Sunday tips round-up: Mothercare, IMI, Melrose...

Mothercare shares have taken a battering since the spring and closed last week at 511p. With profits this year expected to reach £45 million and earnings per share at 38p,that is not a cheap valuation, unless you believe that there are good growth prospects.

Investors should look past the British sales figures at the real growth prospects on the international stage and to Mothercare's direct and wholesale operations. Buy says the Mail on Sunday.

Last week's interim numbers from engineering group IMI were impressive. The company delivered record operating margins in the wake of its restructuring efforts through the downturn. The current yield is 3.3%. They are trading on a December 2012 earnings multiple of 11.1, falling to just 9.9 next year, which does not seem overstretched in a year where the company is expected to post record earnings - and grow them next year too. The margin story has further to run and a recovery in its late-cycle business should boost revenues and volumes. The shares remain a buy says the Telegraph.

Another engineering-related group that posted a good set of numbers last week was Melrose. Essentially, the company is an investment vehicle that buys industrial assets that are underperforming before improving their efficiency and selling them on for a profit. The shares are trading on a December 2010 earnings multiple of 11 times, falling to 9.7 next year. Based on an improvement in the economic environment over the next two years, the valuation does not seem particularly overstretched. Buy says the Telegraph.

Investors in Wm Morrison should hold their nerve. New chief executive Dalton Philips was never going to be able to make a mark in just a few months, but it is getting close to the moment when he should be able to outline his vision of the future, as well as the hard numbers for the first half of Morrisons' financial year. The results should not disappoint and, if Philips can show that he has a plan for the group's growth, the shares should be set fair for the medium term say the Mail on Sunday.


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