Today I want to look at a FTSE 100 stock that’s offering its highest dividend yield for at least five years. I’m also going to consider a smaller stock in the same sector with the potential to deliver attractive capital gains.

A change could be good

The departure of former WPP (LSE: WPP) chief executive Sir Martin Sorrell in April shocked markets and accelerated the slump in the advertising giant’s share price. But while key man risk can be a real concern for investors, in this case I think Sir Martin’s departure could be good news.

From what I’ve read about WPP, it seems likely to me that the large and fragmented conglomerate created by Sir Martin contains areas of overlap and inefficiency. Reducing these — perhaps through selective disposals — could help to create a more mature and durable long-term business.

Regardless of this, trading appears to be fairly stable at the moment. Revenue rose by 2.7% to $6.6bn during the first four months of the year, excluding exchange rate headwinds. And although earnings forecasts have fallen by about 12% over the last year, the decline now seems to have slowed. City projections for earnings of around 117p per share in 2018 have been largely unchanged for the last couple of months.

Real value for investors?

This is a large, complex business, made up of many individual advertising, marketing and PR firms. But I can see value emerging from this conglomerate. One of my preferred measures of valuation is earnings yield. This compares operating profit with the enterprise value (market cap + net debt) of a business.

Earnings yield gives us an idea of the profits available to the owner of a company before tax and interest payments. WPP’s earnings yield is now 9.5%, which I view as attractively high.

The shares also look cheap on more conventional metrics, with a forecast P/E of 10.5 and a prospective yield of 4.8%. In my view, WPP makes sense as a long-term income buy.

What about growth?

Investors looking for a genuine growth stock might want to look elsewhere. One possibility in the marketing sector is St Ives (LSE: SIV). This £150m marketing services company said today that profits for the year ended 28 July are “expected to be at the upper end of market expectations”.

This improvement is largely down to the growth in digital marketing, which contributed to like-for-like revenue growth of 12%, excluding currency headwinds.

My only real concern is that like-for-like revenue growth slowed to just 1% during the second half of the year. The company says this is down to a strong comparative period last year, plus slower trading in the healthcare sector and the group’s data business.

Looking ahead

Customer sentiment is now said to be improving. Earnings are expected to rise by about 7% in 2018/19. This puts St Ives stock on a forecast P/E of 9, with a potential dividend yield of 2.1%.

A new chief executive has just joined the firm, so we could see a renewed focus on growth. For investors who understand this sector, I think this small-cap could be worth a closer look.

The post Why this FTSE 100 5% yielder could help you to quit your job appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the 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.

Specifically, according to today’s press release, management believes “performance is expected to be at the upper end of market expectations” thanks to “strong growth in customer numbers“, particularly in the pre-Christmas trading period. 

Changes yielding results 

Today’s update marks an impressive turnaround for Findel. Only this time last year, the company issued its second profit warning in two years and appointed a new chief executive, Phil Maudsley. 

It seems Maudsley is doing an excellent job. Even though trading was slower than expected during the fourth quarter of last year, due partly to “changes in marketing activity“, the group benefited from stronger collections and recoveries from its credit receivables, which helped improve operating profit by 20% for the year as a whole. 

Meanwhile, sales declines at the Findel Education business have moderated. In the second half of last year, sales fell 2%, following a drop of 10% in the first half. Focus on the group’s digital strategy now means around 50% of sales are coming through online channels “up sharply from c.18% at the start of the year.” 

And finally, the group ended the year with net debt of £74m, down by £7m from the previous year. 

Time to buy

So, what does the above mean for shareholders? Well, after the problems of the last few years, it looks as if Findel is now back on the track and if the firm can stay on its current trajectory, the shares could be too cheap to ignore at current levels. 

Indeed, at the time of writing, the stock is trading at a forward P/E of 10.7 and current City consensus is projecting earnings growth of 13% for the fiscal year ending March 2018. Based on today’s release, it seems as if the company is set to beat this average estimate. Analysts are also forecasting earnings growth of 16% for 2019. 

In my opinion, this rate of growth deserves a mid-teens earnings multiple.

Too cheap to ignore? 

Another turnaround stock that appears to me to be undervalued is media group ST Ives (LSE: SIV). 

