Thursday newspaper share tips: Auto Trader

AutoTrader had done well since floating last March and assuming used car sales continued rising the shares should continue to do quite well, the Financial Times’s Lex column said on Thursday.

Stock in the online car market had outperformed the FTSE All-Share by 65% since then, although the year thus far had been bumpier, with the shares down by a fifth.

Nevertheless, pre-tax margins were at 54% and likely to keep growing, with the firm facing little serious competition and dealer supply should keep increasing.

The company’s net debt was also set to fall, reducing the interest rate costs that ate up the bulk of operating profits last year.

A cynic might question why AutoTrader recently slightly upgraded its operating profit forecast for the year, given that private equity group Apax might wish to exit completely this year.

“Assuming used car sales keep growing, the shares should fly off the lot,” Lex concluded.

Engineering group Bacock International may have been too harshly punished by the recent market sell-off, according to The Times's Tempus.

A recent research note from Shore Capital gave its shares a small lift but they were still down by 10% from their levels at the start of the year.

The company's stock had been hurt by the uncertainty surrounding the upcoming exit of its long-serving boss Peter Rogers, who was due to step down in August.

There had also been doubts about the accounting of its joint-venture revenues, which were approximately 14% of earnings, and organic revenue growth was set to slow to something nearer to 7% - as the company itself had conceded.

On the positive side of the ledger, it had a £10.5bn pipeline of possible work coming from a diversity of business areas and a £20bn order book.

Last Autumn's defence review also meant more could be expected in the future.

"The decline in the shares is hard to understand. Buy for the long-term," Tempus said.