These three stocks all have updates out today, but should you buy them following the EU referendum and the uncertainty now present as the UK approaches Brexit?
Greggs
High street bakery Greggs (LSE: GRG) has risen by around 2% today following the release of its first half results. Sales have risen by an encouraging 6%, with like-for-like (LFL) sales up by 3.8% versus the first half of the previous year. This shows that the company’s turnaround strategy continues to work well, with its focus on the freshness and value of its products and its healthier Balanced Choice offer resonating well with customers in the food-on-the-go market.
Greggs’ first half operating profit has risen by 6.7% and despite the uncertainty in the UK economy following Brexit, it expects to deliver full-year numbers in line with expectations. While this is encouraging news for the company’s investors, Greggs continues to appear overvalued even after its share price decline of 19% since the start of the year.
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For example, it trades on a price-to-earnings (P/E) ratio of over 18 and while its bottom line is due to rise by 9% next year, this still equates to a price-to-earnings growth (PEG) ratio of around 2. So, while Greggs is performing well as a business, other stocks have more appeal as investments in a post-Brexit world.
Travis Perkins
Also reporting today was Travis Perkins (LSE: TPK). Its performance in the first half of the year has been solid, with it continuing to win market share and benefit from the investments it has previously made. Sales growth of 5.8% (3.1% LFL) and operating profit growth of 5.7% show that Travis Perkins continues to outperform most of its sector peers.
However, the outlook for the company is very uncertain following Brexit. In fact, LFL sales in July were below those of the second quarter of the year and while it’s perhaps too soon to come to firm conclusions, it appears as though Travis Perkins may be about to experience a relatively challenging period due to weakness in the wider economy as the UK approaches Brexit.
With Travis Perkins trading on a P/E ratio of 11.7, it appears to offer a sufficiently wide margin of safety to merit purchase at the present time. That’s not to say that its short-term performance will be impressive since there are clear risks, but rather for long-term investors it remains a sound buy.
InterContinental Hotels
Meanwhile, InterContinental Hotels (LSE: IHG) has posted upbeat results for the first half of the current year. Its underlying operating profit increased by 10% as global comparable first-half revenue per available room (RevPAR) increased by 2%. This has allowed InterContinental to raise its dividend by 9%, with the company now yielding 2.2%.
Clearly, InterContinental is an international business and so will be far less affected by Brexit than the likes of Greggs and Travis Perkins, which are UK-focused stocks. And with InterContinental trading on a price-to-earnings growth (PEG) ratio of just 1.1, it seems to offer good value for money as well as a wide economic moat. Furthermore, its investment in its loyalty proposition and digital offering means that its bottom-line growth is likely to remain strong over the medium-to-long term.
