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Telegraph
18 hours ago
- Business
- Telegraph
An attempt to salvage the rubble of our investment thesis
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest We must now pick through the rubble of our investment thesis after last week's profit warning from landscaping and building and roofing products supplier Marshalls. The share price caved in, to leave us sitting on a nasty book loss of around 30pc and with a decision to make as to whether to cut and run, or to try and tough it out. We shall go for the latter, partly because we are habitually reluctant to liquidate a holding in a company where the shares are no higher than in 2000, and partly because we try to adhere to legendary investor Charlie Munger's assertion: 'You don't make money when you buy, and you don't make money when you sell. You make money when you wait.' The update was undeniably disappointing. In the first six months of the year, Marshall's revenues rose 4pc, as higher volumes offset lower prices. Roofing and building products both showed a higher top line, but landscaping offered a 1pc drop, and this is where the outlook turned ugly. Lower volumes, price competition, an unhelpful product mix and input cost inflation have left the unit near breakeven and weighed heavily on overall group profits. After the alert from the West Yorkshire-headquartered company, analysts slashed their earnings forecasts by a fifth for 2025 and by around a sixth for next year. The net result is that the shares are more expensive now than they were 15 months ago on an earnings basis, even after the share price calamity, thanks to those downgrades. That said, a forward price-to-earnings ratio of some 15 times does not seem so unappealing given the multiple is based on what should prove to be depressed profits. Marshalls made nearly 30p in earnings per share (EPS) in 2019, and the share price represents barely seven times that figure, which is a lot more enticing. Granted, that 30p number looks a long way away when the consensus analysts' forecast for 2025 is 14p, the macroeconomic backdrop does not feel unduly helpful, and even the putative recovery only takes EPS estimates to 17.5p by 2027. But management is already looking to take out further costs and at some stage it seems logical to expect further interest rate reductions from the Bank of England. Governor Andrew Bailey and the Monetary Policy Committee may need further signs of a cooling in inflation before it moves decisively to cut headline borrowing costs once more, although lower oil and gas prices (and thus energy price caps), a higher pound and softer economic activity thanks to tariffs and trade wars could all provide encouragement in this respect in the second half of 2025 and beyond. Marshall's share price may well respond to the prospect of such monetary stimulus long before sales and profits start to motor. In the meantime, we must wait, and the balance sheet enables us to do so. Admittedly, there is relatively little asset backing in the business, given how more than 80pc of the £661m in net assets are intangible. But net debt is relatively low, even including pensions and leases, and interest cover is still around four times, even using the downgraded forecasts for this year. Questor says: buy Ticker: MSLH Last share price: 203p Update: Shaftesbury Capital We went looking for trouble at Marshalls and found it, but another contrarian pick has maybe just started to go our way. Real estate investment trust (Reit) Shaftesbury Capital also had a share price chart that went from the top left of the screen to the bottom right when we first studied it, but in this case we have accrued a one-sixth paper gain with 3.5p a share in dividends on top. This week's interim results suggest there could be more to come. The owner of large chunks of Chinatown, Soho, Carnaby Street and Covent Garden pointed to another increase in the net asset value (Nav) of its property portfolio, thanks to higher rents, increased letting activity and lower vacancies. That Nav was also underpinned by the Norwegian sovereign wealth fund's swoop for a 25pc stake in Shaftesbury Capital's Covent Garden assets at a cost of £570m this spring. The Reit's shares still trade at a discount to Nav of more than a fifth and further asset growth looks possible. As with Marshalls, interest cuts would also be helpful for both the underlying business and sentiment toward the shares. Lower borrowing costs can boost economic growth and reduce the company's interest bill on its debt, while a lower return on cash can also make the dividend yields offered by Reits look relatively more attractive.
