Today I am running the rule over three Tuesday newsmakers.
Media might
Media giant Entertainment One (LSE: ETO) released a mixed set of results on Tuesday, causing the shares to basically stay flat.
Entertainment One saw revenues edge 2% higher during the year to March 2016, to £803m, a result that propelled pre-tax profit 9% higher to £48m.
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The company, which was forced to deny a takeover approach had been received in April amid reports of a bid from ITV, continued to enjoy strong revenues growth from the television division last year — indeed, organic sales here rose 27% from fiscal 2015.
But Entertainment One’s film operations endured a 7% sales slippage, to £553m, with a lower number of releases hampering full-year performance.
While the City expects earnings at Entertainment One to stagnate in 2017, I reckon a subsequent P/E rating of 9.1 times represents stellar value.
Not only does the firm’s eOne Television division provide terrific growth opportunities, but the likelihood of further acquisitions this year and beyond should also bring the firm closer to its goal of doubling in size by 2020.
Package it up
Storage specialist Big Yellow Group (LSE: BYG) also furnished the market with fresh financial numbers on Tuesday.
Despite “a backdrop of slower economic activity compared to the prior year,” the company saw revenues canter up 20% in the year to March 2016, to £101.4m. On a like-for-like basis sales strode 10% higher.
This helped pre-tax profits at Big Yellow leap by almost a quarter year-on-year, to £49m.
And I believe the storage play can keep on delivering sterling growth in the years ahead as Britain’s ‘hoarding’ culture intensifies, and Big Yellow’s expansion programme, centred on the affluent areas of London and South-East England, continues.
This view is shared by the City, and earnings are expected to sprint 12% higher in 2017. A consequent P/E rating of 24.8 times may be ‘conventionally’ heady, although a decent 3.3% dividend yield helps to take the heat off this reading.
Show me the money!
I am not so bullish concerning the growth outlook of money printers De La Rue (LSE: DLAR), however.
On Monday the business announced plans to sell its Cash Processing Solutions (or CPS) banknote-counting business to Privet Capital in a deal that could potentially rise to £10.1m.
The pressures created by an increasingly ‘cash-less’ world are weighing on De La Rue’s traditional businesses — the company announced today that revenues at CPS collapsed by a third in the year to March 2016, falling to £33.9m.
Excluding the impact of CPS, De La Rue saw revenues edge 7% higher in the period, it said today, to £454.5m, while pre-tax profits edged 2% higher to £58.5m.
But I believe the firm’s heavy reliance on banknote production still makes it a risky growth prospect. A 1% earnings decline is chalked in for 2017, and I believe a P/E rating of 13.2 times represents poor value given its murky long-term outlook.