For the past two years, the business has reported losses as its turnaround plan, to transform from a struggling publisher into a leading media group, has struggled to gain traction. However, it now looks as if management’s efforts are beginning to pay off. 

At the beginning of March, the company reported an adjusted pre-tax profit of £12.7m, up 34% year-on-year thanks to lower operating costs and a 7% increase in revenues. 

City analysts and management are confident that this trend will continue. Earnings per share growth of 22% is predicted for fiscal 2018, the first significant growth in three years. Based on these targets, the shares are trading at a forward P/E of 6.4. 

Nonetheless, while ST Ives does look cheap, it’s not without problems. The balance sheet is particularly weak. Intangibles account for around 50% of total assets. Stripping these assets out gives a negative shareholder equity value of -£50m, which leads me to conclude that the shares do deserve a low valuation, although a forward P/E of 6.4 seems too harsh. A multiple of 10 times earnings might be more appropriate, in my opinion. 

The post 2 value-growth stocks that could be too cheap to ignore appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

Explosive movements like that don’t arrive every day in the world of small-cap investing, but if we are on the right side of them when they do, such outcomes can really boost a portfolio’s value – as long as a share-price reversal doesn’t come along to take some or all of the gains away again.

What about the downside?

UKOG is a popular stock, and the movement was driven by speculation based on news of the firm’s potentially big oil discoveries beneath the Weald Basin in Britain. Today’s market capitalisation of a little over £259m appears to factor in much future success with regard to developing the oil field to production.

However, I think a lot of potential exists for the market cap to reduce, as the reality of getting oil from the ground sinks in, or if the find turns out to be smaller than the company believes, perhaps because of complicated geology presenting pockets of oil that can lead to bad assumptions about the quantity of oil discovered in the entire field.

If I was sitting on big gains from an investment in UKOG, I’d nail down profits by taking at least some money off the table now.

Legacy challenges

Meanwhile, St Ives (LSE: SIV) has become a value proposition with the potential to turn around. There is a big pension liability, but the firm is certainly no riskier than UKOG right now, in my view, and I find the stock attractive.

The marketing services firm posted ugly full-year results today, but I think it’s worth looking deeper. Although revenue increased by 7% compared to a year ago, adjusted basic earnings per share declined 24% and the directors sliced 75% off the full-year dividend.

Problems exist in what the firm calls its “legacy” Marketing Activation and Books segments. Although the firm enjoys strong market positions in those areas, competition is relentless and margins are under pressure. The directors reckon they are acting to reduce the costs in both divisions to “reflect the new market realities.”

Hidden growth

So far, so challenging, but St Ives also reports “encouraging” underlying progress with its core Strategic Marketing segment, which the directors say “lies at the centre of our long-term growth strategy.”  I reckon situations like this can work out well for investors as a new, vibrant business emerges from the wreckage of the old. During the year to July 2017, the Strategic Marketing operation delivered 42% of the firm’s overall revenues and 75% of adjusted operating profit, so it’s a significant line of business. Revenue in the division grew 13% during the year, 5% of which mushroomed up organically, suggesting market-share gains from a popular offering.

On top of ‘hidden’ growth, St Ives is making progress reducing its borrowings and shaved a third off its debt burden during the year, representing another important indicator moving in the right direction. The share price is responding to the company’s turnaround efforts, up just over 100% since May. At today’s share price near 78.5p, the forward price-to-earnings ratio runs a little over 6.5 for the year to July 2018, and I think the trend has further to run.

The post Why I’d dump UK Oil & Gas Investments plc for this small-cap appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the 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.

According to the figures for the period, the company’s adjusted earnings per share rose 17% to 6.1p and adjusted profit before tax was up 15% to £16.7m. Free cash flow grew 7% year-on-year to £12.9m, and net debt fell £9m to £30m. Off the back of these results, management has hiked the company’s full-year dividend by 10% to 2.42p. 

Unfortunately, the group’s reported pre-tax profit for the period fell by a third from £17.3m to £11.6m, due to a significant one-off £6.7m benefit last year. Still, it’s the company’s free cash flow that’s really attractive here. Considering its market capitalisation is £110m, a free cash flow of £12.9m per annum implies a free cash flow yield of 11.7%. So compared to current interest rates, the shares look severely undervalued. 

