Including dividends, the stock’s performance has been slightly better. On a total return basis, the shares have lost 26% over the past 12 months, underperforming FTSE 100 (including dividends) by around 30% over the same timeframe.

The question is, do I think investors should make the most of these declines and buy into easyJet today, or is there a chance this could be just the beginning of a much bigger slump?

Buy, sell or hold?

The way I see it, there are several reasons why its shares have lagged the FTSE 100 over the past 12 months. 

Firstly, there’s Brexit. Investors and analysts alike are worried about the impact this may have on airlines like easyJet as they struggle to grapple with increased regulation and border controls that will be introduced if the UK leaves the European Union without a deal at the end of March.

Secondly, easyJet is facing rising competition and rising costs, which is hitting the firm’s bottom line. Indeed, companies across Europe are trying to copy the group’s low-cost operating model, and this is having the impact of driving down ticket prices, but costs remain fixed.

These factors are expected to weigh on earnings in 2019 with analysts anticipating a decline of 11%. A recovery is expected in 2020, although considering how quickly the environment can change in the airline industry, I’m not willing to give the company the benefit of the doubt here.

Considering all of the above as uncertainty prevails, I think shares in easyJet deserve their current multiple of just 10.2 times forward earnings, so I’m not a buyer at the moment. However, I’m not a seller either. If you already own the shares, I think it’s worth holding on as the firm’s dividend yield of 5% is highly attractive.

Growth opportunity

Stobart Group (LSE: STOB) sits at the other end of the airline industry spectrum. I’m much more positive on the outlook for this business because, as the number of planes flying around the world is expanding rapidly, the number of airports remains relatively constant. 

As the owner of Southend Airport, Stobart is looking to capitalise on the booming demand for air travel by expanding. It wants to boost capacity to 10m passengers a year in the near term — up from 1.5m last year.

To fund this expansion, the company, which recently acquired regional carrier Flybe with Virgin Atlantic, has today announced it’s cutting its dividend from 15p last year to 6p. While disappointing, I think it’s the right decision as it will free up cash to invest for the long term.

It’s a bit difficult to place a value on Stobart at the moment because most of its value is tied up in assets. I think this is more of a blue sky growth opportunity. Over the next few years, as the company dramatically increases the number of passengers flying from Southend, earnings could surge. 

Analysts are already expecting earnings growth of 90% for fiscal 2020 as Ryanair starts flying from Southend in a few months. Over the long term, this could be a great way to play the growth of the global aviation industry.

The post The easyJet share price has slumped 30%. Buy, sell or hold? 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.

The two bidders have formed a company called Connect Airways which will pay 1p per share for Flybe, a shocking result for investors as only yesterday the shares were changing hands for 16.4p. Flybe has accepted the offer and, once complete, its planes will be rebranded with the Virgin livery.

Distressed assets 

It is easy to see why bidders have decided to swoop on Flybe. The business operates the UK’s largest regional airline, managing 55% of UK domestic flights outside of London, and owns some valuable landing slots at key airports.

Together, Stobart and Virgin should be able to give the firm a new lease of life. Stobart Air already owns Southend Airport and has an extensive aviation division. Meanwhile, Virgin has global connections and code-sharing agreements with other large, international carriers.

As well as forking out £2.2m to buy Flybe’s equity, the partners are also putting £20m into the business to keep the lights on, and a further £80m of investment is planned in the new enterprise.

Income boost 

Even though the deal still has to be voted through by shareholders, I think the decision to buy Flybe with Virgin could wake up Stobart’s sleepy stock. 

Flybe struggled because it could never really achieve scale. With Virgin on board, the new Connect Airways will have one of the most successful airlines in the world in its corner, which should help the new business take off. 

What’s more, as Stobart already has an aviation division, there should be some synergies to be had here. I’m excited to see what the rest of the year holds for the company as it completes this transformative deal.

Market opportunity 

Another stock that I like the look of for 2019 is National Express (LSE: NEX). As a frequent coach user, I can say with relative confidence that this is a well-run business, especially when compared to the rail network. National Express coaches are not only significantly cheaper than trains, but they also usually get you there on time and don’t suddenly stop running if it gets too cold (or leaves fall on the road). 

As the price of rail travel continues to rise, I can see more and more customers opting for this cheaper option (70% cheaper in some cases). Indeed, more customers are already turning to the company, helping the business to achieve an “outstanding” trading performance over the summer in the UK, according to its latest trading update. Between the 1st of July and the end of September, passenger numbers in the UK expanded by 6% and revenue grew 10.1%. August bank holiday Monday’s revenue was up 13% alone.

This isn’t a new trend. The company has hardly struggled to grow over the past six years. Net profit has increased at a compound annual rate of 17% per annum since 2012, and City analysts have pencilled in earnings per share (EPS) growth of 16% for 2018, followed by an increase of 6% for 2019. On top of this growth, the stock supports a dividend yield of 3.9%.

All in all, I don’t think National Express’ growth is going to slow any time soon, and this could fuel impressive share price gains during 2019.

