The recent pull-back in the Australian sharemarket has finally given analysts and investors a reason to reconsider the companies on their watchlists that were looking a little pricey. Today I’ve found a retailer, an online classifieds group, and a nickel miner that you should consider for your portfolio.
Kathmandu Holdings Ltd (ASX: KMD) shares have fallen exactly 25% over the last six months following relentless media reports of difficult retail conditions and a slew of earnings downgrades from competitors. Kathmandu was one of the few to perform strongly (in an operational sense) and now trades on a trailing PE of 13.5 and a forecast forward PE of just 11.2. For a company that analysts are forecasting to improve earnings per share by 19% this year, that appears low. I believe investors are nervous about the planned UK expansion and the potential for a further decline in the Australian economy, however at the current price the long-term capital risk appears low in my opinion.
Shares in online property classified company REA Group Limited (ASX: REA) have fallen 11% in the last month, 5% more than the ASX 200, following the purchase of a 20% stake in the number 3 property website in the US and concerns over the company’s lofty share price. Analysts are concerned that the group over-paid for the stake in Move, Inc and that the company’s trailing PE ratio of 36 is expensive (even though earnings are forecast to grow by 30% this year).
I’m of the belief that REA Group will outperform expectations again this year and more than justify its forward PE ratio of around 28.
The last three months have been hard for shareholders of Independence Group NL (ASX: IGO). A 60% rise between January and August has been followed by a 15% decline over the last three months. Analysts are still positive on the company’s future, with huge amounts of cash being generated by the group’s nickel, gold and copper mines. The recent fracas following ANU’s decision to divest from the company may also have contributed to giving investors an opportunity to invest in this quality mid-sized miner.
The most important aspect to consider when looking at companies on your watchlist is their future prospects. Sure, the big four banks have also fallen a long way but their growth prospects are negligible compared to the three companies above.