Thursday tips round-up: Dignity, Melrose, BBA Aviation

6th Mar 2014 07:27

Since its flotation in 2004 funeral provider Dignity has seen revenues rise by 7.3 per cent per year and a steady 16 per cent rate of increase in its earnings per share. Furthermore, it has room to grow, the Government Actuary Department projects the rate of deaths in the UK to rise from 2015 onwards, after bottoming out at 539,000 in 2011. As well, the majority of funeral parlours in the country are independently owned. Hence, that steady growth is providing the firm the predictable cash flow it needs to continue expanding. However, at 19 times forecast earnings, falling to 16 times next year, the price looks a bit too rich; although it is well worth watching and buying if a market correction takes place. 'Hold', says The Daily Telegraph´s Questor column.Judging by the continuing upsurge in US business travellers confidence at American corporates may have returned, at last, to pre-crash levels. Given that BBA Aviation derives 80% of its revenues from that market that is important. Yet the key lies in the rising confidence as reflected in firms´ increasingly shuttling executives about to supervise operations. The stock is a good proxy for US economic growth and the company achieved strong cash flows last year to finance its investment plans. However, the European market remains in the doldrums so the stock, at 18 times´ earnings, shows no urgent need to buy, writes The Times´ Tempus. Shares of Melrose hit the skids after the turnaround specialist reported a fall in revenues and profits at the two businesses remaining from its 2008 acquisition of FKI. Despite yesterday's shudder in the stock price the company has a good track record. Furthermore, its recently acquired German gas and electricity metering company, Elster, has seen an improvement in its margins much faster than expected. As well, the company is a patient investor, knowing full well the value of waiting for the correct moment to enter the market and make purchases. At 18 times forecast earnings the shares remain a long-term buy, says The Daily Telegraph´s Questor. 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.AB