Manchester United (MANU) the well-known English Football club, or soccer team as Americans would call it, was the Champion of the Premier League for 2012-13. Maybe the loss of their longtime coach has dampened the spirits of the analyst that cover the stock, but they have been moving estimates lower. Today the Red Devils stock is the Bear of the Day.
Missing the Goal
Performance on the field is one thing, but investors care more about the bottom line than the goal line. MANU has missed each of the last three quarters, reporting earnings that came in below the Zacks Consensus Estimate.
Zacks show the company missing all but one quarter over the last year and a half. The lone beat was the September 2012 quarter reported on November 14, 2012. Despite the beat, the stock traded lower in the session following the release by about 2%.
Company Description
Manchester United Football Club is an English professional football club, based in Old Trafford, Greater Manchester, that plays in the Premier League. Founded as Newton Heath LYR Football Club in 1878, the club changed its name to Manchester United in 1902 and moved to Old Trafford in 1910.
Estimates Bending Lower
Over the last few months, estimates for MANU have been kicked all over the place. The Zacks Consensus Estimate stood at $0.64 in May of this year, but slid to $0.62 in the following month. By August the number jumped to $0.71, but it was as if analysts gave the company a red card in September. Estimates dropped to $0.35, a fall of 50% from the previous month. The estimate remains at that level today.
Estimates for 2014 were impacted as well, but not to the same degree. In August the number was standing at $0.81 and then fell to $0.64. The 2014 estimate then dribbled lower to its present level of $0.52.
Valuation
You might think that all these misses have resulted in a reasonable valuation. That is not the case with MANU. The stock trades at a premium to the industry average for trailing and forward PE, a wildly used measure to value a stock. In fact, a forward PE of 46x is more than 50% higher than the 29x industry average. The valuation is more reasonable in terms of price to book, selling at just below 1x and just over 1x for the price to sales metric. Both of those metrics show the stock trading at a discount. One thing that does stand out to me is the margins that MANU commands. A net margin of nearly 41% is head and shoulders above the 5.8% industry average.
Charting A Championship
For the better part of the last year, the stock has been stuck in a range of $16 to $18 with a few periods peaks and valleys. The rabid fan base may be more than willing buy stock should they see a dramatic decline in share price. With estimates sinking and a big valuation to support investors might be wise to look elsewhere to get their kicks.
Brian Bolan is a Stock Strategist
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