Sunday share tips: Wolseley, CVS

Wolseley´s John Martin will be able to hold his head up high when he goes in front of analysts for the first time as the company´s boss next Tesday.

Consensus expects the world´s largest seller of plumbing parts to report a 60% jump in pre-tax profits to reach £833m on sales of £14.3bn.

The company has done very well since the last housing crisis, pushing deeper into the US market and selling secondary businesses.

Its UK operations continue to be the 'problem child' but here too there are indications that Martin may be looking to repeat the success of its wildly successful US website build.com, which last year already sold far more wares, about £1.5bn-worth, than the likes of Asos.

More online growth appears to be the pipeline, with turnover from that channel possibly reaching £2bn.

To take note of, aalysts at JP Morgan believe Wolseley may announce a £250m share repurchase programme.

Nonetheless, trading on 15 times´s earnings a smooth transition at the top ofthe firm looks already priced-in. So, 'hold', says The Sunday Times´s Danny Fortson.

CVS had room - and the financial power - to continue growing and management was doing all the right things, but following large share price gains the stock had probably gotten ahead of itself, the Sunday Telegraph´s Questor team said.

Scale was key in the highly fragmented and low-margin veterinary industry, the tipster argued, pointing out the fact that CVS still only accounted for 7% of the UK market, despite owning 360 surgeries spread across the country.

Fortunately, it had the financial wherewithal to continue scooping up market share.

Hence, total turnover was up by a third in its last financial year, as the firm picked up 67 surgeries.

The company´s Healthy Pet Club was also seeing strong growth and the firm was moving into new areas, running diagnostic laboratories, pet crematoria, a digital dispensary, a recruitement firm and was developing its referral business to tap into the need for expensive surgeries.

Leverage was high, with net debt standing at 2.8 times cash profits, but the vet business was highly cash generative and required little investment.

Yet the shares were trading at 23 times´ expected earnings and offered hardly any yield.

"That makes CVS a core holding, but one that’s too expensive for Questor at the moment. Hold."