When the glory days have gone, it can be hard to get them back. The following three companies have taken a hit lately so can they come roaring back to form?
ARM needs a leg up
Microchip maker ARM Holdings(LSE: ARM) was a super whizz-bang stock for years, turning into a four or five-bagger, depending on when you bought it. See the mighty fallen: its share price is trading 15% lower than it was three years ago. It took another knock recently, on bad from news from key customer Apple, which reported a 16% drop in iPhone sales in the three months to March 26.
Yet little is wrong at ARM, whose first quarter results showed 15% growth in US royalty revenues (against a drop of 3% across the industry) and 39 new licences signed. It also boasts a robust licensing pipeline and strong demand for its next-generation products, and not just from Apple. ARM has £1bn net to invest in further intellectual property rights, putting it in a commanding position against its rivals. ARM looks cheap by its own heady standards, trading at 38 times earnings (I remember when it topped 70 times). It remains a great British company but is hardly a raging buy at today's price.
This is a rough time for the banking sector and Banco Santander(LSE: BNC) has struggled accordingly, its share price almost halving over the past two years to today's 314p. Emerging markets exposure was supposed to be a good thing for it, but that theory has floundered on HSBC and Standard Chartered's troubles in Asia, and Santander's misadventures in troubled Brazil, where it earns 18% of its profits. Although business levels have held up in Brazil, currency headwinds still hit revenues.
Santander continues to win new customers in its biggest markets, the UK (23% of business) and Spain (15%), helped by the popularity of its 123 account. A first quarter rise of 4% in customer lending and revenues is respectable, and although the yield disappoints at 2.27%, its valuation looks tempting at 8.53 times earnings. Earnings per share (EPS) are forecast to fall another 4% this year but rebound 10% in 2017, and Santander looks a good buy for the long term.
Off your marks
I've made snide comments about former high street hero Marks and Spencer Group's (LSE: MKS) fashion sense in the past but I was in its flagship Marble Arch store last week and it had more dash than I remember. Sadly, there's nothing cool about its share price, which is down 25% in the last year alone.
This has been a tough year for the retail sector generally, both food and groceries, with Marks having a foot in both camps. This split personality is reflected in sales, with its much-admired food halls thrashing the struggling grocery market, but general merchandise (clothes) a real drag on performance.
New boss Steve Rowe is the latest to try and succeed where others have failed, but I suspect there's a structural problem that no individual appointment can resolve. Forecast EPS growth of 4% and 7% over the next two years may justify its 12.98 times earnings valuation. The yield of 4.16% is also tasty. I can't imagine Marks & Spencer roaring back into life but it might give the odd polite cough.
At Motley Fool we reckon there are far more exciting growth prospects out there, like this rather nifty British company.
This mid-cap company has been putting on the style lately and one of the Motley Fool's top analysts reckons it's the latest British brand with the potential to go global.
To find out its name all you need do is download our BRAND NEW report A Top Growth Share From The Motley Fool.
Click here to read this no obligation report. It will be yours in moments and won't cost you a single penny.
Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool UK has recommended ARM Holdings and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.