Telegraph
3 days ago
- Business
- Telegraph
Quiet luxury is out and that's great news for Burberry
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest After a wild and scary ride, we are back to breakeven in our Burberry position. This gives us the option to check out of the British fashion icon without any undue portfolio damage, but it is early in the turnaround sought by chief executive Joshua Schulman. For the moment, we are inclined to give him and the company the benefit of the doubt, even if the headline financial figures do not entice at first glance. This month's first-quarter trading update was no great thing of beauty either. Comparable store sales for the three months to June fell 1pc year on year at the retail arm, and that came on top of a 21pc plunge in the equivalent period a year ago. Yet that was still better than the analysts' expectation of a 3pc decline. Moreover, it does seem as if things have stopped getting worse, and if they have stopped getting worse then at some stage they might just start getting better – especially if Mr Schulman's plans to reinvigorate the brand and product ranges come to fruition. At least 'quiet luxury' is out, according to this columnist's daughter's editions of Vogue, and a return to favour for luxury would at least provide a more encouraging backdrop, despite the uncertain macroeconomic environment. Last year's operating loss and absence of a dividend mean investors have to buy into the turnaround plan for them to be even vaguely optimistic about Burberry's share price maintaining its momentum – it is up 85pc in a year and by more than double from the autumn 2024 lows. A price-to-earnings ratio of more than 80 for the year to March 2026 and forecasts of a 6pc operating margin show just how much work the luxury goods specialist has to do after a terribly difficult two years. Analysts only expect a 12pc operating margin by March 2028, well below the 20pc-plus return on sales generated by leading plutocratic product makers such as LVMH and Richemont. A return to the 16pc level that prevailed between 2016 and 2021 would leave Burberry on 17 times 2028 earnings, and a dash to 20pc would put it on a tempting 13 times. Again, we are long way from that, but the worst may be behind Burberry and patience could yet get a reward. Questor says: Buy Genus (GNS) £24.75 We are off to a fast start with Genus and already have a paper gain of around 25pc to show for our initial analysis back in spring. This month's year-end update reads well and offers more than enough hints to suggest that our investment thesis for the genomics expert is still on the mark. The trading statement revealed that adjusted pre-tax profit for the year to June 2025 would be at least £72m, even though unhelpful foreign exchange movements cost the company some £8.4m. Of Genus' two divisions, Pig Improvement Company (PIC) continued to perform strongly, and the bovine-oriented American Breeders Service (ABS) showed some signs of improved momentum. In the latter case, things can hardly get any worse given that US cattle inventory languishes at 70-year lows. Any upturn here could bring benefits to ABS. Its expertise in genomics helps dairy farmers increase the chances of cows giving birth to female calves suitable for dairy production or young more suited to beef production. Perhaps most importantly of all, the trading statement flags the first tangible benefits of American regulatory approval from the Food and Drug Administration (FDA) for Genus' PRRS (Porcine Reproductive and Respiratory Syndrome) Pig Resistant Programme (PRP). FDA approval opens the way to the commercialisation of PRP and is already triggering milestone payments from partner companies, as evidenced by the £3.7m received from Beijing Capital Agribusiness. Such payments should help cash flow, too, and, as a result, chief executive Jorgen Kokke signals a reduction in net debt in this month's update. This is a further boost for the investment case, as Genus' record for free cash flow generation in the past few years is spotty at best. If the investment in PRRS starts to pay off, then cash flow could blossom and a reduction in debt would reduce net interest costs and provide a further kicker to profits growth. As it is, the forecast of £72m in pre-tax income for the fiscal year just ended would be a record for the FTSE 250 index member, yet the share price still stands at less than half 2021's peak, even after the recent run.
Telegraph
4 days ago
- Business
- Telegraph
This French stock recently faced shareholder revolt. Its response worked
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. Many of us will be familiar with the 'Mmm, Da-none' advertising catchphrase designed to boost yoghurt sales for the French food and drinks group of the same name. But perhaps fewer will be aware that Danone, headquartered in Paris, owns a string of similar household-name brands, including the gut-friendly drinks and yoghurts Actimel and Activia, and bottled waters Evian and Volvic. The group makes a big play of how healthy and nutritious its products are as it aims to lock itself into the long-term trend of a more health-conscious consumer. And as a number of the world's businesses start to drop their environmental pledges, Danone has also, following a management change, dialled back its focus, which many investors had viewed as a costly distraction. However, it still continues to actively promote sustainability, including commitments to reduce waste, use less water and move to a 'circular' packaging model. The group, which also makes baby formula and foods, sells its products in more than 120 countries and last year generated pre-tax profits of nearly €3.3bn (£2.9bn) on sales of just under €27.4bn.
Yahoo
4 days ago
- Business
- Yahoo
Westpac Banking's (ASX:WBC) earnings growth rate lags the 20% CAGR delivered to shareholders
Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Westpac Banking share price has climbed 93% in five years, easily topping the market return of 45% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 21%, including dividends. While the stock has fallen 3.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). During five years of share price growth, Westpac Banking achieved compound earnings per share (EPS) growth of 8.4% per year. This EPS growth is lower than the 14% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. You can see how EPS has changed over time in the image below (click on the chart to see the exact values). We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Westpac Banking's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further. What About Dividends? It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Westpac Banking the TSR over the last 5 years was 152%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return. A Different Perspective We're pleased to report that Westpac Banking shareholders have received a total shareholder return of 21% over one year. And that does include the dividend. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Westpac Banking (at least 1 which can't be ignored) , and understanding them should be part of your investment process. There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
24-07-2025
- Business
- Yahoo
Those who invested in TH Plantations Berhad (KLSE:THPLANT) five years ago are up 73%
Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the TH Plantations Berhad (KLSE:THPLANT) share price is up 51% in the last 5 years, clearly besting the market decline of around 0.2% (ignoring dividends). Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). During the five years of share price growth, TH Plantations Berhad moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price. The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers). We know that TH Plantations Berhad has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained. What About Dividends? As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, TH Plantations Berhad's TSR for the last 5 years was 73%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments! A Different Perspective While the broader market lost about 7.5% in the twelve months, TH Plantations Berhad shareholders did even worse, losing 14% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand TH Plantations Berhad better, we need to consider many other factors. For example, we've discovered 3 warning signs for TH Plantations Berhad (1 is a bit unpleasant!) that you should be aware of before investing here. We will like TH Plantations Berhad better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
