Sunday share tips: Tesco, easyJet, Mulberry

9th Jun 2013 18:06

A company trading at 10.4 times current year earnings - with a prospective yield of 4.4 per cent - is usually not deemed expensive. However, given how elusive growth is proving at Tesco that does not hold true in its case. The simple fact is that over the last two years like-for-like growth has fallen in almost every single country in which it operates, with the exception of Hungary. As well, its main market - the UK - has reached saturation point and rivals are fighting back. Yes, 'on-line' sales are a bright spot, but a low-margin one, and in itself that is a long-term risk. For all of the above reasons The Daily Telegraph´s Questor team has decided to cut its rating to 'hold' from 'buy.'EasyJet shares´ ascent shows no sign of stopping. Passenger numbers have grown over the last year as has the load factor for its planes - a measure of how full they are. The company has further invested in 25 pairs of arrival and departure slots at Gatwick, which looks set to increase profits further. Thus, the only question seems to be whether it should buy more aircraft to try and steal more market share from competitors, especially business travellers. For the company´s largest shareholder, Sir Stelios Haji-Ioannou, that would be a vanity excercise and a drag on profitability. The earnings multiple of 14.5, falling to 13, does not look overstretched for a growth business and the yield is 2.1%, with plenty of scope to increase. The shares are once again a buy, Questor concludes.The pause that refreshes? That is what investors in Mulberry are hoping the recent share price fall is signalling, as the company gears up for another expansion drive overseas, opening 20 stores, including flagship outlets in Shanghai and Beijing. Nevertheless, the company will require quite a bit of marketing magic - if not luck - if it wants customers to put its wares in the same camp as Louis Vuitton and Chanel. Warren Buffett famously said: "Never invest in a business you don't understand." "I'm sorry; I just don't understand how you convince anyone to pay £3,000 for a handbag. Pass," says The Sunday Times´s Danny Fortson. ABPlease note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.