The post Forget the FTSE 100! I’m considering these mid-caps for 2019 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.

Even in the FTSE 250 there are plenty of stocks that could end up costing you money. Here are two such businesses I’m avoiding at all costs. 

Boardroom battles

Boardroom bust-ups rarely end well for investors because management infighting usually leaves the company floating without direction. 

It’s for this reason I’m avoiding the ower of Southend airport, Stobart Group (LSE: STOB). 

Today Stobart has announced the sacking of former CEO Andrew Tinkler and accused him of “subverting the company in his own interests” while demonstrating a “flagrant disregard for fiduciary duties“. Tinkler, who retired as CEO last year but went on to serve on the board, has been trying to oust chairman Iain Ferguson and replace him with billionaire Philip Day. Neil Woodford, who owns nearly a fifth Stobart, had thrown his support behind Tinkler. Together, Woodford and Tinkler own 27% of Stobart. 

Stobart is accusing Tinkler of abusing his power, running up excessive expenses and trying to enrich himself at the expense of the company. Meanwhile, Tinkler is now accusing his former employer of “attempts to defame him.” 

Both sides have hired lawyers to take the fight to the next stage. Stobart has filed a £4m lawsuit against Tinkler over historical-related party transactions, while Tinkler has issued proceedings claiming defamation. 

As these two sides fight it out, it’s clear there’s only going to be one real winner, and that’s the law firms representing each party. In my view, until the battle is over and dust has settled at Stobart, it might be best for investors to avoid the company. 

Revenue diversification 

Another stock I’m avoiding today is speciality pharmaceutical group BTG (LSE: BTG). 

Shares in BTG have been marked down today after the company announced that the US Food & Drug Administration panel has voted against the approval of its Elevair Endobronchial Coil System for the treatment of people with severe emphysema. This is a set back for BTG as City analysts were expecting Elevair to be a significant contributor to growth in the years ahead. 

According to BTG, the FDA panel voted in favour of recognising the safety of Elevair, but against its effectiveness. The benefits of using the product do not outweigh the risks, the panel concluded. 

While the company is planning to work with the FDA to find a solution to its concerns, this isn’t the only headwind BTG faces. Analysts have also warned that the risks around BTG’s CroFab snake antivenom have been “underestimated” by investors as new competition hits the market next year. CroFab is BTG’s second-best selling product, and management is relying on new products to more than double annual revenues to $1.5bn within five years. 

Unfortunately, the Elevair setback is a step in the wrong direction for the group. And with risks to growth escalating, I believe it’s best to avoid the shares at this time. 

The post 2 Footsie 250 stocks I’m avoiding at all costs appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended BTG. 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.

Robust trading

Over the past 12 months, shares in Marston’s have taken a beating as investors became concerned about the group’s trading outlook. Luckily, as it turns out, rather than Brexit-related issues, Marston’s most significant headwind over the crucial Christmas trading period was the weather. 

According to today’s trading statement, total group sales for the 16-week period to 20 January 2018 rose 4.9% year-on-year, thanks to the expansion of the pub estate. Like-for-like sales, excluding the impact of two snow-affected weeks, rose 1.1%. Including the effects of the adverse weather, like-for-like sales were down 0.9% in the period. The weather’s impact on comp sales was around 2%, on an unadjusted basis, and management expects this to impact profit for the full-year by £1m. 

Still, despite the snow, today’s update notes that Marston’s had a record Christmas Day with total sales across the firm hitting £4m, 5.4% higher than last year. And looking ahead, management is confident that customers will return to its premises while efforts to contain costs will help keep margins stable. 

The payout looks safe 

All in all, despite the decline in Marston’s share price over the past 12 months, it seems as if the underlying business is continuing to grow, which is great news for income investors. 

Over the past five years, the company has generated an average of £43m per year from operations, including acquisitions and disposals, just enough to cover the average dividend distribution of £40m. For the fiscal year ending 30 September 2017, the group spent more than usual on expansion, meaning that is was the first year in five where cash flow didn’t cover dividend costs. This was mainly a result of the £55m acquisition of the Charles Wells Brewing and Beer Company, although, with a 15%+ return on capital expected from this business in the first year, it looks as if the outlay was not wasted and should complement growth in the years ahead. 

Cash-rich 

Another income stock I’m positive about is Stobart (LSE: STOB). With a dividend yield of just under 7%, this infrastructure and support service business could make a great addition to your income portfolio. 

After selling its investment in Eddie Stobart Logistics, the business is now cash rich and debt free. At the end of August, the group’s net cash had risen to £2.9m from a net debt position of £120.7m in the same period last year. A healthy balance sheet should underpin the firm’s dividend policy as earnings continue to grow. 

City analysts are expecting the company to report earnings per share of 37.4p for the 2018 fiscal year, although this includes the proceeds from the disposal. For 2019, a more conservative figure of 7.9p is projected, which is more than double the 3.7p reported for full-year 2017. 

Even though the company is a dividend champion, its shares are slightly expensive based on its earnings outlook. Specifically, according to estimates for 2019, the shares are trading at a P/E of 33, which might be too costly for some income investors. 

