WH Smith Plc : Crossover strategy
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08/06/2012 | 04:05am
Opinion : Bullish above 0 GBp
Target price : 587.5 GBp
Stop loss: 534 GBp
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LONDON STOCK EXCHANGE
Retail - Specialty |
WH Smith is one of the UK’s leading retailers and is made up of two core businesses – Travel and High Street. The stock continues its bullish rally to test new highs.
The company is low valued as shown by the "enterprise value/revenue" ratio estimated at 0.56 and the PER is at 9.45x. Moreover, analysts polled by Thomson-Reuters have regularly upgraded their earnings per share estimates. Therefore, the consensus expects an increase in profitability and also shows the financial health of the WH Smith group.
Technically, the stock is moving in an upward trend for many weeks. This movement reflects a buyer enthusiasm confirmed also by the well orientation of the moving averages. The security is going toward GBp 560.5 and would give a strong buying signal if the crossover is confirmed in daily closing.
Therefore, investors will benefit from the signal given by the breakout of the GBp 560.5 resistance to take a long position in the stock. The objective will be set close to GBp 587.5 (long-term resistance). Once the position is opened, a stop loss should be fixed under 20-day moving average to guard against a trend reversal.
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Valuation |
2013e |
2014e |
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PER (Price / EPS)
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10,9x |
10,1x |
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Capitalization / Revenue
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0,80x |
0,80x |
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EV / Revenue
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0,77x |
0,77x |
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EV / EBITDA
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6,47x |
6,20x |
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Yield (DPS / Price)
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3,95% |
4,33% |
| Profitability |
2013e |
2014e |
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Operating Margin (EBIT / Sales)
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8,86% |
9,26% |
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operating laverage (Delta EBIT / Delta Sales)
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- |
- |
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Net Margin (Net Profit / Revenue)
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7,32% |
7,59% |
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ROA (Net Profit / Asset)
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19,3% |
20,3% |
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ROE (Net Profit / Equities)
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62,4% |
63,6% |
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Rate of Dividend
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43,0% |
43,6% |
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