Wednesday tips round-up: Stagecoach, Melrose, Carpetright

27th Jun 2012 06:59

In the Telegraph, Questor makes the case for Stagecoach, which owns the East Midlands and South West Trains franchises as well as a very large bus network. Broadly, train companies are suffering in the recession but buses are doing well and the North American Megabus gamble appears to be paying off. Trading at 10 times earnings with a decent three per cent yield, the stock is a buy. Tempus in the Times is something of a fan of Melrose, an engineering firm which buys other engineering firms then sells them at a profit. It has made around £550m on the sale of McKechnie and Dynacast, bought in 2005 and is now in the hunt for German firm Elster which makes smart meters for measuring power usage in people's homes. With an impressive track record and a price to earnings ratio of just 11 times, Tempus think Melrose is worth a shout.Tempus looks, very skeptically, at Carpetright. The column admits the firm is doing nothing wrong in terms of strategy but argues, in the current market: "any company trying to sell big-ticket items that people do not necessarily need is going to struggle." The figures are dire, pre-tax profits at £4m compared to £16m last year. Yet, very oddly, the shares have gained by two thirds since last Autumn. The explanation, thinks Tempus, are some institutional investors who just "believe" in Carpetright, but as it's currently trading at a staggering 172 times last year's earnings, the stock seems best avoided.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.