All Eyes On Monitise Plc, Barratt Developments Plc & SThree Plc Next Week!

Here’s what you should expect next week from Monitise Plc (LON:MONI), Barratt Developments Plc (LON:BDEV) and SThree Plc (LON:STHR).

| More on:

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.

Monitise (LSE: MONI), Barratt Developments (LSE: BDEV) and SThree (LSE: STHR) report their trading updates next week: what should investors expect?

And, equally important, are their shares attractive enough, based on fundamentals, at their current valuations?

Here’s my quick take on them.

Monitise (5.8p A Share, Down 77% This Year)

If you are invested, you really have to hope that a takeover from a larger player takes place sooner rather than later. There’s plenty of choice, really!

Visa Europe said it will reduce its shareholding over time, but Monitise retains the backing of Santander, Telefonica and MasterCard, while a multi-year global alliance is in place with IBM and a seven-year digital banking partnership was agreed with Virgin Money last year. 

But maybe you think you need more than that to invest your savings in this mobile payments processor. The problem is that its cash generation profile based on less than £90m of projected revenues doesn’t look great in a sector where competition from the major tech companies in the world is fierce.

Under chief executive Elizabeth Buse, Monitise will continue “to drive towards Ebitda profitability in FY 2016 and profitable growth thereafter“, the group said in a recent trading update. But it’s burning cash at a fast rate this year, and dilution risk stemming from a cash call is a real risk. 

Moreover, there’s no visibility on multiples for earnings and cash flows. Finally, its 0.3x price-to-book value signals distress, while its price-to-tangible book value signals that its stock is still overpriced by at least 40%, in my view, even at less than 6p a share. 

SThree (352p A Share, Up 18% This Year)

SThree provides recruitment services in the information and communication technology industry, which is hot property these days.

Keep an eye on its third-quarter results, paying particular attention to core cash flow growth and any possible beat on revenues. Also, make sure you check its core operating margin, which should hover north of 5% — if it doesn’t, it could be a bad day for shareholders. 

Its shares are not cheap at 18x forward earnings, but its 4% forward yield is rather attractive and its balance sheet is sound. That said, its yield is rich based on its earnings profile.

I am not ready to buy into this income story, but if you plan to add exposure to SThree, consider that consolidation in the recruitment industry in the UK is long overdue. 

Barratt Developments (633p A Share, Up 38% This Year)

Barratt is profiting from risk appetite in a sector where the shares of most homebuilders have been rising for months now. The bulls have been proved right so far in 2015, and even recent market volatility has not spoiled their plans. 

Indeed, if Barratt meets estimates for growth in earnings per share (EPS), it will have grown EPS at an astonishing 25% compound annual growth rate between 2014 and 2017.

If you believe in these estimates, you’d do well to build up a long position in the stock, given that its forward trading multiples for net earnings are in the mid-teens, and investors seem to believe that nothing can shake confidence in the sector. 

Its projected yield at 3.6% is rock solid, based on its earnings profile. One caveat, however,  is that Barratt one the most expensive bets in the sector…

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 UK owns shares of Monitise. 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

2 cheap shares I’ll consider buying for my ISA in 2025

Harvey Jones will be on the hunt for cheap shares for his ISA in 2025 and these two unsung FTSE…

Read more »

Investing Articles

I am backing the Glencore share price — at a 3-year low — to bounce back in 2025

The Glencore share price has been falling for some time, but Andrew Mackie argues demand for metals will reverse that…

Read more »

Road trip. Father and son travelling together by car
Investing Articles

A 10% dividend yield? There could be significant potential here to earn a second income

Mark Hartley delves into the finances and performance of one of the top-earning dividend stocks in his second income portfolio.

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Charlie Munger recommended shares in this growth company back in 2022. Here’s what’s happened since

One of Charlie Munger’s key insights is that a high P/E ratio shouldn’t put investors off buying shares if the…

Read more »

Investing Articles

What might 2025 have in store for the Aviva share price? Let’s ask the experts

After a rocky five years, the Aviva share price has inched up in 2024. And City forecasters reckon we could…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Trading around an 11-year high, is Tesco’s share price still significantly undervalued?

Although Tesco’s share price has risen a lot in the past few years, it could still have significant value left…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£11,000 in savings? Investors could consider targeting £5,979 a year of passive income with this FTSE 250 high-yield gem!

This FTSE 250 firm currently delivers a yield of more than double the index’s average, which could generate very sizeable…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

Does a 9.7% yield and a P/E under 10 make the Legal & General share price a no-brainer?

With a very high dividend yield and a falling P/E forecast, could the Legal & General share price really be…

Read more »