5 Opportunities for the Week Ahead
LONDON -- There are still more interim releases coming next week from companies in the FTSE 100 and other FTSE indexes, but we're also starting to see a few full-year results coming through, which should add to the potential opportunities out there.
If you want to check out any prospects ahead of the results, here are some interesting ones coming our way.
Johnson Service Group (ISE: JSG.L)
I'm going to start this week with a potential small-cap opportunity in the shape of Johnson Service Group, which is due to release interim figures on Tuesday. Though it's probably best-known for Johnson's dry cleaners, that's actually a relatively small part of the business; textile rentals and facilities management make up the bulk.
The AIM-listed firm, valued at around 72 million pounds, has seen its share price stagnate over the past few years, though earnings have been steady. We have a couple of good years forecast, with a prospective price-to-earnings ratio of seven for this year, falling to 5.8 for 2013. However, at the end of 2011 there was net debt of 49.7 million pounds on the books, which is more than half the company's market cap.
But that debt is being reduced every year, and there's a 3.8% full-year dividend expected this year, rising to 4.3% next -- and if you're concerned that the debt position might damage confidence in those payouts, they should be covered about four times by earnings. I'll be watching out for dividend and debt news on Tuesday.
Dechra Pharmaceuticals (ISE: DPH.L)
On the same day, we'll have full-year results from Dechra Pharmaceuticals, and according to the veterinary pharmaceuticals development company's preclose update released in July, things look to be going well. We're expecting to hear of a rise in total revenue of 9.3%, or 7.5% after the contribution from Dechra's acquisition of Eurovet Animal Health is excluded. Net borrowing, which rose last year, should be heading down again.
Although the shares are up about 25% over the past 12 months to 498 pence, forecasts suggest earnings growth of around 20% this year and 10% next. The shares are valued at a prospective P/E of 13, which may not seem cheap, but any investment would be based on the prospect of higher-than-average earnings growth.
Hargreaves Lansdown (ISE: HL.L)
Wednesday brings us full-year results from Hargreaves Lansdown, the financial-services firm that offers brokerage, funds, and other investments. And what can you say about a company that had its origins in a bedroom in 1981 and has gone on to reach the FTSE 100 with a 2.9 billion pound valuation? "Wow" springs to mind.
The share price has piled on up in recent years, growing more than 450% since mid-2008 to stand at 615 pence today. Earnings and dividends have been rising steadily, and earnings per share are forecast to grow 16% for this year and 22% next, with dividends of about 3.5% and 4% expected.
Wm. Morrison (ISE: MRW.L)
On Thursday it will be interim time for Wm. Morrison Supermarkets. Supermarkets were big in the news in the first half of 2012, but we haven't heard much about them of late, and this report should bring us an update on how the sector is going.
Morrison's profits have been rising steadily, but the share price hasn't: At 283 pence, it's down 14% since the start of the year, even though strong progress is expected for this year. In fact, forecasts suggest dividends of 4.2% and 4.7%, respectively, for the next two years, which seems pretty good for a company a relatively safe and defensive supermarket.
Go-Ahead (ISE: GOG.L)
Go-Ahead Group, which reports its full year on Thursday, might just be a bargain. The group, which runs a number of bus and train companies, told us in its June preclose update of a robust year: "Overall, we remain confident that we will deliver a full-year result in line with our expectations."
With the shares at 1,300 pence, those expectations suggest a dividend of 6.2% from a P/E of about nine, with a further 6.3% payout penciled in for next year. Net debt should be around 95 million pounds to 100 million pounds, which is a significant fall and not really a problem for the 550 million pound company. What might hold things back is fear of a slowdown in rail services as poor economic conditions continue. But we could be looking at a good long-term opportunity here.
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Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Hargreaves Lansdown. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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