Wednesday share tips: Ashtead, Crest Nicholson

17th Jun 2015 14:34

Shares in Ashtead came off on profit-taking following its latest full-year profits. The company, which rents out equipment, believes it can outspend rivals on new investment, allowing it to deliver better service and thus continue to grow its market share. It has been doing just that and the historical share price performance is a testament to it. The stock has almost doubled since the autumn of 2013.The company´s footprint in the US sunbelt has grown from about 4% in 2010 to 7% today. In parallel, the market share of its smaller US rivals has fallen to 48% from 61%. The risk is that investment is too high, debt goes too far and the market collapses - as occurred in 2010. Nonetheless, in the year to the end of April the company´s rental revenues grew by 24% and its pre-tax profits by another 35% to 489.6m pounds. The differential in the growth rates of those two magnitudes lies in the fact the company has more efficient outlets. Significantly, the firm managed the above results in the face of a cold winter Stateside and a slowdown in the energy market.At 14 times´earnings the valuation on the shares might look toppy for a cyclical business. However, there is virtuous cycle in playwhich means the shares are still a long-term buy. Buy for the long-term, writes The Times´s Tempus.Conditions in the housebuilding sector are currently some of the best ever, Crest Nicholson chief Stephen Stone believes. Its targets reflect that. Stone is forecasting sales reaching £1.4bn by 2019 and 4,000 completions. To get there, the company plans to move into the private renting sector and bulding homes for institutions that want to invest.In the very short-term, forward orders are up by 26% to £436m and 80% of the current financial year´s output has been sold. Likewise, the pre-election slowdown in the top segment of the market has already been made up. Yet changings hands now at 2.4 times net asset value all of the above has been priced into the shares already, although the long-term growth is there. Even so, after rising by 80% since the autumn investors may want to take some profits, Tempus says.