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Handle with care: 18 high risk stocks

Canaccord Genuity's Simon McGarry highlights 18 stocks with a high level of risk investors should approach with caution.

Simon McGarry, senior equity analyst at Canaccord Genuity Wealth Management, says that a high level of risk for a stock can mask factors that could impact the dividend down the line or damage a company's value. 

Using the firm's Quest tool, McGarry has highlighted a number of companies that have red flags. 

According to the tool a company will get a red flag for: 

  • Pension deficit or large pension fund 
  • Low or declining tax charges 
  • Any big acquisition – they are risky and can go wrong 
  • Material loss provision in their accounts 
  • If they can’t convert profits to cash or if there’s been a slow down in earnings growth 

He added: 'Unsurprisingly, with the tumble in oil prices, energy companies feature quite prominently. And after all the blow ups we have seen in the services sector, it’s not surprising that two support services companies also feature.'

Here are 18 stocks investors should approach with caution: 

Simon McGarry, senior equity analyst at Canaccord Genuity Wealth Management, says that a high level of risk for a stock can mask factors that could impact the dividend down the line or damage a company's value. 

Using the firm's Quest tool, McGarry has highlighted a number of companies that have red flags. 

According to the tool a company will get a red flag for: 

  • Pension deficit or large pension fund 
  • Low or declining tax charges 
  • Any big acquisition – they are risky and can go wrong 
  • Material loss provision in their accounts 
  • If they can’t convert profits to cash or if there’s been a slow down in earnings growth 

He added: 'Unsurprisingly, with the tumble in oil prices, energy companies feature quite prominently. And after all the blow ups we have seen in the services sector, it’s not surprising that two support services companies also feature.'

Here are 18 stocks investors should approach with caution: 

Rolls-Royce

  • Market cap: £15.8 billion
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 23.3
  • Dividend yield: 1.5%
  • Dividend cover: 2.8
  • Net debt/Ebitda: 0.4

Prior year: 

  • Pension deficit as % of market cap: 9%

Price performance:

  • Over three months: -6%
  • Over 12 months: 21%

Man Group

  • Market cap: £2.7 billion
  • Blob score (number of warning flags): 7

12-months forward:

  • Price earnings ratio: 12.4
  • Dividend yield: 4.9%
  • Dividend cover: 1.7
  • Net debt/Ebitda: -1.5

Prior year: 

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: 6%
  • Over 12 months: 49%

GVC

  • Market cap: £2.5 billion
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 13.5
  • Dividend yield: 3.8%
  • Dividend cover: 2.0
  • Net debt/Ebitda: -0.4

Prior year: 

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: 10%
  • Over 12 months: 13%

Serco

  • Market cap: £1.28 billion
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 37.7
  • Dividend yield: 0.3%
  • Dividend cover: 10.0
  • Net debt/Ebitda: 1.4

Prior year: 

  • Pension deficit as % of market cap: 1%

Price performance:

  • Over three months: -2%
  • Over 12 months: -11%

Assura Group

  • Market cap: £1.1 billion
  • Blob score (number of warning flags): 7

12-months forward:

  • Price earnings ratio: 23.4
  • Dividend yield: 4.1%
  • Dividend cover: 1.8
  • Net debt/Ebitda: 6.6

Prior year: 

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: -2%
  • Over 12 months: 8%

Renewi

  • Market cap: £788 million
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 20.6
  • Dividend yield: 3.1%
  • Dividend cover: 1.5
  • Net debt/Ebitda: 2.9

Prior year: 

  • Pension deficit as % of market cap: 3%

Price performance:

  • Over three months: 12%
  • Over 12 months: 13%

Laird

  • Market cap: £696 million
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 13.5
  • Dividend yield: 2.8%
  • Dividend cover: 2.7
  • Net debt/Ebitda: 2.5

Prior year: 

  • Pension deficit as % of market cap: 2%

Price performance:

  • Over three months: 4%
  • Over 12 months: -41%

Ophir Energy

  • Market cap: £507 million
  • Blob score (number of warning flags): 7

12-months forward:

  • Price earnings ratio: -48.3
  • Dividend yield: 0.0%
  • Dividend cover: n/a
  • Net debt/Ebitda: -2.2

Prior year: 

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: -12%
  • Over 12 months: 0%

Cambian

  • Market cap: £364 million
  • Blob score (number of warning flags): 7

12-months forward:

  • Price earnings ratio: 33.8
  • Dividend yield: 3.7%
  • Dividend cover: 0.9
  • Net debt/Ebitda: -4.9

Prior year:

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: 19%
  • Over 12 months: 105%

Faroe Petroleum

  • Market cap: £357 million
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 12.8
  • Dividend yield: 0.0%
  • Dividend cover: n/a
  • Net debt/Ebitda: -0.8

Prior year: 

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: 16%
  • Over 12 months: 40%

Premier Foods

  • Market cap: £335 million
  • Blob score (number of warning flags): 7

12-months forward: 

  • Price earnings ratio: 5.3
  • Dividend yield: 0.0%
  • Dividend cover: n/a
  • Net debt/Ebitda: 3.2

Prior year: 

  • Pension deficit as % of market cap: 146% 

Price performance:

  • Over three months: 3%
  • Over 12 months: -25%

Enquest

  • Market cap: £301 million
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 15.6
  • Dividend yield: 0.0%
  • Dividend cover: n/a
  • Net debt/Ebitda: 3.6

Prior year: 

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: -16%
  • Over 12 months: 8%

Huntsworth

  • Market cap: £245 million
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 12.7
  • Dividend yield: 2.7%
  • Dividend cover: 3.0
  • Net debt/Ebitda: 0.2

 Prior year: 

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: 27%
  • Over 12 months: 63%

Quantum Pharma

  • Market cap: £132 million
  • Blob score (number of warning flags): 6

12-months forward:

  •  Price earnings ratio: 21
  • Dividend yield: 0.0%
  • Dividend cover: n/a
  • Net debt/Ebitda: -0.1

Prior year: 

  • Pension deficit as % of market cap: 0%

 Price performance:

  • Over three months: 41%
  • Over 12 months: 13%

Carpetright

  • Market cap: £131 million
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 10.2
  • Dividend yield: 1.6%
  • Dividend cover:  6.4
  • Net debt/Ebitda: -0.3%

Prior year: 

  • Pension deficit as % of market cap: 3%

Price performance:

  • Over three months: -3%
  • Over 12 months: -17%

Inland Homes

  • Market cap: £116 million
  • Blob score (number of warning flags): 7

12-months forward:

  • Price earnings ratio: 7.8
  • Dividend yield: 3.1%
  • Dividend cover: 4.8
  • Net debt/Ebitda: 1.8

Prior year: 

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: -1%
  • Over 12 months: -10%

Maintel Holdings

  • Market cap: £114 million
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 9.0
  • Dividend yield: 4.5%
  • Dividend cover: 2.5
  • Net debt/Ebitda: 0.2

Prior year: 

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: -12%
  • Over 12 months: -16%

Gama Aviation

  • Market cap: £111 million
  • Blob score (number of warning flags): 6

12-months forward:

  • Price earnings ratio: 9.2
  • Dividend yield: 1.2%
  • Dividend cover: 8.8
  • Net debt/Ebitda: 0

Prior year

  • Pension deficit as % of market cap: 0%

Price performance:

  • Over three months: 3%
  • Over 12 months: 72%
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