The FTSE 250 stock index has risen an impressive 12% over the last year. Does this mean investors have missed the chance to snap up some bargains? No chance!
Today, the FTSE 350 index of large- and mid-cap shares still trades at a 30-year discount to the S&P 500 index of US stocks.
So which UK companies have grabbed my attention? Three in particular stand out to me. These are:
Here’s why I think they’re top value shares to consider.
A cut-price REIT
With a price-to-earnings (P/E) ratio of 9.4 times, Grainger’s cheap share price doesn’t reflect the stability of the residential rentals market, in my view, nor the long-term earnings opportunity it enjoys.
It’s true that rising inflation has raised the risks the FTSE 250 company faces. If interest rates rise, its cost of borrowing could rise sharply. But I’m still expecting earnings to rise as the UK’s chronic housing shortage drives rental growth.
Grainger’s like-for-like rents rose 3.1% during October-March. Occupancy also remained high at 96%, underlining the durable nature of the rentals market.
One final thing: Grainger’s dividend yield has shot up to an impressive 5.3%. Under real estate investment trust (REIT) rules, the firm must pay 90% of its rental profits out to shareholders.
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Growth and dividends
Rathbones shares also look dirt-cheap based on expected earnings and dividends. Its P/E-to-growth (PEG) ratio comes in at just 0.4. A reminder that any sub-1 figure suggests a stock that’s trading below value.
Meanwhile, the asset manager’s dividend yield is 5.4%. Like Grainger, that’s roughly 2% better than the FTSE 250 average.
So what else makes Rathbones a top bargain to consider? Rising competition in the financial services space is a clear risk. But the company’s excellent reputation means it is (at least for now) continuing to thrive in what remains a fast-growing sector.
Rathbones notes that “a projected £5.5trn in intergenerational wealth transfer over the next 25 years, combined with an ageing population and rising financial complexity, continues to drive long-term demand for professional advice“. Its 2024 acquisition of Investec Wealth & Investment gives it added scope to seize this opportunity.
Bowled over?
Hollywood Bowl’s shares surged after late May’s latest trading update (more on this later). But the 10-pin bowling operator still looks cheap based on predicted earnings, with a PEG ratio of just 0.9.
Like many other UK leisure shares, its revenues are highly sensitive to the the broader economic landscape. Things could become more challenging as inflation rises. But trading remains rock-solid so far, with sales and adjusted pre-tax profit up 9.5% and 8.1% during October-March.
The question is, can it keep up the pace? I’m confident it can, supported by rapid expansion in Canada, along with investment in areas like amusements to encourage bowlers to spend more.
One last big perk for value chasers: Hollywood Bowl’s dividend yield is a tasty 4.7%.
Should you invest £5,000 in Hollywood Bowl 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 Hollywood Bowl Group Plc made the list?
Royston Wild does not hold any positions in the companies mentioned.
