Why I’m avoiding Carillion plc, Interserve plc and Mitie Group PLC

These 3 shares could have tough futures in my view: Carillion plc (LON:CLLN) (CLLN.L), Interserve plc (LON:IRV) (IRV.L) and Mitie Group PLC (LON:MTO) (MTO.L)

Interserve plc
Interserve plc

Three shares which have experienced difficult years so far are Carillion plc (LON:CLLN) (CLLN.L), Interserve plc (LON:IRV) (IRV.L) and Mitie Group PLC (LON:MTO) (MTO.L).

The three support services businesses have all released profit warnings in recent months which have sent their share prices lower. In my view, they all face difficult outlooks and while they are on my watchlist, I’m not looking to buy them at the moment.

Carillion, for instance, is without a CEO and is conducting a review of its business. This brings added uncertainty to my mind regarding its near-term future. With the company’s update due out at the end of September, I think it could be a relatively unstable period for the stock. The lack of a dividend for the current year also makes me less keen on the company at a time when CPI inflation is nearly at 3%.

Interserve faces difficulties in the near term in my opinion. The company is facing difficult end markets and I think that situation has the potential to continue in the short run. I think there is a sound underlying business, but if demand for the company’s services comes under further pressure then I wouldn’t be surprised if it experiences more challenges ahead. Interserve’s share price could remain volatile after a 47% fall in the last month.

Mitie faces a tough outlook in my view. Although its new management team may prove successful in turning the business around, I believe it may be priced for success. Mitie’s share price has risen 27% in the last 6 months and I think investors have assumed that its turnaround will be successful. With the threat of Brexit and economic uncertainty potentially ahead, I believe there may be better options for me on valuation grounds than Mitie at this moment in time.

About Robert Stephens 3883 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page