Everybody likes picking up a bargain in the January sales, and the following three companies are all trading at a discount after a tough 2016. Should you pop them into your shopping basket?
easyJet
Budget airline easyJet (LSE: EZJ) has had a year to forget with the share price down 40% over the past 12 months. The companyhas been hit by falling revenues per seat as it cuts fares to fight off tough competition from rivals Ryanair and Wizz Air. Terrorist attacks have inflicted collateral damage, by hitting passenger demand. Brexit was a further blow, as easyJetgeneratesroughly half its revenues from UK passengers, whose money doesnt travel as far overseas these days, while European airport costs have risen sharply in sterling terms.
Novemberpassenger statistics showed a rise of 2.9% to 4.95m year-on-year, which may give grounds for optimism, althoughload factor dropped 0.6 percentage points to 89.7%. At todays reduced valuation of 9.55 times earnings, easyJet does look a temptingrecovery play, while income seekerswill be tempted by its soaring 5.3% yield. However, with Brexit uncertainty weighing, and the companys earnings per share (EPS) expectedto have fallen21% over the year to 30 September 2016, it may take a little longer before easyJet is ready to fly.
ITV
Broadcaster ITV (LSE: ITV) hasbeen a real turn-off in 2016, with the share price down 26% in that time. This follows years of must-seegrowth, so some kind of retrenchment was inevitable. ITV has beenhit hard by falling TV advertising revenues, which only accelerated after the shock Brexit decision, astravel companies, retailers, banks and insurers cutback on their spend. TheBBCs Olympics coverage will havehit summer viewing figures.
There are still good reasons to tune into ITV. In a fragmented media market, the company can still regularly deliver 5m eyeballs, or 15m for its most popular shows. Its also diversifying its revenues away from domestic advertising by selling more programmes overseas, with revenuesfrom ITV Studios rising18% to 923m in the third quarter, driven by acquisitions. Chief executive Adam Crozieralso expectsdeliver double-digit revenue growth in online, pay and interactive, and plans to make the operation leaner by slashing 25m of costs. The shares have rallied lately andITVs ratings could continue to risein 2017.
Next
Retail chain Next (LSE: NXT) has slippedout of style amonginvestors in recent years but 2016 was a real fashiondisaster. Sales plunged due to unseasonal weather, stock shortagesin itsformerly fast-expandingDirectory operation, and Brexit, as the subsequent fall in the pound is drivingup the cost of imported materials.As incomes stagnate shoppers will beresistant to rising prices.
Theres no sign of a recoveryyet.Q4 retail sales fell5.9%, while Directory sales wereflat. However, operating margins of 20.7% are impressive, and the stocks 3.2% yield is covered 2.8 times. Trading at 11.1 times earnings, thiswell-managed company has strong recovery potential, although given Brexit uncertainty, investors may have to be patient before Nextcan finally strut its stuff.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended ITV. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.