First-half results season is getting firmly underway. And the latest results are throwing up what look suspiciously like some cheap stocks. Here are three companies I might add to my buy list after this week’s news.
TV
My first pick is broadcaster and TV content maker ITV (LSE: ITV). The ITV share price had been falling back in 2022. But it jumped 6.7% on Thursday morning on the back of the company’s half-year report.
ITV recorded an 8% rise in total revenue, to £1,679m, with a 16% increase in revenue from ITV Studios. I don’t see much to distinguish delivery platforms, and I reckon success is increasingly down to content production.
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Statutory pre-tax profit rose by 65%. Adjusted EBITA did drop 3%, but the company put that down to additional reinvestment ahead of the launch of ITVX.
The committed full-year dividend of at least 5p would yield 6.8% on today’s price. And the shares are on a forecast price-to-earnings (P/E) ratio of under seven.
Drugs
Next up is Indivior (LSE: INDV), whose share price dropped 3% on first-half results. It has still doubled over the past 12 months, mind.
The generic drug manufacturer reported a 10% increase in net revenue. But operating profit dipped 14% with earnings per share (EPS) down 13%. That was pretty much in line with expectations. But analysts are forecasting earnings growth in the next few years which would drop the forward P/E to only around 11 by 2024.
It all stems from the company’s specialisation in opioid addiction treatments, with demand expected to climb in the US in the coming years. Revenue from Sublocade, specifically, grew 61% in Q2. And the board expects $390m-$420m from it for the full year.
Is the stock cheap now? Indivior is engaged in a share buyback programme, so it seems to think so.
Pumps
Weir Group (LSE: WEIR) is the third of the potentially cheap stocks I’m picking, after H1 results sent its shares up 6%. It does come after a slide since late 2021, so we might just be seeing a new buying opportunity.
The engineering firm makes pumps, turbines, valves, and things like that. And demand looks strong now. The company reported “record aftermarket orders” in the half, up 23%.
Revenue grew by 18%, with second quarter growth reaching 20%. The company does carry net debt, at a two times multiple of EBITDA, and that concerns me a little. But it expects free cash flow to increase through the second half, with 80%-90% free operating cash conversion.
And though Weir experienced input cost inflation, the firm says it managed to maintain its gross margins.
We’re looking at a P/E of close to 20. But growth forecasts would drop that to 14.5 by 2024.
Buy?
All three of these face individual risks, for sure. And I would not buy any of them based on just one set of results. No, I’d need to do some deeper research. But right now, they all look like cheap stocks to me.
