Today I am looking at whether investors should book profits on these four recent risers.
International Consolidated Airlines Group
With air travel surging across the globe, I believe that International Consolidated Airlines (LSE: IAG) — or IAG — is a terrific selection for eager growth hunters. The business has seen shares advance 9% during July, but I believe much more strength can be expected — the business announced today that revenues leapt 11.3% during April-June, in turn driving pre-tax profit 25.4% higher to €449m.
With a tanking oil price also helping IAG’s cost-stripping drive, I believe earnings look set to keep climbing, helped by the firm’s likely purchase of Aer Lingus — the Heathrow firm has previously announced that Ryanair has agreed to sell its stake in the budget carrier. Consequently the City expects IAG to record earnings expansion of 76% and 19% in 2015 and 2016 respectively, producing ultra-low P/E ratios of 10.4 times and 8.4 times. This suggests the firm remains significantly undervalued despite lively price rises more recently.
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Dignity
Funeral directors Dignity (LSE: DTY) have also seen their share price ascend steadily during the past four weeks and the business was last 14% higher from levels seen at the end of June. This ascent has been helped by strong financials released this week, revealing that revenues climbed 19.2% in the first six months of 2015, propelling underlying pre-tax profit 44% higher to £46.5m.
Dignity benefitted from a 13% rise in the number of deaths during the period, while a large expansion scheme has also boosted sales — just this month the firm completed the purchase of 36 shops from Laurel Funerals. Dignity’s defensive operations make it a decent candidate for those seeking reliable earnings growth, in my opinion, fully justifying elevated P/E multiples of 24.3 times and 21.6 times for 2015 and 2016 — the City expects the bottom line to swell 15% this year and 12% in 2016.
Reckitt Benckiser Group
Supported by recovering spend in emerging markets, I reckon household goods specialist Reckitt Benckiser (LSE: RB) should enjoy brilliant earnings expansion well into the future. This week’s bubbly trading update reinforced this view, and allowed it to continue the 12% share price gain enjoyed during the past four weeks — the London firm saw like-for-like sales advance 5% during January-June, with product rollouts like its Scholl Express Pedi and Durex Real Feel helping to drive shopper interest.
While constant innovation across its blue-chip brands has proved a reliable winner for Reckitt Benckiser, the firm also has plenty of cash in reserve to embark on fresh acquisitions and boost sales still higher — the business is currently in discussions to purchase K-Y Jelly from Johnson & Johnson, for example. Reckitt Benckiser is anticipated to see growth accelerate from 2% this year to 7% in 2016. Although these numbers produce elevated P/E ratios of 24.8 times and 23.2 times, I believe the firm’s massive long-term growth potential fully merits this premium.
Domino’s Pizza Group
Fast food vendor Domino’s Pizza (LSE: DOM) has been one of the major gainers after releasing eye-watering numbers earlier this week, and in total the firm has gained 14.7% in July. The dough-kneaders saw like-for-like sales canter 10% higher during January-June, driving pre-tax profit 29% higher to £25.4m. While new store openings are helping to drive custom skywards, Domino’s Pizza has found the recipe to unlocking internet sales, and total online orders climbed by 24.4% during the period.
In particular, the Domino’s ‘app’ is intensifying the appetite of couch potatoes across the land, and a total of 10 million software downloads to date enabled ‘mobile’ orders to overtake ‘desktop’ transactions for the first time in January-June. Propelled by lively web activity the City expects the business to generate earnings growth of 15% and 13% in 2015 and 2016 respectively, generating earnings multiples of 26.9 times and 23.6 times. But like Reckitt Benckiser, I believe Domino’s Pizza’s brilliant growth potential mitigates such high numbers.
