Wednesday tips round-up: Asos, IG Group

19th Mar 2014 07:09

At 100 times' earnings the valuation of Asos' shares requires perfect execution, not slowing sales growth and higher than expected costs. Yet that is exactly what investors are getting at the moment. Its investments in distribution capacity and new IT systems are now expected to cost 68m pounds, and not the 55m pounds previously expected. In parallel, advertising costs doubled over the last reporting period, to 40.9m pounds. As for sales, in the first two months of the year they slowed to a 26 per cent pace, from 39 per cent in the year ago period and in comparison to the 33 per cent which analysts had plugged into their spreadsheets. Hence, the forecast for profits in the year ahead came down. The company is a UK success story but it's hard to get worked up about them at these levels. Hence, the stock is still a sell, writes The Daily Telegraph's Questor. Things are humming along at IG Group but there does not seem to be an immediate catalyst on the horizon for the shares. Its strategy of 'de-emphasising' clients who do little business in favour of bigger hitters is proceeding apace. The firm is rolling out its own online equities trading business, to compete with the likes of Barclays and Hargreaves Lansdown. That is a low margin affair but the aim is to channel clients towards higher margin products. On the other hand, while revenues rose by 9% over the third quarter they will now be facing tougher comparables in the next period. As well, its US platform Nadex remains disappointingly slow, although the push into Europe continues. At 16 times earnings its shares look to be high enough for now, writes The Times' Tempus. 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