Undervalued 

Shares in Communisis look undervalued on other metrics as well. For example, at the time of writing the shares are trading at a historic P/E of 8.3 based on today’s adjusted earnings figures. For the past four years, the shares have traded at an average P/E of 10 so a return to this multiple would see the shares hit 61p. 

That’s not all. Over the next two years, analysts expect earnings per share to hit 6.5p, indicating a potential price target of 65p. Over this period, 5p per share of dividends are also pencilled-in, suggesting a potential total return of 70p — that’s a potential upside of 40% from current levels. 

Different fortunes 

Its fortunes could not be more different to those of the company’s peer, St Ives (LSE: SIV). 

St Ives has lurched from one disaster to another during the past 12 months, and now the business looks to be on life support. 

Even though the company’s management issued an upbeat outlook alongside yesterday’s results release, there was no hiding from the fact that the firm’s loss ballooned to £26.8m, widening substantially from £2.8m at the same time last year. And while net debt declined by £10.4m, the £70m debt pile is still more than twice the size of the firm’s tangible asset base. To help keep debt under control, management has slashed St Ives’ interim dividend by 72%. 

Too cheap to pass up? 

City analysts expected St Ives’ pain to continue. Earnings per share are projected to decline by 23% for the year ending 31 July 2017 before falling a further 9% to 12.2p for the year after. 

However, it could be argued that the low valuation more than makes up for the company’s declining growth. The shares currently trade at a forward P/E of 3.8, which could be too cheap for some investors to pass up. 

That being said, when compared to its peer, St Ives certainly looks as if it should be avoided. Communisis is just the all-round better option. 

The post This super growth stock looks undervalued by 40% appeared first on The Twelfth Magpie.

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

Technology services

Servelec (LSE: SERV) provides software, hardware and related services across a wide range of industrial sectors, including healthcare, education, oil and gas, utilities, broadcast, and rail.

Things were going swimmingly until 15 June last year, when the company issued a profit warning and told us it was going to fall short of its 2016 expectations. The shares slumped by 32% to 237p on the day, although they have since recovered, and currently stand at 280p, on the day the preliminary results were released.

The results were in line with revised expectations, and showed a 29% fall in pre-tax profit from continuing operations, leading to an 11% fall in adjusted EPS. But the full-year dividend was lifted by 10% to 5.65p per share, and signs of recovery were starting to show. Highlights include a strengthening order book, the company’s automation business recovering “on the back of significant project wins“, and several acquisitions being made.

Chairman Richard Last said that the “situation around procurement delays, noted in our trading update in June 2016, has improved and we are optimistic that Servelec will return to growth in 2017“, and the City’s analysts appear supportive with a 20% rise in EPS penciled in for this year followed by a further 9% in 2018.

The dividend is expected to keep on rising ahead of inflation, and though it’s set to yield only a little over 2%, it should be very well covered by forecast earnings.

It’s often suggested that profit warnings come in threes, but I don’t see that here and I think Servelec is on the happy road to recovery.

Treble whammy

The first warning from St Ives (LSE: SIV) came in April 2016, telling us that “the outlook for the final quarter, and for the following financial year, has deteriorated“. Then the printing and marketing services firm added in January that its pursuit of new business was “taking longer than previously anticipated” and that we will not see “full benefit of the new work we have won until the final quarter of the current financial year“.

If that wasn’t enough, in February we heard that a contract with HarperCollins will not be renewed when it ends in June. That’s three bits of bad news, and three hits to the shares, which are now trading at 52.5p — but at least the firm’s first-half results haven’t done any further damage.

In fact, I think the worst is probably over and I see St Ives’ recovery efforts as starting to bear fruit. The firm stressed the importance of its Strategic Marketing business, with chief executive Matt Armitage speaking of “a number of exciting new projects being won from existing and new clients” and telling us he is confident of its long-term growth.

Mr Armitage added that the firm is considering options for its Marketing Activation and its Books segments, so we could see something drastic there in the coming months and that might cause a little more share price volatility.

But with forecasts putting the shares on a forward P/E of only 3.9 for this year and 4.3 next, I see more pessimism built into the share price than is deserved. I see a risky but potentially profitable recovery investment.

The post 2 small-cap stocks headed for profitable recovery 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.

