Wickes, the UK home improvement retailer, became a stand-alone company on the London Stock Exchange in April this year, after separating from construction dealer Travis Perkins.
It has 232 stores serving local artisans and DIY enthusiasts. The company also offers so-called âdo-it-for-meâ services to help bring home projects to life.
However, the share price has seen a pretty tough course since the split – despite Wickes making better than expected interim profits before tax and declaring their first dividend.
The share is currently at Â£ 2.36 per share, around 10% below the closing price on the first trading day after the split. So what happened?
Here, we take a look at the company’s finances, discuss what’s next, and consider whether its stocks are a buy or sell candidate at their current level.
Wickes share price analysis: the downtrend continues
Wickes shares started trading at Â£ 2.50 on the first trading day on April 28, 2021 and had risen to Â£ 2.63 by the market close. A 5% increase was not a bad start.
The share’s highest closing price was in June when it hit Â£ 2.77, but the price has practically fallen since.
Its lowest point came in mid-September when shares fell to Â£ 2.32. Since then it has slowly recovered to its current level of Â£ 2.36.
Such a performance is clearly disappointing and especially when compared to the fortune of Travis Perkins. Shares of the former parent company rose around 10% over the same period.
The story from Wickes: the split
The story of the split began in December 2018, when Travis Perkins unveiled a long-term strategy to simplify the group and introduce a streamlined cost structure.
The following July, she announced her intention to disband Wickes. However, the process was suspended in March 2020 due to Covid-19 and was relaunched a year later.
Looking ahead to the completion of the split, the move has been described as a win-win scenario for both companies.
Nick Roberts, CEO of Travis Perkins, said it was an important step towards simplifying the group and allowing his company to focus on commercial customers.
âThe separation will allow the two companies to allocate capital to stimulate growth and further strengthen their leadership position in the market,â he said.
Meanwhile, Wickes CEO David Wood said it would be a âtransformative momentâ for his company.
“The results we have achieved during this period are a testament to the strength of our unique proposition, our digital capability and our efficient operating model, which have enabled us to respond quickly to the changing demands of our clients,” he said. -he explains.
Wickes stock review: WIX price has lost some of its shine
AJ Bell financial analyst Danni Hewson agrees that Wickes’ stock price has “lost some of its shine,” but believes the company’s biggest problem isn’t Travis Perkins.
âThe apparent disinterest from investors seems a bit harsh when you consider the DIY store’s early figures which beat expectations, saw it raise earnings forecasts and offer shareholders their first dividend,â he said. she declared.
Hewson suggests that reluctant investors are swayed by longer-term issues and concerns.
âThey may be wondering if the post-pandemic DIY boom is sustainable and if the much-discussed global supply issues will have a ripple effect later in the year,â she added.
Wickes Fundamentals: Latest Results
Wickes recently released a strong set of interim results, spanning the 26 weeks through June 26, 2021.
He said revenue rose 32.5% to Â£ 812million, with adjusted pre-tax profits of Â£ 46.5million, well ahead of the forecast of Â£ 45million which had been data.
In a statement, the company declared its first interim dividend of 2.1 pence per share and said it expected annual profits to be above market expectations (Â£ 67million at Â£ 75million).
CEO David Wood called it a âgood first half performance,â underpinned by its attractive service-oriented and digital-focused proposition.
âIn our first round of results since the split, we saw increased sales and profits as we continue to help the nation feel proud of its home,â he said.
Wood also stressed that a strong relationship with suppliers meant that Wickes had “handled inflationary pressures and raw material constraints well” – and that it remained the case.
Wickes’ stock market outlook: the reasons for the positivity
Looking ahead, David Wood argued that external factors continue to point to strong growth opportunities in the broader home improvement market.
âAn aging housing stock, continued real estate transactions and growing consumer confidence are driving all clients to improve their homes,â he said.
Wood also believes that the blockages experienced over the past 18 months have changed the attitudes of many people.
âThe increase in time spent at home has fueled the desire to renovate and refurbish – not only on the part of homeowners – but also renters and millennials,â he added.
