5 Opportunities For The Week Ahead

Published in Investing on 31 August 2012

Results season continues, and we pick five worth a close inspection.

There are still more interim releases coming next week from companies in the FTSE 100 (UKX) and other FTSE indices, but we're also starting to see a few full-year results coming through, which should add to the potential opportunities out there.

If you want to check out any prospects ahead of the results, here are some interesting ones coming our way...

Johnson Service Group

I'm going to start this week with a potential small-cap opportunity, in the shape of Johnson Service Group (LSE: JSG), which is due to release interim figures on Tuesday. Probably best known for Johnson's dry cleaners, that's actually a relatively small part of the business, with textile rentals and facilities management making up the bulk.

The AIM-listed firm, valued at around £72m, has seen its share price stagnate over the past couple of years, though earnings have been steady. We have a couple of good years forecast, with a prospective price-to-earnings (P/E) ratio of 7 for this year for the 28p shares, falling to 5.8 for 2013. However, at the end of 2011 there was net debt of £49.7m on the books, which is more than half the company's market cap.

But that debt is being reduced every year, and there's a 3.8% full-year dividend expected this year, rising to 4.3% next -- and if you're concerned that the debt position might damage confidence in those payouts, they should be around four times covered by earnings. I'll be watching out for dividend and debt news on Tuesday.

Dechra Pharmaceuticals

On the same day, we'll have full-year results from Dechra Pharmaceuticals (LSE: DPH) and, according to the veterinary pharmaceuticals development firm's pre-close update released in July, things look to be going well. We're expecting to hear of a 9.3% rise in total revenues, with a 7.5% rise after the contribution from Dechra's acquisition of Eurovet Animal Health is excluded. Net borrowing, which rose last year, should be heading down again.

Although the shares are up around 25% over the past 12 months, to 498p today, forecasts suggest earnings growth of around 20% this year and 10% next. The shares are valued at a prospective P/E of 13, which might not seem cheap, but any investment would be based on prospects of higher-than-average earnings growth.

Hargreaves Lansdown

Wednesday brings us full-year results from Hargreaves Lansdown (LSE: HL), the financial services firm that offers brokerage, funds, and other investments. And what can you say about a company that had its origins in a bedroom in 1981 and has gone on to reach the FTSE 100 with a £2.9bn valuation? "Wow" springs to mind.

The share price has piled on up in recent years, growing more than four-and-a-half fold since mid 2008, to stand at 615p today. Earnings and dividends have been rising steadily, and we have earnings per share growth forecasts of 16% for this year and 22% next, with dividends of around 3.5% and 4% expected.

Wm Morrison

On Thursday it ill be interim time for Wm Morrison Supermarkets (LSE: MRW). After being big in the news in the first half of 2012, we haven't heard a lot about supermarkets of late, and this should bring us an update on how the sector is going.

Morrison's profits have been rising steadily, but the share price hasn't -- at 283p, it's down 14% since the start of the year, even though further strong progress is expected for this year. In fact, forecasts suggest dividends of 4.2% and 4.7% for the next two years, which seem pretty good for a company as relatively safe and defensive as a supermarket.

Go-Ahead

Go-Ahead Group (LSE: GOG), which reports its full year on Thursday, might just be a bargain. The group, which runs a number of bus and train companies, told us in its June pre-close update of a robust year, telling us: "Overall, we remain confident that we will deliver a full-year result in line with our expectations."

With the shares at 1,300p, those expectations suggest a dividend of 6.2% from a P/E of around 9, with a further 6.3% payout pencilled in for next year. Net debt should be around £95-100m, which is a significant fall, and not really a problem for the £550m company. What might hold things back is fear of a slowdown in rail services as poor economic conditions continue. But we could be looking at a good long-term opportunity here.

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> Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Hargreaves Lansdown.

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Comments

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TMFBoing 01 Sep 2012 , 11:50am

Hi Luniversal,

Thanks for posting these.

Best,
Alan
TMFBoing

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