Posh handbags maker, Mulberry (MUL) is down a thumping 25% this morning to 998p, following a disappointing trading update, containing a profit warning. The ridiculously high rating for this share meant that it was always an accident waiting to happen.
EPS was 44p last year, and they say today that this year will see lower profits than last year (but not quantified). So if the drop is only small to say 40p EPS, then that means the shares are still very highly rated on a PER of 25, even after today's falls. Any more bad news, and it would be easy to see these shares fall much lower again. Not for me, I'd rather buy bombed out things where the bad news is already in the price, not premium-priced shares which are a hostage to fortune - especially in these times of macroeconomic uncertainty.
Another share on a premium rating is chip designer ARM Holdings (ARM). At £8.1bn, it's market cap is in the stratosphere, but I mention it merely to point out the rating. Q3 EPS came in at 3.7p, so annualise that (ignoring any seasonality) and you get 14.8p EPS. So at 627p the shares are on a staggering PER of 42. Turnover & profit growth are both only around 20% year on year, so this looks a really toppy valuation.
Software group, Sanderson (SND) has fallen for the latest fashion of heading up a trading update with a tag line which is supposed to tell the reader how to interpret it, which in this case is, "Strong trading momentum maintained".
I detest these tag lines, because it is our job as investors to interpret the trading update. Just give us the facts & figures, and no spin thank you!
Pleasingly, the shares have fallen on this announcement, by 3% to 46p (£21m mkt cap).
The statement itself isn't bad though, with the key line being that "trading results for y/e 30 Sept 2012 are slightly ahead of market forecasts, and the Group's cash balance as at 30 Sept 2012 has further improved to £4m".
The shares look priced about right, on 13 times this year's forecast earnings.
I see that TNI have just put out a response to the phone hacking allegations, which is short & sweet, saying;