Stocks to watch in July
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Shares in Sports Direct, the retail group controlled by controversial Newcastle United owner Mike Ashley, have now finally broken above the 300p level they were floated at in 2007. Optimism is building for the shares ahead of the Olympics.
The stockmarket's previous disappointment with the performance of the company - the shares hit a low of 35p in November 2008 - is now giving way to much greater optimism as the group benefits from internet sales growth.
Brokers are forecasting profits this year of £163 million, compared with £119 million last time, while the consensus analyst forecast for the current year is £200 million. This brings the forward earnings multiple down to a reasonable 12.3, as the company finally shows its genuine growth credentials.
The market now hopes the better share performance will encourage founder Ashley to release some of his 70% stake to allow wider public investment in the business.
KSK Power Ventur
KSK Power Ventur, probably India's largest supplier of power generation to the country's rapidly-expanding industrial base, gained a full London market listing in 2010. While the growth potential of the company is obvious, the track record so far has been volatile.
The shares were under 200p in late 2008 but have lately been as high as 690p on hope of more solid profits performance to match KSK's rapid revenue growth.
Profits for the year just ended are expected to come in at £25.6 million, compared with £10.9 million last time, and, according to the company's broker, could double to more than £50 million this year.
Renishaw is a global leader in hi-tech measuring equipment for industries such as automotives, electronics, energy and aviation.
However, although revenues are growing steadily and long-term prospects look good, the company finds it difficult to grow profits year in, year out. It has been losing money in its healthcare business, which it hopes to turn around this year.
Upcoming results should show revenues at record levels of around £320 million but profits slipping from £82 million to £76 million. However, chairman Sir David McMurtry is confident enough to project a further dividend boost while profits are expected to top £84 million this year.
The shares were as high as 1,886p in July last year and now change hands at 1,455p. Brokers are divided over the outlook now. But there is no doubting the quality of the company and its products. The balance sheet is in a healthy state despite heavy new investment spending.
Review: How last year's tips are performing
The stockmarket these days is merciless with companies failing to meet their profit forecasts. SuperGroup, the company behind the Superdry fashion label, has been on a real rollercoaster ride since it came to market in March 2010.
The shares more than trebled in the space of 18 months to reach a peak of 1,600p, shortly after featuring in this column on the strength of its remarkable growth forecasts. But those forecasts have proved way too optimistic.
The company failed to hit its 2010/2011 expectations of a £50 million profit, and the shares halved in the space of a couple of weeks last summer and have continued to slide since an admission in April that profits for 2011/12 would be just £43 million, against £478.3 million last time, way below the £50 million the market had expected.
Although profits are forecast to climb to £59 million over the next two years, when a surge in revenue from £320 million to £435 million is expected, the market is now taking these projections with a large pinch of salt.
The company is going to start paying dividends, and the forecast yield on the shares of 4.8% could provide some support at these lower levels.
Computer security specialist NCC did this column proud last year when its shares rose in price from 584.5p to a peak of 921p in March. The anti-hacking group has delivered solid growth since listing on AIM in 2004, and the pace of expansion is, if anything, quickening.
The latest management statement in April indicated that 20% growth in revenue was likely, and brokers think profits could hit £21.45 million for the year just ended (compared with £12.77 million last time). The market thinks NCC might make £24.2 million this year and £27.2 million next year.
Kirkland Lake Gold
Shares in Canadian miner Kirkland Lake Gold rose in price from 890p to a peak of 1,330p last autumn but then drifted back to 825p. The fundamentals, however, are strong as long as the gold price stays high.
Revenues are projected to rise from CAN$105 million (£65 million) for 2011 to CAN$440 million in 2014. Profits should rise from £12 million to £31 million for the year just ended and hit £75 million this year, and maybe £120 million next year. That cuts the future earnings multiple down to 5.4
Another computer group in the software services sector has also performed well. Results from Anite, due on 29 June, should show profits more than doubled to £24.6 million. Meanwhile, the shares have risen from 67.25p to 129p during the past year.
Shares in Photo-Me, the photobooth operator, rose from 47.5p to a peak of 67p after featuring last summer but failed to hold on to the gain. The market seems to think the current management has steadied the ship after losses in 2008 and 2009.
Profits of £20 million (£18 million last time) are projected for the year just ended and further growth to £22 million is expected for this year. The shares are on a forecast yield of 6.4%.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.