Re: AG Barr
Posted: July 17th, 2019, 1:35 pm
There was an article in the Investors Chron today by Phil Oakley. It was titled "What to do about profit warnings".
AG BARR were one of the companies discussed.
https://www.investorschronicle.co.uk/co ... -warnings/
Mr Oakley discusses a conventional method of avoiding companies that might issue profit warnings by investing in highly profitable companies with a history of delivering predictable profits & cash flows "in good times and bad". The dilemma is that investors see these as "bond proxies" and pile in , pushing up the share price, resulting in a high P/E ratio. There are no guarantees though, case in point being AG Barr (P/E of 26 before yesterday).
His overall summary:-
"AG Barr is a good business that has proven to be very reliable, but its reputation has taken a big hit here. A 20 per cent downgrade to 2019 profit forecasts would still leave the shares on a forecast PE of 25 times at 642p a share. This is virtually unchanged from the pre-warning multiple. Given the damage to Barr’s reputation for dependability, a lower valuation seems warranted and therefore the risks to shareholders still seem quite high. "
AG BARR were one of the companies discussed.
https://www.investorschronicle.co.uk/co ... -warnings/
Mr Oakley discusses a conventional method of avoiding companies that might issue profit warnings by investing in highly profitable companies with a history of delivering predictable profits & cash flows "in good times and bad". The dilemma is that investors see these as "bond proxies" and pile in , pushing up the share price, resulting in a high P/E ratio. There are no guarantees though, case in point being AG Barr (P/E of 26 before yesterday).
His overall summary:-
"AG Barr is a good business that has proven to be very reliable, but its reputation has taken a big hit here. A 20 per cent downgrade to 2019 profit forecasts would still leave the shares on a forecast PE of 25 times at 642p a share. This is virtually unchanged from the pre-warning multiple. Given the damage to Barr’s reputation for dependability, a lower valuation seems warranted and therefore the risks to shareholders still seem quite high. "