What is the forecast for the Wickes share price?
Are Wickes shares bought or sold? There is a difference of opinion regarding Wickes’ outlook. Based on Wickes Group’s share price forecast by a single analyst, MarketBeat suggests the stock could reach 420p in the next 12 months.
Two analysts polled by TipRanks also support a positive forecast for Wickes shares. The stock earned a smart ‘Buy Moderate’ score and an average price target of 366.50p based on positive investor sentiment and technical analysis data.
However, Wallet Investor’s algorithm-based analysis suggests that the stock price is likely to go the other way, with a 3.8% drop to 233.9p expected for the coming year. .
Keep in mind that analysts’ forecasts can be wrong. They are based on the past performance of the stock, which never guarantees future results. We encourage our traders to do their due diligence before making a trading decision.
Wickes (WIX) stock price forecast: analyst sentiment
In a brokerage note, Sam Cullen, analyst at Peel Hunt, argued that the company’s stock price is far too low given its quality and the market context.
“Given the latter and the strength of the group’s balance sheet, we believe that the arguments in favor of a better return for shareholders, whether through a special dividend or a buyout, will be strong. more and more convincing if stocks fail to reassess themselves, âhe said.
Wayne Brown, analyst at Liberum, says delivering upgrades in today’s environment is impressive.
âThis reflects Wickes’ well-rounded, digitally-led, market-leading customer proposition supported by what we see as long-term structural tailwinds for RMI,â he said.
He also sees Wickes as one of the best ways to play UK RMI trading (refurbishment, maintenance, improvement).
âEquities remain far too cheap for the high quality growth, upgrade momentum and strong cash generation on offer,â he added.
In a separate report focusing on its digital capabilities, Brown said Wickes has evolved into a âdigitally ledâ and integrated products and services company.
He noted that âtwo-thirds of customer journeysâ use a digital channel at some point, and about one-third of revenue is purely online.
âHaving been part of the Travis Perkins group for many years, we believe that Wickes’ integrated, high-quality, digitally-driven business model remains underappreciated by the market,â he wrote.
AJ Bell’s Danni Hewson has acknowledged that uncertainty may continue to hold back the action, but remains optimistic about his outlook.
âSlowing economic growth coupled with rising prices must be a concern, but our homes have become more than just a place to live,â she told Capital.com.
The trend towards hybrid work is a perfect example.
“This suggests that there is still a lot of growth in the pipeline as we heat desks in air-conditioned closets or succumb to the allure of the ‘zoom-worthy’ book corner,” she said. added. “Wickes looks cheap and while there are never any guarantees, there is a lot to like and a lot of potential for steady, but not stellar, growth.”
Wickes Group: company history
The history of the company dates back to 1854 and the start of a modest lumber business in Michigan, USA, by Henry Dunn Wickes and his brother.
The business grew during the real estate boom that occurred in the United States in the 1950s with one-stop builders selling a wide variety of building products.
The first UK Wickes opened in 1972 in Whitefield, Manchester. The concept was a traditional DIY store that sold to commerce. The customers were traders and DIY enthusiasts.
In 25 years there were 100 stores operating in the UK. The company was then bought by the Focus Group in 2000 and by Travis Perkins, the builders’ dealer, five years later, for Â£ 950million.
This year – 2021 – it parted ways with Travis Perkins plc to become a stand-alone company on the London Stock Exchange.
How to invest in Wickes?
One way to trade WIX stocks is to use Contracts for Difference (CFDs) on Capital.com. CFDs allow you to try to profit from positive and negative fluctuations in the price of WIX shares. If you believe in a positive forecast for the Wickes share price and expect the price to rise, you can open a long position. If you think he’s going to fall, you can make it short.
Keep in mind that CFDs are leveraged products, which means that profits and losses can be magnified. Make sure you understand how CFDs work and never invest more than what you can afford to lose.
Edited by Alexandra Pankratyeva
Read more: Demerged Wickes sees profits increase and declares dividend
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