It warned that its results for the full year are set to miss prior expectations due to ongoing weakness in its Marketing Activation unit. Expectations have already been lowered once in the past 12 months after the company warned on profits at the beginning of 2016. Also, some project cancellations and deferrals in the group Strategic Marketing arm will weigh on full-year results.

In Strategic Marketing, revenue for the first half will rise around 9% year-on-year and revenue at the group’s legacy book business will rise around 11% year-on-year, driven by a “generally positive” pre-Christmas trading period. Still, despite these positive figures, management expects the ongoing problems in Marketing Activation and Strategic Marketing will mean St Ives’s full-year results will be “materially” below its previous expectations. 

Second warning, more cuts

It’s the second time in 12 months that ST Ives has issued such a disastrous profit warning and just as before, management is promising more cost-cutting and diversification to help stabilise the business.

However, it seems that investors may be running out of patience with the group. The shares have lost 70% of their value over the past 10 months, and over the last 10 years, they’ve returned -74%. 

Before today’s update, City analysts had expected the company to report a pre-tax profit of £32m for the year ending 31 July 2017 and earnings per share of 17.7p, giving a forward P/E of 7.1 at current prices. While this valuation may seem cheap, investors need to keep in mind ST Ives’ ability to consistently disappoint.

A better pick? 

As ST Ives plunges, shares in sector peer Communisis (LSE: CMS) are pushing higher after the company published a broadly positive trading update ahead of its annual results on March 9. 

The company reported that trading across the group was in line with expectations with revenue at its Customer Experience arm boosted by a contract won with HM Revenue & Customs. What’s more, the group’s Brand Deployment benefitted from a deal won with Sony Europe.

Communisis has been a relative success story over the past five years. Indeed, since the beginning of 2012, shares in the company have risen 73% and further gains could be on the cards. 

City analysts have pencilled-in earnings per share growth of 14% for the year ending 31 December 2016, and further earnings growth of 6% and 4% is expected for 2017 and 2018 respectively. Despite these attractive growth rates, shares in the media group are trading at a forward P/E of 6.8, and recent declines have pushed the shares’ yield up to 5.9%. The payout is covered 2.4 times by earnings per share. 

Unlike ST Ives, which appears to be cheap for a reason, shares in Communisis seem to be undervalued both in comparison to historic earnings growth and future earnings potential.

The post Why have ST Ives plc shares crashed by a third today? appeared first on The Twelfth Magpie.

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

However, in the cases of printer St Ives Group (LSE: SIV) and distributor Connect Group (LSE: CNCT), City analysts watching the firms collectively rate the stocks as ‘strong buys’, so it’s worth digging a bit deeper. 

Robust dividend records

I can’t fault either firm on its dividend record. Over the last five years, St Ives has raised its dividend by 49% and Connect by 32%. Forward estimates are for Connect to increase its payout by 2.4% for 2017 and 2.8% in 2018. Analysts expect St Ives to hold the dividend flat for the next two years.

Forward earnings will likely cover Connect’s 2017 dividend just over twice and the St Ives dividend around 2.3 times. So no concerns about support from profits. But firms pay dividends with cold, hard cash and not with profits that can disappear at the stroke of an accountant’s pen. 

On that front the news is good. Connect has a record of generally rising operating cash flow per share, which supports earnings per share well. The St Ives cash flow is a little more patchy but averages out to decent support for earnings.

Are these stocks cheap?

At first glance, both firm’s share prices put a low valuation on the underlying businesses. There’s that tempting 6%-plus yield in each case, but also a low-looking forward price-to-earnings (P/E) rating. At a share price of 159p, Connect’s forward P/E ratio for 2017 runs around eight and at 129p, St Ives’ is just above seven.

However, I’m not getting too excited about that because both firms have a high level of cyclicality to their operations and deserve their low ratings, in my opinion. The market as a whole will likely be trying to anticipate the next cyclical collapse in earnings for these firms. So I’m not expecting a valuation re-rating with these two. 

Borrowings seem to be manageable in each case with Connect’s net debt sitting almost three times the level of operating profit and that of St Ives around 2.5 times operating profit. However, I would be happier if debt levels were lower at this mature stage in the macroeconomic cycle. Right now, when business is good, I reckon cyclical firms should be well on the way to paying down all of their debt so that they’re financially strong in order to survive the next downturn.

