Brammer (LSE: BRAM), Rentokil Initial (LSE: RTO) and Computacenter (LSE: CCC) are all falling today, although each company is heading lower for a different reason. Here’s what you need to know.
Profit warning
Brammer is one of the market’s biggest fallers today. The company’s shares have fallen around 12% at time of writing, after the company issued a profit warning on the back of weaker than expected trading in the UK and Europe.
Indeed, during the four months to the end of October, Brammer’s UK sales per working day dropped 3.1%, as several key customers reduced their business with the company in a bid to lower costs.
Still, during the period, at constant currency, total group sales grew by 15.5%, with sales up nearly 15% in both France and Spain and by nearly 10% in Germany.
So, despite a small set-back Brammer’s sales are still expanding and for this growth investors are willing to pay a premium. At present levels the company trades at a forward P/E of 14.5, which may be too rich for some investors. City analysts only expect the company’s earnings to grow by 5% this year.
Disappointing update
Like Brammer, Rentokil also issued a trading update today. However, Rentokil’s trading update was relatively upbeat.
For example, during the three months to the end of September the company’s revenue ticked higher by 3.3%. Pre-tax profit increased by 16.7% during the period as a number of small acquisitions across Europe helped boost profitability.
Unfortunately, the company’s outlook disappointed investors as management warned that:
“… we expect Q4 operating performance to be in line with Q3 … “
It seems as if the group is unlikely to report any growth during the fourth quarter.
But like Brammer, with growth slowing Rentokil looks expensive at present levels. In particular, City analysts expect the company’s earnings per share to contract by 4% this year, although at present levels, the company trades at a P/E of 15.1, a multiple usually assigned to a high growth company.
No news
Finally, Computacenter is falling today, although there has been little in the way of news to fuel declines.
Computacenter’s growth has been impressive over the past five years with the company growing earnings by more than 50% since 2009. However, the company’s growth has started to stagnate this year, as revealed within the group’s interim management statement for the four months to October.
During the quarter, revenue declined 3% at constant currency. Management still expects the company to achieve to achieve 7% earnings per share growth for the full-year.
Nevertheless, just like Brammer and Rentokil, Computacenter appears expensive at present levels compared to the company’s projected growth. At present, Computacenter trades at a forward P/E of 13.1, which means that the shares are trading at a PEG ratio of around 2.
