While the UK stock market has had a good run in recent years, there are still plenty of opportunities for investors today. This is especially true in the small-cap space where there are tons of hidden gems.
Here, I’m going to highlight a stock that appears to offer growth, value, and dividends. Could it be worth considering for a Stocks and Shares ISA or SIPP?
A small company with big potential
The company in focus today is Costain (LSE: COST). This is a small British business that specialises in sustainable infrastructure solutions and operates across a range of industries including energy, water, transportation, defence, and nuclear.
At present, its shares trade for around £1.88. At that price, an investor could pick up 531 shares for £1,000 (ignoring trading commissions).
Strong growth forecast
Looking at Costain today, there’s a lot to like from an investment perspective, in my view. For a start, we have revenue growth.
This year, analysts expect the company’s top line to grow by around 18% to £1.23bn. Note that the group recently advised that it has a £7bn backlog.
I’ll point out here that Costain has been working hard to diversify its customer base recently. The goal here is to make the business more resilient.
Going back to that £7bn backlog, around 50% of it is from private and regulated customers (for instance, London Gatwick airport, Thames Water, EDF Energy). So, Costain is far less reliant on government contracts than it was in the past.
“The Group’s chosen markets continue to demonstrate highly attractive growth opportunities”
Costain AGM Trading Update
The stock looks cheap
We also have a low valuation. With analysts forecasting earnings per share of 15p this year, the price-to-earnings (P/E) ratio is only 12.5.
Note that analysts believe the stock is undervalued today. At present, the average price target is 237p.
Dividend income on offer
Another attraction of the stock is the income potential. Currently, the dividend yield on offer is about 2.7%.
That’s not the highest yield in the market but dividends are very well covered by earnings. So, there’s scope for the payout to be increased in the years ahead.
A nice share price trend
Finally, the chart looks attractive. Currently, this stock is in a nice upward trend.
It’s worth pointing out that it’s had three cracks at the £2 mark this year and run into resistance. I reckon there’s a good chance that it will shoot straight through on its next attempt at breaking this level.
Worth a look?
Of course, there are no guarantees that it will charge through the £2 mark or hit analysts’ price target of 237p. A risk is a slowdown in the UK economy (Costain operates almost exclusively in the UK).
Overall though, I like the risk/reward proposition at present. In my view, this stock is worth a closer look.
But it’s not the only opportunity I see in the UK market today…
Should you invest £5,000 in Costain Group Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Costain Group Plc made the list?
Edward Sheldon does not hold any positions in the companies mentioned
