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Blackmores Limited, Smartgroup Corporation Ltd and STW Communications Group Ltd: Buy, Hold or Sell?

vitamins
Credit: Shannon Kringen

The following three companies are amongst the leaders in their respective fields, but right now at their current share prices should you buy, hold or sell them?

Here are some clues based on the view of one of Australia’s leading fund managers, Wilson Asset Management which is the manager of listed investment company WAM Capital Limited (ASX: WAM).

1. Blackmores Limited (ASX: BKL)

It’s been a great run for shareholders in Australia’s leading vitamin producer with the share price of the health products group soaring 170% in the past year. The long-term performance of the company is equally impressive with Blackmores achieving a ten-year total shareholder return of 24.5% per annum.

Wilson’s began purchasing stock in Blackmores around $47 a share so the fund manager has already captured much of the recent upside, however, they do see further earnings momentum particularly thanks to growth in Asian markets which could keep the share price climbing higher.

Trading on a price-to-earnings (PE) ratio of roughly 30x and with earnings per share growth of around 60% the current price level of $74 could be justified

2. Smartgroup Corporation Ltd (ASX: SIQ)

Operating in the salary packaging and novated lease sector, Smartgroup has been listed for less than 12 months so it is likely still flying under the radar of many investors

Wilson’s purchased stock in the initial public offering at $1.60 and after a rocky start – which wasn’t helped by lingering concerns over potential regulatory changes – the stock has recently rallied to a high of $2 a share.

The fund manager views the government sector trend to outsourcing as compelling and coupled with acquisition opportunities this should provide positive earnings momentum.

Trading on a PE of 10.5x and with forecast growth of 16%, the stock looks like it could still be good value.

3. STW Communications Group Ltd (ASX: SGN)

Despite owning a suite of wide-ranging and highly regarded advertising and marketing agencies, STW has struggled from being caught in the headwinds buffeting media companies such as free-to-air television.

Wilson’s explained that it got caught out by the severity of the decline in business fundamentals and exited its STW position back in February at 74 cents per share.

Despite the share price continuing to decline – it is currently trading at just 57.5 cents, given the weak earnings outlook this might be one stock to continue avoiding.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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