Outlooks

Back in October, Connect’s chief executive said that 2016 had been a year of both strategic and operational progress and he had confidence in the firm’s ability to succeed in the click-and-collect market in 2017 onwards.

Meanwhile, the St Ives chief executive said the firm is alert to possible deterioration in business confidence as an outcome of the Brexit process. However, assuming no change in current market conditions St Ives is well positioned to make further progress with its growth plans.

Overall, I reckon these two firms are interesting dividend payers, but their cyclical operations mean I would keep a close eye on them for signs of a deterioration in trading if they were in my portfolio.

The post 2 stocks yielding 6% City analysts rate as ‘strong buys’ appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

The company reported today that for the 52 weeks ended 29 June revenue had increased by 7% to £368m, while adjusted profit before tax fell 8% to £30.4m and adjusted basic earnings per share declined 13% to 17.6p. On a statutory basis, the company reported a loss for the period of £5.7m and a loss per share of 5.9p.

For a company that saw 40% of its market value wiped out in a single day earlier this year after issuing a profit warning, these results from St Ives are encouraging. What’s more, it would appear that the company’s management is more optimistic about the future than it was just a few months ago. 

Indeed, back in April management warned that group trading was being hammered by ”global economic uncertainty“ resulting in “greater caution in the allocation of marketing budgets“ and “significant projects being deferred or cancelled.“ However, alongside today’s results Matt Armitage, Chief Executive declares that St Ives is “making encouraging progress in bringing in new projects from both existing and new clients” and the group is “well positioned to make further progress this year.“

All change 

It would appear that a lot has changed at St Ives over the past few months and after the shock earlier this year, the company is now back on track. Still, personally, I would want to see more from the group before considering it as a potential investment. 

St Ives has a history of over-promising and under-delivering. Before the profit warning in April, City analysts were forecasting a pre-tax profit of £37.4m for the year ending 31 July, based on management’s guidance. Last year the company reported a pre-tax profit of £8.7m and over the five years between 2011 and 2015 the group only reported unadjusted cumulative pre-tax profits of £49.4m.

St Ives is trying to diversify away from its legacy printing business towards media. In many ways the group is trying to become a mini WPP (LSE: WPP), with management using bolt-on acquisitions to expand into new markets. But unlike WPP, St Ives is struggling to build any kind of growth momentum. 

Under the stewardship of Sir Martin Sorrell WPP’s pre-tax profit has expanded by 50% since 2011,as the company has successfully integrated numerous bolt-on acquisitions designed to boost growth. As a result, investors are willing to pay a premium to buy WPP’s shares which currently trade at a forward P/E of 16.4. City analysts have pencilled in earnings per share growth of 16% for this year. Meanwhile, shares in St Ives currently trade at a lowly P/E of 7.7 reflecting market sentiment towards the company.

So, is St Ives a buy after today’s results? It doesn’t look like it. The group is a serial disappointer, and when you compare the group to other sector peers such as WPP, it’s clear why the market is placing such a low valuation on St Ives’s shares.

The post Is St Ives plc a buy after today’s surprisingly upbeat results? appeared first on The Twelfth Magpie.

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

While the term ‘fallen angel’ originates from the credit markets, it can also be used to describe companies that were once market darlings but have since, for whatever reason, fallen from grace.

OneSavings Bank (LSE: OSB) is one such company. Until the end of June, OneSavings was championed as one of the challenger banks that would shake up the UK’s banking industry and since the company’s IPO at the beginning of 2014, shares in the bank returned more than 100% for investors. Over the same period, pre-tax profits tripled. 

However, since Brexit investors have turned their backs on the challenger bank due to concerns about the UK’s economic outlook.

Since Brexit, shares in OneSavings are down by around 41%, a decline that seems to indicate investors believe the bank’s profits will be cut in half over the next six months.

The City doesn’t hold the same view. City analysts expect the group’s earnings per share to grow by 8% this year and a further 3% for 2017. Based on these forecasts shares in the bank are trading at a forward P/E of 5.4 and a PEG ratio of 0.7. The shares also offer a dividend yield of 4.6%.

Over-reaction to a profit warning?

