Do The Latest Updates From Tesco PLC, ASOS plc And Fidessa Group plc Confirm Their Recovery Potential?
Shares in information solutions provider Fidessa(LSE: FDSA) have risen sharply today after the release of its full-year results. That's despite the company recording zero growth in pre-tax profit for the 2015 financial year even though revenue rose by 7%. This top line figure was, however, a strong performance since the company experienced volatile conditions in financial markets.
Looking ahead, Fidessa's end markets continue to improve and it believes there are increasing opportunities for new services, with a strengthening pipeline on offer throughout the business. Furthermore, with Fidessa reassuring its investors that its current level of investment won't hurt its potential to pay dividends in future, its appeal as an income stock remains relatively high - especially since it yields 4.6% at the present time.
However, with Fidessa trading on a price-to-earnings (P/E) ratio of 23.3, its shares appear to be overpriced in a relatively cheap wider market. As such, there may be better options available elsewhere.
Also lacking value for money are shares in ASOS(LSE: ASC). The online fashion retailer recently reported positive results for the key Christmas trading period, with retail sales increasing by a very impressive 22%. Furthermore, the company remains on track to deliver on its full-year guidance and with a strong balance sheet and impressive cash position, it appears to be well-placed to deliver on its long-term growth strategy.
Despite its potential as a business, ASOS continues to lack appeal as an investment. That's largely because it trades on a P/E ratio of 49.1, which indicates considerable downside potential and a lack of upward rerating prospects. That's especially the case since ASOS is forecast to grow its bottom line by 23% this year, which puts it on a price-to-earnings growth (PEG) ratio of over two. Therefore, with the prospects for the stock market and the consumer spending space being uncertain, it may be prudent to avoid ASOS at the present time.
Meanwhile, Tesco's (LSE: TSCO) Christmas trading update was perhaps better than many investors expected. For example, it recorded like-for-like (LFL) sales growth of 2.1% over the six-week Christmas period, with a particularly strong performance being delivered by its international operations. That part of Tesco saw LFL sales increase by 4.1% versus the comparable period from last year and this indicates that the company's new strategy is gaining traction in an improving macroeconomic environment.
Looking ahead, Tesco appears to offer excellent value for money as evidenced by its PEG ratio of just 0.2. And with the likes of Aldi and Lidl unlikely to be able to sustain their previous rates of growth simply due to them becoming more mature businesses with more limited expansion potential, the outlook for Tesco and its investors remains encouraging. As such, now appears to be a good time to buy it for the long term.
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Peter Stephens owns shares of Tesco. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended Fidessa. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.