Company in the news: Majestic Wine

If you’ve ever been shopping in one of Majestic Wine’s  (Aim: MJW) stores, you can’t fail to be impressed by the range of wines and the high levels of customer service. As a potential investor, this is always a good sign. The firm had a good Christmas as people splashed out on upmarket wines.

But it seems that its customers have been laying off the booze for longer than was expected, which led to a profits warning last week and the share price tanking by 20%. Profits probably won’t grow in 2014. The bad news for shareholders is that they are unlikely to grow in 2015 either. The good news is that it’s holding on to its share of the wine market.

It is spending money to open new stores and is investing in bigger distribution facilities, as well as beefing up the internet side of its business. This is all positive for the long term. My only fear is that without growing profits in the short term, Majestic shares are probably too dear even after their slump.

At 400p they trade on nearly 15 times earnings. Although it’s a specialist retailer, you can buy shares in Sainsbury’s for less than ten times earnings. Majestic’s dividend looks safe and the 4.1% yield is reasonable. But despite liking this firm, I wouldn’t buy the shares now – 350p looks like a better entry point.

Verdict: buy if the share price falls

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
In the balance

How May 2015 could hit your pocket

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Russell Napier: deflation is coming – hold on to your cash

Financial historian Russell Napier talks to Merryn Somerset Webb about the next deflationary bust – why it's coming, what it means for you, and how you can survive it.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


28 November 1660: the Royal Society is founded

After the restoration of the monarchy, members of the 'Invisible College' asked King Charles II to approve their scientific and literary society on this day in 1660.