Thursday tips round-up: Caretech, Domino's, Babcock International

29th Sep 2011 06:34

CareTech, the care home operator, was hit by a messy corporate governance row over capitalising the cost of its M&A team, which is not generally the done thing, and the fallout from the collapse of the larger Southern Cross. At the current price, the shares trade on about 4.4 times earnings for the year about to close, which suggests that management might be looking at a bargain. But the company's history does not encourage much confidence, writes the Times.The pizza delivery firm Domino's group like-for-like sales grew by 3.9%, including Ireland, but by 4.1% in the UK over the 13 weeks to 25 September. Overall, we believe the only spanner in the works is its lofty forward earnings multiple of 23. But with a proven track record in a downturn, roaring sales and an expansion in Germany under way, we are buyers, says the Independent.The Telegraph has a hold recommendation on Domino's. Analysts expect earnings-per-share growth of 13pc this year and next, which is still pretty impressive - and Questor suspects that the risk to forecasts will be to the upside. However, yesterday's market reaction to a good set of numbers from a quality business showed just how nervous investors are at the moment because of the current market backdrop - and will remain until the turmoil ends. In the spring Babcock International emerged from talks with the Ministry of Defence, one of its biggest customers, with a memorandum of understanding which suggested that, in the light of budget cuts, it was going to have to renegotiate much of that work, and presumably at lower prices. The latest trading statement, at the close of the first half, again reassured that there has been no change to the financial performance of its bigger contracts "or the level of savings we are able to deliver to our customers". The shares have bounced back by a pound or so from their low in August and now sell on about 11 times this year's earnings. A strong hold for that assured work flow, says the Times.The banking software firm Misys yesterday said demand from fast growing markets for its newer offerings was strong. This demand is helping offset the impact of the pressures on the financial markets, and revenue in the company's first quarter was up 4%. However, the share price slump means that Misys now trades on multiples of 11 times forward earnings for next year, falling to under 9 times on the estimates for the year after that. Buy, the Independent says.Yesterday's pre-close update from Future was reassuring. After the somewhat grim update in July, the company indicated that the full year results would be in line with hopes. The key issue in the summer was the performance of the publishing group's US unit, which was hit by poor performance. Future has an ace up its sleeve. The prospective yield stands at more than 9%, according to Altium. Yes, it may be cut. But it's attractive even if you shave a large chunk off the figure. Buy, says the Independent. Please 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.