Publisher ST Ives (LSE: SIV) is another fallen angel that has seen its share price cut in half over the past six months. St Ives’ poor share price performance followed a profit warning from the company.

This warning came just as the group’s profits were expected to stabilise this year after nearly a decade of restructuring. Up until the warning City analysts were expecting the company to report a pre-tax profit of £37.4m for the year ending 31 July. Between 2011 and 2015 the group only reported unadjusted cumulative pre-tax profits of £49.4m. 

Nonetheless, current City figures suggest St Ives is set to report earnings per share of 17.2p for the year to 31 July 2016, indicating that the company’s shares currently trade at a forward P/E of 6.4, a rock bottom valuation that seems to discount any further disappointments.

A play on oil prices 

Amec Foster Wheeler (LSE: AMFW) is a casualty of the oil price crash. Shares in the company are down by 45% over the past 12 months. After these declines Amec’s shares are trading at a forward P/E of 8.1, City analysts expect the company’s earnings per share to fall by 19% this year before stabilising next year. Amec’s shares support a dividend yield of 5%, and the company has a relatively strong balance sheet. 

If you’re looking for a way to play a recovery in oil prices Amec could be a great pick. The company is still winning contracts in the oil sector, and two major long-term contracts in the North Sea were awarded to the group last month. Amec’s order backlog was £6.4bn at the end of March, giving just over a year’s worth of work at current run rates. Management expects revenue to register only a ‘slight’ decline for 2016 and is planning to reduce debt to £600m from the current level of £1.2bn by the end of 2017 through improved cash flow and select asset disposals. 

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A financial firecracker

Insurance goliath Legal & General’s (LSE: LGEN) share price suffered a mild hiccup last week, a 9% decline taking it to levels not seen since late February.

I see this weakness as a fresh buying opportunity, however, and expect the firm to regain its upward momentum sooner rather than later.

The company’s tearaway success around the globe continues to deliver terrific returns, and total assets under management leapt 8% in 2015 to £746.1bn. And I believe new business generation should keep on surging as Legal & General expands its presence in the US and Asia in particular.

Indeed, the City expects Legal & General to enjoy earnings rises of 8% and 7% in 2016 and 2017, respectively, figures that make the insurer appear chronically undervalued — the company carries P/E ratings of just 10.9 times and 10.1 times for these years. I reckon the company is a savvy bargain buy at current prices.

Defence play dives

Defence giant Cobham (LSE: COB) sent shockwaves across markets last week after releasing hugely-disappointing trading numbers.

The engineering play shed a quarter of its share value after announcing that a variety of operational problems forced first-quarter profit to slump to £15m from £50m in the same 2015 period. As a consequence Cobham now expects full-year trading profit to clock in £15m lower than the previous estimate of £315m.

As if this wasn’t enough, Cobham advised that it would need to raise £500m via an emergency rights issue. The cost of borrowings to fund its Aeroflex acquisition in 2014 hadn’t fallen as quickly as hoped, it said, putting it in danger of breaching loan covenants.

The City expects Cobham to endure a 12% earnings slide in 2016, resulting in an ultra-low P/E rating of 8.7 times. Still, I reckon the scale of problems across its core markets and its fragile balance sheet make the business a risk too far even at current prices.

Profits sinking

But Cobham wasn’t the only Footsie firm to collapse last week, the engineer’s slide was put in the shade by St Ives (LSE: SIV) whose share price more than halved from Monday to Friday.

The marketing services play tanked after advising that “underlying profit before tax for the current financial year is likely to be materially below management’s current expectations” thanks to deteriorating conditions in the final quarter. Indeed, St Ives noted that global economic uncertainty “has led to the cancellation and deferral of a number of significant projects.”

Rubbing salt in the wounds, St Ives added that “while it is too early to judge with accuracy at this stage, it is expected that these factors will impact the outturn for the next financial year also.”

The number crunchers expect St Ives to endure a 5% earnings slip in the year to July 2016, resulting in a P/E rating of just 5.8 times. However, I reckon value seekers should steer well clear, as escalating jitters over the health of the global economy could prompt further problems over at St Ives.

The post Should you buy last week’s losers Legal & General Group plc (-9%), Cobham plc (-28%) and St Ives plc (-50%)? 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.