Will Quindell Plc Rise 30% This Week?

This Fool would comfortably hold shares of Quindell (LON:QPP) as part of a diversified portfolio at this price.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Quindell  (LSE: QPP) may surprise investors on Thursday when it reports interim results for the six months to 30 June — but will its shares rise more than 30%, just like they did in mid-July? 

quindell

Quindell is a hard call to make. On the one hand, it’s tempting to suggest that its stock, at this price, should be included in a diversified portfolio. It is incredibly volatile, true, but it might turn out to be a once-in-a-lifetime opportunity. On the other hand, and unfortunately for Quindell shareholders, corporate governance and cash flow pose more questions than answers when it comes to assessing the investment case.

Should you invest £1,000 in Amazon right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Amazon made the list?

See the 6 stocks

Trading Below Fair Value

The company’s current assets are worth about 124p under a base-case scenario, for a 28% discount to Quindell’s stock price of 174p. Based on the value of Quindell’s total assets, and making certain assumptions, Quindell stock trades at a 17% discount to fair value, according to my calculations. The shares deserve attention, in my view. 

There are problems with the business. The cash flow statement signals massive swings in account receivables, while poor working capital management indicates that the group can’t self-finance its short-term operations but must rely on external funding options to operate as a going concern.

The failure to pursue a listing on the main stock exchange in the UK wasn’t easy to digest for shareholders, particularly because it left Quindell with limited funding options. Faced with stiff competition, this insurance claims processor may find it difficult to raise new funds if its cash flow doesn’t grow at a faster pace. In fact, refinancing risk is an issue, given that Quindell’s debt maturity profile isn’t reassuring — although Quindell stated that its resources would suffice to meet budget requirements.

All these elements are already priced into its shares, though. 

Valuation

Quindell stock trades at 2.5x and 1.5x adjusted operating cash flow for 2014 and 2015, respectively. Revenues are expected to double in the next couple of years, but Quindell’s sales multiple is a low 0.6x into 2015, which doesn’t really reflect the full potential of a business whose accounts show hefty operating margins and a steep growth rate all across the P&L.

These trading multiples indicate distress, rather than a growth story. Quindell stock may well be oversold. The group has recently reiterated the view that : a) revenues of up to £900m will be achieved this year, which points to a steeper growth rate in the upcoming months; b) the speed at which credit are collected is getting better.

There is talk that its key joint venture with RAC may implode but that, too, is priced into Quindell stock — a stock that is not for the faint-hearted. 

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool 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.

More on Investing Articles

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »