury is out on whether these measures are likely to stimulate metals and energy consumption to the extent needed to suck up abundant market supplies.

But one thing is for sure — with Glencore and Antofagasta dealing on massive P/E ratings of 35.9 times and 58.1 times for 2016, I believe both stocks are in peril of even further share price weakness should market data keep on disappointing.

The post Can Q2 losers Glencore plc (-17%), Antofagasta plc (-12%) and Sepura plc (-66%) finish with a flourish? 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. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Mothercare (LSE: MTC) is one such out-of-favour stock that’s been sold down by investors this year after publishing yet another set of dismal trading figures. 

Year-to-date the company’s shares have lost around 50% of their value, taking declines over the past 11 months to around 60%, the kind of fall that would scare off even the most experienced investors. 

Still, these declines have left Mothercare’s shares trading at a forward P/E of 10.7 for the year ending 31 March 2017. If the company meets consensus growth forecasts, then earnings per share are set to grow by another 28% in the year to the end of March 2018, implying that the group is trading at a 2018 earnings multiple of 7.4. 

Nonetheless, Mothercare’s success is dependent on the company’s ability to return to growth overseas. UK sales are still growing, and this part of the business should support the rest of the group while it pulls through these turbulent times. UK sales rose 2.1% during the first quarter, marking Mothercare’s eighth consecutive quarter of like-for-like UK sales growth. And online UK sales grew by 5.6% so Mothercare looks unlikely to fold in the near future.

Management mistakes 

Shares in Sepura (LSE: SEPU) have lost around 66% of their value since the end of March after the once-high-flying critical communications services company announced that it was in talks with its lenders.

According to the company, order delays have hurt its working capital position putting short-term constraints on cash and forcing the group to consider raising fresh equity. After acquiring the Teltronic business last year, Sepura has been left with net debt of €119m and slower-than-expected receipts from customers have also put the company in a precarious position. As a result, Sepura is subject to those short-term cash constraints that it expects will require an extension to its banking facilities and a waiver of a possible covenant breach at the end of June. Talks are under way with major shareholders to raise around £50m through an equity fundraising.

This whole scenario is quite a clear warning to investors that they should stay away from Sepura. Management has shown that it’s unable to run the business effectively, and it has fallen on the shoulders of shareholders to foot the bill for the company’s mistakes. Sepura might be able to buy itself some time with a placing, but poor management means that it might be wise to avoid the company.

Running out of cash 

Similarly, Gulf Keystone (LSE: GKP) has proven itself to be a poor steward of shareholder capital over the years and now shareholders face significant dilution if the company is forced to restructure its debts. Unless there’s a sudden dramatic increase in the price of oil, then Gulf Keystone is likely to run out of cash and headroom on its borrowing facilities this year. Once again, it will fall to shareholders to foot the bill for the company’s excess. Another firm it might be wise to avoid for the time being.

The post Is there any equity value left in Mothercare plc, Sepura plc and Gulf Keystone Petroleum Limited 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?

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.

Software star

Shares in IT giant Fidessa Group (LSE: FDSA) were basically unchanged in Thursday trade, despite the release of a positive trading update.

Although trading conditions remain difficult for the software play’s client base, Fidessa advised that

“the themes Fidessa saw during 2015 are continuing, with more opportunities opening up as customers position their businesses for the future.”

Indeed, Fidessa said that it expects the investments made during the recent downturn to leave it well positioned for the near-term and beyond.

The City certainly believes that Fidessa is a company on the rise, and expects earnings to rise 4% in 2016 and 5% in 2017. While subsequent P/E ratings may be a tad heady on paper, a dividend yield of 3.5% through to the end of next year helps to mitigate these elevated multiples. I reckon Fidessa could prove a canny growth pick as market conditions steadily improve.

Over and out?

