TalkTalk
Shares in TalkTalk (LSE: TALK) have risen 4.5% today, on news that the extent of data accessed in its latest cyber attack was significantly less than originally suspected. Fewer than 21,000 bank details had been accessed, despite the company having more than 4 million customers.
Nevertheless, TalkTalks customers are likely to remain concerned that their personal data may have been affected and TalkTalks reputation for data security has been severely damaged. Repairing the damage to its brand will no doubt take time and cost the company dearly.
Even before the hack, TalkTalk shares have underperformed the market. Up until the attack was announced, the value of its shares had already fallen by 25% since its peak in June this year, and this reflects the companys slowing growth outlook. TalkTalks sales growth in the first quarter slowed to a lacklustre figure of 3.5%, as competition on pricing has begun to intensify in the broadband market.
TalkTalks valuations are unattractive too. Its shares trade with a P/E of 29.4 and 7.8 times its book value. TalkTalk does have an attractive dividend yield of 5.7%, but the sustainability of the dividend is in question. Capital expenditure have been rising as TalkTalk builds its fibre broadband network in York and the company does not generate enough free cash flow to cover its dividend payments.
Centrica
Centricas (LSE: CNA) prospective dividend yield of 5.1% may tempt many dividend investors, but investors should remain cautious over the utility companys deteriorating outlook on earnings. Owning both downstream and upstream have historically helped it to offset volatility in commodity prices and allow it to generate stable cash flows, but now, both businesses are struggling.
Falling commodity prices have hurt its upstream business, whilst increased competition has put pressure on its supply margins. As these tough trading conditions are unlikely to go away any time soon, shares in Centrica could have further to fall.
EnQuest
EnQuests (LSE: ENQ) focus in the North Sea oil is why I have been avoiding shares in the company. The North Sea isone of the more expensive oil producing regions in the world, and its operations there puts the company in a weak position to copewith the lower for longer outlook on oil prices.
Although EnQuest is trying to reduce its production cost, it is still one of the higher cost producers on the market, asEnQuest has many mature North Sea wells, which are uncompetitive in todays low oil price environment. The company alsoappears to be burning cash too quickly, withits capital expenditure budgetthis yearlikely to be more than three times its operating cash flow.
Net debt has risen by almost $350 million in the first half of 2015 alone, and now stands at $1.28 billion. And as banks are becoming increasingly reluctant to lend to the sector, EnQuest could be forced toask shareholders for more cash.
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Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
