Got £2k to invest? I’d take a close look at these 2 turnaround stocks today
Aston MartinLaguna Global Holdings (LSE: AML) has glamour, cachet and James Bond on its side, none of which has helped its share price, which has gone into reverse since last autumns high profile IPO.
Its now down 45% in six months, and has dipped slightly after todays Q1 results. Could this a buying opportunity for long-term investors?Maybe. If you are of an optimistic bent.
Put your foot down
Theres some good news in todays numbers, with revenues up 6% to 196m in what was a seasonally small quarter. However, adjusted EBITDA fell a whopping 35% to 28m year-on-year, although management pinned this on planned higher costs to support product expansion.
There was a 10% rise in sales of wholesale units, (cars to me and you) with sales hitting 1,057 against 963 a year before. This was driven by 30% growth in demand from Asia Pacific, particularly China, with the Americas up 20%. This offset UK and European softness, down 9% and 4%, respectively.
Aston Martin made a gross profit of 83m, in line with last year, but margins dipped 2% to 42%.Net cash from operations rose 37m, as expected, while net debt stood at 590m. Management is optimistic as deliveries are significantly weighted towards the second half.
Investing in Aston Martin was never going to be an easy ride. As Rupert Hargreaves pointed out at the IPO, this is a company that has gone through seven bankruptcies. Luxury car volumes have been falling across the industry, so todays sales increase is positive, and suggests some resilience to wider automotive trends. A doubling of retail growth in the Americas is a reward for its focus on this key region.
The 1.85bn company isnt cheap, trading at 21.9 times forward earnings. But City analysts are optimistic, predicting earnings per share growth of 42% across 2019, followed by 90% the following year.
However, these are challenging times, and first half adjusted profits are expected to fall year-on-year, due to the non-repetition of 20m income, more fixed costs, and fewer specials.I wouldnt rush to buy Aston Martins stock today.
Brexit hasnt helped, witness the drop in UK sales, but travel group TUI (LSE: TUI) has taken an even greater hit, with a fall in holiday bookings as Britons worry about how departing the EU might hit flights, as well as their own prosperity.
The groups share price has more than halved over the last year, despite a recent rebound after the postponed Brexit deadline prodded people into booking a summer escape.
Todays half-year results showed a 1.7% rise in turnover to 3.1bn at constant currency, with summer bookings falling just 3%, which is pretty good in the circumstances, while the average selling price actually rose 1%. Overall it falls into the could have been worse category.
As well as Brexit, the group has also been hit by the grounding of Boeing 737 MAX aircraft, last summers heatwave (which reduced last-minute bookings), and overcapacity in Spain.
However, TUI is benefiting from its integrated model, with its booming Cruise and Destinations activities offsetting declines in Markets & Airlines.
Earnings forecasts look bumpy but this is reflected in a valuation of just 7.1 times forward earnings. The current yield is a mighty 8.1%, covered 1.6 times by earnings. Royston Wild has previously named it a tasty proposition for income seekers. It may not be smooth sailing, though.