Tuesday tips round-up: Staffline, Ricardo

20th May 2014 07:15

Staffline's share placement to raise 16m pounds was greeted by investors with a three per cent premium. That amounts to a vote of confidence in the firm's plans to employ the monies thus generated to fund the purchase of Avanta, the company that helps the unemployed get back to work. In parallel, the outfit's shares were catapulted 16 per cent higher by the news. At about five times' earnings the 65m pound price tag looks very reasonable. The transaction will see Staffline become the third largest provider of welfare to work services. In reaction to the above broker Liberum upwardly revised its forecasts for earnings per share (EPS) by 32% for the present year and 45% for the next two years. Its analysts now see pre-tax profits of £18.4m in 2014, rising to £22m next year, giving 59p, and 69p in earnings per share respectively. "The stock is now changing hands on a forecast price-to-earnings multiple of 15 times, falling to 12.9 times next year. That still looks cheap. Buy," says The Daily Telegraph's Questor column. At 17 times' earnings shares of Ricardo are not cheap, but they are worth it in the long-run, given the firm's strong market position and technical skills. Unfortunately for the company, such is the secrecy surrounding upcoming product launches that it is unable to talk much about them. However, it is a known fact that it is working on the engines for the next "supercar" being produced by McLaren, that it has signed a contract with a large unnamed US manufacturer and finalised an agreement with a Chinese outfit for its "HyBoost" hybrid technology. A second deal is expected shortly with the latter. The order book was up on last year, Monday's figures showed. There is now also cash to spend on acquisitions and it's moving to expand its consulting activities into areas such as water, although there are few potential targets to be had, writes The Times Tempus. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB