Wednesday tips round-up: Victrex, Just Eat

9th Apr 2014 07:31

Polymer specialist Victrex saw a significant uplift in second quarter sales, for growth of 14 per cent to 1,584 tonnes for the whole of the first half. However, the firm added that it is now selling higher volumes of lower profit-margin products. As well, foreign exchange headwinds in key markets such as the US and Europe are now expected to be stronger during the current financial year, which ends in September. The outfit also benefited from a steady recovery in the demand for its plastic products used in the medical market. More significantly, it is embarking in the largest expansion ever of its capacity to manufacture its temperature and chemical resistant lightweight polymer Peek, which is used in both the automotive and aerospace markets. The shares are currently changing hands at 22 times expected profits, falling to 20 times' next year. The stock is by no means cheap but with pre-tax profit margins of about 42% it demands a premium. Hence, the Daily Telegraph's Questor team retains its recommendation to 'hold'.Just the same as other recently floated outfits, such as AO World and Boohoo.com, shares of Just Eat have dropped below the price at which they debuted on the stock-market - 260p in the case of the latter. However, this is more akin to a balloon deflating, instead of a bubble bursting. True, the shares are trading on a preposterous historical price-to-earnings multiple of 100. However, if one concentrates on its 'core', and profitable, markets - which are Britain and Denmark, then that multiple decreased to 50 times earnings, on the basis of reasonable projections. Furthermore, by 2015 it is fair to expect revenues to double when compared with last year's levels. In parallel, it is likely the losses in which it is incurring to expand in 11 new geographies will at some point disappear, if it is able to replicate past successes. Under such a scenario, which makes optimistic assumptions for several "unknown unknowns", the above valuation metric drops to 30. Even so, and despite the fact that it is an interesting business with a strong market position, there is no reason why retail investors should rush to get in now after having being left out of the initial sale, says The Times's 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