The ASX has been working overtime to separate the wheat from the chaff in the past few weeks, with huge numbers of companies hitting 52-week lows. Retail stocks in particular have suffered a flogging, although other shares dependent on a boom-time economy are not immune.
FlexiGroup Limited (ASX: FXL) – last traded at $3.07, down 31% for the year.
FlexiGroup is the latest consumer discretionary share to be beaten with the market's unpopularity stick. In the absence of any bad news, the company is down 31% for the year amid poor consumer confidence and wide-ranging fear over retail profitability. While the fears are likely justified with a huge number of retail shares downgrading their profit expectations, I don't feel that FlexiGroup fits into the 'traditional' retail mould.
In fact I think that FlexiGroup's 'no interest ever' finance and 'Flexi-rent' arrangements may even grow in popularity as belts tighten, because the option of buying televisions, computers and whitegoods outright becomes more difficult for certain people. A weakening dollar may contribute to this by making imported goods (which is almost all of them) more expensive. Depending on your appetite for risk, FlexiGroup looks pretty appealing at its current price; although the more wary may wish to wait a while to see if any profit downgrades are in the works.
Skilled Group Ltd. (ASX: SKE) – last traded at $2.23, down 7% for the year.
Skilled is a tough company to judge. On the one hand, in a tight employment market, companies have a larger pool of unemployed workers to choose from, making them less likely to retain Skilled's services. On the other hand, more workers may sign up to Skilled in the hope of finding work, thus increasing the pool of available contractors and the likelihood of securing a position.
Likewise, as the total number of full-time job vacancies shrinks, Skilled has a harder time finding jobs in which to place its contractors. Conversely as companies cut costs and use employees more flexibly, Skilled is in an excellent position to fill temporary and casual positions. Results dictate that Skilled is losing more than it gains however, with half-yearly NPAT down 25%. I personally would avoid this company until more clear signs of the economy's future prospects emerge.
Editor's Note: An earlier version of this article stated that Skilled Group's final dividend had been suspended. Skilled Group has contacted us to confirm that statement is incorrect. The Motley Fool apologises for the error.
Toll Holdings Limited (ASX: TOL) – last traded at $5.05, down 1% for the year.
As indicated by management, Toll's EBIT has been broadly in line with the previous year while the company restructures its operations for greater efficiency and cost savings. Despite flat earnings, Toll's share price has been quite volatile, only recently returning to a P/E valuation in line with last year's earnings.
The company expects to save between $15 and 20 million a year beginning from 1 July 2014, presenting investors with a window of opportunity to pick up Toll at a reasonable price. With a fully-franked dividend of 5.5% at today's prices, Toll is about as good as it gets in the transportation industry. The Motley Fool knows you like shares with growing earnings and reliable prospects – both in boom times and in a downturn. Unfortunately Toll and Skilled simply don't fit the bill – but that's why our top analyst has recently released a FREE report on our Top Stock for 2014. Click here, it's free!