The post Two 6% dividend stocks I’m happy to buy and forget 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.

Going for growth

Infrastructure and support services company Stobart Group (LSE: STOB) has just published its interim results for the six months ended 31 August, and rewarded investors with a big juicy dividend. The FTSE 250 firm upped its dividend from 3p to 4.5p per quarter, a rise of 50%, as it increased its underlying EBITDA to £131.8m. However, today’s profits are mostly made up of £123.9m from the partial disposal of its stake in Eddie Stobart Logistics (ESL), which generated £112m in net cash. The company’s revenue almost doubled to £124.6m in the period, compared to £65.3m a year earlier.

CEO Warwick Brady said the group continues to work towards its clear targets for its three growth divisions – Energy, Aviation and Rail & Civil Engineering, and is also “driving growth in cash generation and returns to our shareholders”. 

Losing power

Stobart Aviation saw good progress, with passenger numbers at London Southend Airport up 25% year-on-year to 610,492. However, Stobart Energy experienced delays in the commissioning of new third party biomass power stations which have impacted short-term volumes by 33%, although EBITDA per tonne is ahead of target and long-term volume unaffected.

Stobart Rail & Civil Engineering is on track to deliver target EBITDA on rail and non-rail civil engineering projects, against a reduction in external revenue. Stobart Infrastructure and Stobart Investments benefitted from the partial disposal of the investment in ESL, in which the group retains a 12.5% stake.

Shine on

The stock currently yields a healthy 5%, forecast to hit an even more tempting 6.5%. That is pretty impressive, especially when you take into account its rampant share price growth, soaring 193% in the last three years.

City forecasters predict a 74% drop in earnings per share in the year to 28 February 2018, but never fear, they are pencilling in a whopping 276% growth in 2019. However, there is a price to pay for its turbo-charged prospects, with the stock valued at a hefty 34 times earnings.

High energy

Kingspan Group (LSE: KGP) has also had a strong year, its share price up an impressive 50% from 24p to 36p in the last 12 months. The firm, which provides insulation products for roofs, wall and floors, posted a solid first half, with revenue up 19% to €1.75bn, and trading profit up 6% to €177.8m. Revenues have been rising particularly strongly, up 20% from €1.47bn to €1.75m year-on-year.

Kingspan’s growth is being drive by increasing demand for greater energy efficiency, the robust European recovery and surprisingly resilient UK despite Brexit. Its strong balance sheet allows it to invest in the business and drive growth with €14m earmarked for acquisitions. It recently entered the lucrative South American market.

The group has posted five consecutive years of double-digit earnings per-share growth, including a spectacular 77% in 2015, and another 35% last year. City forecasters reckon this will slow, to 8% in both 2017 and 2018, but its prospects still look bright to me.

The post These 2 hot growth stocks could turbo-charge your pension appeared first on The Twelfth Magpie.

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Harvey Jones 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.

A boring business but worth the money 

Volution might seem like a boring business, but such businesses tend to produce the best results, thanks to specialisation and a lack of competition. Volution is no different. Over the past five years, the company’s revenues have grown at a compound annual rate of around 12%, and the operating margin has averaged around 10% for the period. Also, very little in the way of capital spending is required for the business, so free cash flow is robust. For fiscal 2016 free cash flow per share was 12.4p.

This slow and steady growth is worth paying for. While the firm might not have the allure of some high-growth tech stocks, it knows its market well, and steady growth with a healthy cash flow is the name of the game. 

The shares currently trade at a forward P/E of 14.1, which might look expensive, but on other metrics the group is cheap. Specifically, on a price-to-free cash flow basis, shares in the company trade at a multiple of 12.6, a 35% discount to the wider sector average of 19.4. As Volution’s growth continues, this valuation gap should narrow as the market realises the company’s potential.

Unlocking value 

Shares in Stobart Group (LSE: STOB) have added 89% excluding dividends over the past 12 months and even after this explosive rally they still look cheap compared to projected earnings growth rates. City analysts have pencilled-in earnings per share growth of 76% for the fiscal year ending 28 February 2018 after the company sold off its Eddie Stobart Logistics business during April. 

Now the management has divested this asset, the company can concentrate on the management of London Southend airport and the group’s biomass business. While the shares are trading at an estimated forward P/E of 21.1, considering the group’s rapid earnings growth, they trade at a PEG ratio of 0.5. A ratio of less than one indicates that shares offer growth at a reasonable price.

Like Volution, Stobart is a cash cow. According to a recent update, management believes that between the end of March and June this year, the company generated £160m in cash to support its dividend and invest across the business. A significant portion of this was produced from the Stobart Logistics listing, and the sale and leaseback of eight aircraft for a total of £46.4m also helped. The realisation of value from these assets gives the group firepower to accelerate growth in other parts of the business, and that should underpin further earnings expansion.

The post These 2 growth stocks could be too cheap to pass up appeared first on The Twelfth Magpie.

More reading

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• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Rupert Hargreaves 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.