Since late January 2014, Hargreaves Lansdown (LSE: HL) shares are actually down 6%, but that snapshot hides a much more interesting story. The shares were widely considered a bit toppy back then, and some profit-taking, coupled with sell-off caused by slowing earnings, led to a slump in late October 2014 to around the 850p level.
But in the time since, a fresh spurt has seen the price put on 70% to reach 1,458p — and over five years, the price has almost trebled! But here comes the bad news: that share price climb has pushed the firm’s forward P/E as high as 37, with dividends poised to yield only around 2.5%.
Hargreaves Lansdown’s earnings growth has been impressive, and EPS is predicted to rise by 18% again in the current year. But that’s serious growth pricing, and when it looks like it’s slowing again I’d expect to see a reversion closer to the long-term FTSE 100 average P/E of 14 to 15. It’s a very well-managed company, but way too pricey for me.
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Cheap telly
Over at telly and broadband supplier Sky (LSE: SKY) we’ve seen a very strong 2015, with the shares up 24% in 12 months to 1,098p. But in this case, we’re looking at a much more down-to-earth P/E of 17 based on current forecasts, with dividend yields of around 3.3%.
After three years of double-digit EPS rises to 2013, Sky’s growth went off the boil a little and we’ve had a couple of minor falls. But that should reverse again this year, with forecasts suggesting growth of 14%. First-quarter results support those predictions, too, after Sky reported a 10% rise in operating profit from a 6% gain in revenue. Customer numbers are rising nicely, as are the numbers of subscription products they’re buying.
Sky’s share price looks modest to me for a company with such good future growth prospects, and I can see further gains in the next few years.
Finally back?
Investors have had a bit of a love/hate relationship with Marks and Spencer (LSE: MKS) over the years. As a result, the share price today is only around 14% higher than it was at its 1993 peak — and we’ve been through a couple of bone-shaking booms and busts in between.
But it’s looking increasingly like the high-street favourite is finally seeing results from its turnaround plan, with Wednesday’s first-half report telling of a 6.1% rise in underlying pre-tax profit and underlying EPS up 4.9%. And though like-for-like General Merchandise (which is clothing, mainly) fell 1.2%, the firm’s online offering enjoyed a very nice 34% sales rise. Free cash flow was up, and the interim dividend was hiked 6.3% to 6.8p.
The upturn has helped push the shares up 36% since their low in October 2014, to 536p, although they were even higher in the summer. And with forecasts of two years of growth dropping the P/E to under 14 by March 2017, while the dividend yield rises to 4%, I really can believe that M&S is back on track and looking good value.