Things are not quite as bubbly over at digital radio manufacturer Sepura (LSE: SEPU), however. The stock continues to oscillate wildly, and although shares are up 18% in Thursday business, Sepura’s value is still down almost three-quarters since the start of the month.

Sepura announced at the beginning of April that “two significant opportunities” had not been signed-off in time for the close of the year. As a result, the radio specialists expected EBITDA for the period to March 2016 to register between €16m and €20m.

This estimate was confirmed today, with full-year earnings chalked up at €17m. However, the failure of Sepura to close out the orders has placed huge stress on the balance sheet. The company now plans to raise £50m via a rights issue, and has commenced talks with its creditors over possible covenant breaches.

Still, today’s release further illustrated the breakneck demand for Sepura’s gizmos, with organic revenues rising by 10% last year to €145m.

The City consequently expects earnings to surge 96% and 11% in 2017 and 2018 respectively, resulting in P/E ratios of 9.8 times and 9.1 times. And these ultra-low readings suggests that the near-term risks facing Sepura are currently baked into the share price.

WANdisco dances higher

Software play WANdisco (LSE: WAND) has fared much better in Thursday’s session, with an 18% surge taking the stock to levels not seen since last July.

The market became giddy following news that the firm had inked a non-exclusive OEM sales agreement with IBM, a move that will see WANdisco’s Fusion data replication product installed as a standard component for the US giant’s storage and analytics software.

WANdisco advised that

“whilst we expect that revenues will begin to flow during the second half of this year, we will provide further guidance once product launches have taken place and initial customer uptake has been evaluated.”

News of monster deals like these should, of course, make investors sit up. But the full financial impact of this latest accord is yet to be evaluated. And in the meantime, WANdisco is likely to remain at the mercy of variability in new contract bookings.

The City expects the tech play to remain in the red for the foreseeable future, with losses of 67 US cents and 55 cents expected for 2016 and 2017 respectively. I reckon investors should give WANdisco a miss until it can show signs of sustained revenues growth.

The post Should you buy WANdisco plc, Fidessa Group plc & Sepura plc & 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?

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

As such, Sepura expects to report EBITDA of €17m, a flat performance versus the prior year. However, the delays in purchase orders, for which inventory has already been procured, as well as slower than expected receipts from customers who have previously paid to terms, means that Sepura’s net debt is expected to be relatively high at €119m.

Sepura said in its update that it’s subject to short-term cash constraints that the company expects will require an extension of its banking facilities and a waiver of a possible covenant breach at 30 June. Therefore, it’s in discussions with its lenders as well as with major shareholders regarding an equity capital raising of up to £50m to reduce leverage and provide the working capital required to support the development of the business.

Clearly, today’s update is hugely disappointing and while the shares have already fallen heavily, there could be further to go in the short run as investors digest the news. This means that while Sepura has maintained its full-year guidance, it may be prudent to await further news on its capital position before buying.

Under pressure

Also falling heavily today are shares in Pressure Technologies (LSE: PRES). They’re down by 24% following the release of a profit warning after a disappointing six months to 2 April.

As Pressure Technologies has highlighted in recent months, it faces difficult trading conditions in the oil and gas sector, with them continuing throughout the period. And with the business being highly dependent on that industry, there has been a substantial decline in orders during the second quarter, which has been complicated by unpredictable demand and very short lead times.

Looking ahead, Pressure Technologies expects a slow recovery in the oil and gas market, with high levels of inventory pushing back a pick-up in the sector. And with capital expenditure subject to further cuts, it looks unlikely that investment will pick up until 2017 at the earliest.

Clearly, today’s profit warning is hard news for investors to digest and while Pressure Technologies is making progress in terms of reducing costs via productivity improvements and headcount reductions, its outlook remains highly uncertain. Therefore, while its long-term prospects may be bright, things could get worse before they get better and it may be prudent to await a wider margin of safety or else evidence of improved trading conditions before piling-in.

The post Sepura plc and Pressure Technologies plc crash 20% on 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.