Friday tips round-up: National Express, Aviva
National Express seems to be on a firm footing, with a sound base from which to expand into new territories. Nevertheless, the company’s chief executive, Mr. Finch, has experienced some setbacks of late. His outfit wasn’t picked for Crossrail and he decided not to compete on TransPennine or Northern. However, Finch accumulated an enviable track record while at First Group, given his ability to farm contracts from the Department for Transport.
Aviva
459.70p
16:45 19/04/24
FTSE 100
7,895.85
16:59 19/04/24
Legal & General Group
244.60p
17:05 19/04/24
Mobico Group
60.05p
16:40 19/04/24
Old Mutual
210.90p
16:55 22/06/18
Furthermore, the company appears to be on the cusp of winning a new UK rail franchise soon. Not only that, National Express managed to grow profits by 15% in the third quarter despite various headwinds which wiped £8m from the bottom line. Likewise, it has recently won several contracts in the UK and over on the Continent. It is also expanding its footprint in the US, in Boston and Memphis. All the while, the businesses are on course to deliver free-cash-flow of £150m and further reduce debt. Therefore, the discount on which the shares are trading, on a multiple of about 12 times’ earnings, versus 15 times for Stagecoach, seems “a bit cautious,” says The Times’s Tempus.
Chief executive Mark Wilson is doing a sterling job of turning Aviva, the country’s second largest insurer, into a lean and efficient cash cow capable of pumping out dividends. Unfortunately, there is a problem when trying to buy into recovery stories, namely that you might just turn out to be “too early”. Conversely, if you wait too long you can easily miss the boat. Yesterday’s market reaction seems to indicate that markets are demanding a bit more cash-flow and a tad more growth; both of those are strategic priorities for Mr. Wilson.
To be fair, the stock is up by 40% year-to-date, trouncing the returns achieved by its benchmark, the FTSE 100, which has advanced by a comparatively paltry 9.4% over that same timespan. On the other hand, rivals such as Legal&General or Old Mutual offer a better dividend yield. A hardening market for general insurance would seem to suggest that Aviva's stock price does not yet reflect the company’s progress, writes Tempus.