Recent monthsbeen tough for financial stocks, which have been shaken by volatile markets. These three companieshave all been punished as a result, but could they be bang on the money again?
Aviva
Ive clung onto my stake in struggling insurer Aviva (LSE: AV) hoping it will come good and Im still waiting as the stock continues itsslide, fallingmore than 21% in the last year. Yet I dont seeanything seriously wrong with Aviva, which has weathered the impact of Chancellor George Osbornes pension freedom reforms on annuity sales, and speedily integrated recent acquisition FriendsLife. Forecast earnings per share (EPS) growth of 108% this year (following last years 56% drop) also show promise, with another 10% EPS growth forecast for 2017.
The dividendhas also recoveredfrom its savaging three years ago and is on a forecast yield of 5.6% by the end of this year. Itsbalance sheetis one of the strongest in the sector, and chief executive Mark Wilson has made progress in craftinga tighter ship. Aviva sets sailfull of hope but continues to flounder. Stormy stock market seas are onereason. Or maybe investorsare reluctant to buyat todays surprisingly priceyvaluation of 18.8 times earnings.
Barclays
Investors in Barclays (LSE: BARC) have had an even hardertime of it, with the stock falling 35% in the past 12 months. UK banks seem to be exposed to every global risk, with panic in the European banking sector causing disarray over here. Barclays, naturally, has problems of its own making as well, with the 18% rise in Q1 core pre-tax profits to 18.6bn marred by rising losses from running down non-core operations. This reducedQ1 pre-tax profits to793m, down from1,057m last year.
Investors who were shocked at the scale of the mess banks got themselves into before the financial crisis havebeen similarlysurprised (and dismayed) by how long theyvetaken tosort themselves out. Mud sticks, especially toxic mud. Barclays still isnt there yet, with another 50bn of non-core disposals in the pipeline before chief executive Jes Staley can present investors with a cleaner, streamlined bank. Investors who can look beyondthe current mess will be tempted by its valuation of 10.3 times earnings, and predicted EPS growth of 49%in2017. It may take longer than that for the dividend to be restored to full health, however.
Hargreaves Lansdown
The UKs largest independent financial adviser Hargreaves Lansdown (LSE: HL) is a super soaraway growth stock no more, falling 17% in the last six months. Itsshare price has nonethelessdoubled in the last five years and this leaves it trading an expensive37.65 times earnings. Forecast EPS growth of 13% in the year to 30 June 2017 offers some justification for this, as do operating margins of 50.1% and return on capital employed of 85%. Inevitably, given strong share price growth, the yield disappoints at 1.71%.
Hargreaves is effectively a geared play on global stock markets, and as marketsstruggle,itsshare price also faces an uphill battle. It certainly isnt a buy, and given todays market volatility and toppy valuation, it may even be time to take some profits.
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Harvey Jones owns shares of Aviva. The Motley Fool UK has recommended Barclays and Hargreaves Lansdown. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
