Is Now The Perfect Time To Buy Tesco PLC, Prudential plc And Stanley Gibbons Group PLC Following Weakness?
Shares in collectibles company Stanley Gibbons(LSE: SGI) have tumbled by 29% today after it issued a profit warning as well as details of a rights issue. It's seeking to raise £10m of new equity in order to support a rationalisation exercise, to complete the integration of previous acquisitions and also to provide the additional working capital required to provide the company with the financial flexibility to trade efficiently in the medium term.
Stanley Gibbons has already identified at least £5m of cost savings that are set to be implemented alongside other initiatives designed to make the company more efficient. However, the bulk of the £10m raised will be used to repay an approximately £6m overdraft, which needs to be repaid by the end of March.
With the company continuing to experience lower sales throughout its business, it continues to offer a relatively unappealing near-term outlook. Certainly, Stanley Gibbons has potential as a turnaround play, but with an adjusted loss before tax of up to £2m now set to be reported this year, it appears as though it's a stock to watch rather than buy right now.
Meanwhile, Prudential (LSE: PRU) continues to record a disappointing share price performance. Its value has fallen by 18% in the last three months, with weakness in China being a key reason for this. However, with financial product penetration in the world's second largest economy being relatively low and Asia being underrepresented in terms of the financial products people have, there's an opportunity for Prudential to deliver strong sales growth in future years.
Certainly, the company's bottom line performance continues to be strong and Prudential is expected to report a rise in its earnings of 14% in the 2015 financial year. This has the potential to positively catalyse investor sentiment in the stock, with further growth of 9% expected in the current financial year. Therefore, Prudential seems to be performing well but is suffering from weak investor sentiment, which could prove to be an ideal combination for capital gains over the medium-to-long term.
Return to growth?
Meanwhile, shares in Tesco(LSE: TSCO) may seem to be a poor performer when looked at over the last year, with them being down by 24%. But they've experienced a revival in recent months, rising by 13% in the last month alone. Part of the reason for this is a gradual realisation by the market that the company's new strategy could be starting to pay off and could return Tesco to profit growth as soon as this year.
In fact, Tesco is forecast to increase its earnings by 78% in 2016 as a more efficient supply chain, reduced opening hours and a staff pay freeze begin to have a positive impact on margins. With the company's shares trading on a price-to-earnings growth (PEG) ratio of only 0.2, they appear to offer excellent value for money. And with investor sentiment on the up, now could be a good time to buy ahead of further share price rises.
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Peter Stephens owns shares of Prudential and Tesco. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.