Investor appetite for Avation (LSE: AVAP) has failed to recover from the waves of selling that set in across stock bourses in mid-January. I see this as an opportunity for savvy dip buyers to pick up a bargain.

Avation, which leases commercial aircraft to some of the world’s biggest airlines including easyJet and Air France, is thriving in an environment of improving lease yields. As a result, it reported record revenues and pre-tax profits last year, the latter up 18% year-on-year in the 12 months to June 2017 to $21.4m.

And the Singapore-based firm is spending a fortune on building its fleet to capitalise on these favourable metrics. It now has around 40 aeroplanes on its books and, critically, it’s mixing up the types of aircraft it leases out maximise business opportunities. The acquisition of a number of large twin-aisle aircraft more recently marks the latest step in this journey.

Stunning dividend growth

With Avation also enjoying booming operating cash flows, up 20% last year, the business has also continued to light a fire under dividends. For example, the leasing giant hiked the dividend by an astonishing 85% last year to 6 US cents per share.

Even though City analysts expect earnings to slip 21% in the year ending June 2018, the flying ace’s solid long-term profits outlook should still keep dividends shooting skywards. An 8.4-cent payout is forecast by the number crunchers, resulting in a chunky 2.7% yield.

The good news doesn’t stop here either. Supported by a predicted 22% earnings rebound in fiscal 2019, the dividend is expected to rise to 11.2 cents. Thus the yield for next year jumps to 3.5%.

What’s more, the stratospheric dividend growth being predicted doesn’t come at the expense of solid protection either. Added to Avation’s brilliant cash flows, investors can also sleep soundly in the knowledge that predicted dividends are covered between 3.2 times and 3.4 times by estimated earnings through to the close of next year. That’s some distance inside the accepted safety watermark of 2 times or above.

All told, I reckon Avation is a brilliant, bargain growth and income share with the firm dealing on a forward P/E ratio of just 11 times.

The 6%+ yielder

Jupiter Fund Management (LSE: JUP) is another white-hot dividend share worthy of a seriously close look today.

The company’s brilliant growth record has also enabled it to lift shareholder rewards at a brisk pace in recent years. And with profits anticipated to keep on swelling — rises of 8% and 9% are forecasted for 2018 and 2019, respectively — dividends are expected to also trek higher.

So the anticipated 30.2p per share payment for 2017 is expected to rise to 32.5p in the present year and to increase to 35.6p in 2019. Consequently, the fund giant carries monster yields of 6% and 6.6% for this year and next.

Like Avation, Jupiter has also fallen out of favour with share pickers since hitting record tops in early  January, even though it has since announced business has continued to boom. A £5.5bn improvement in net inflows in 2017 drove total assets under management 24% higher year-on-year, to £50.2bn.

Given its terrific trading momentum, I reckon Jupiter’s forward P/E ratio of 14.4 times makes it a steal right now.

The post 2 dirt-cheap dividend shares I’d buy today appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Indeed, there are many studies which show that value investing has outperformed all other methods for decades and following a value strategy has helped billionaire Warren Buffett build the reputation and fortune he has today.

While I can’t give you the secret to guaranteeing riches like Warren Buffett, here are three attractive looking value stocks that may help put you on the path to investing success. 

Pipes and plumbing

Norcros (LSE: NXR) is, in my opinion, one of London’s most undervalued stocks. The company manufactures and sells bathroom products such as showers, taps and tiling equipment and has ambitious growth plans. 

However, for some reason, the market doesn’t trust management to hit growth targets or even hit annual profitability targets. Nonetheless, management has continually proved the market wrong. 

Net profit has grown at an average compounded rate of 14.2% since 2011. Analysts are expecting a slight fall in earnings per share for the year ending 31 March thanks to high costs from the integration of a new acquisition. Still, even though earnings per share are expected to fall 7%, the shares trade at a forward P/E of only 6.7 and support a dividend yield of 4.2%, a valuation that seems too hard to pass up for a business that’s achieved such an impressive historic growth record.

Oil troubles 

Gulf Marine Services (LSE: GMS) is one of the many companies that has suffered from the decline in oil prices over the past few years. The company is expected to report a net profit of only £33.5m for 2017, more than 50% below its 2014 peak of £75m.

Gulf Marine operates self-propelled and self-elevating support vessels, which are used by the oil and gas industry to maintain and service offshore oil platforms. Other companies that operate offshore platforms also use the company’s services, so Gulf Marine has customers outside the oil and gas sector. 

Even though the company has sailed into stormy waters recently, it’s likely that over the long term the demand for support vessels will return to normal levels and when it does, Gulf Marine’s profit should go back to 2014 levels. 

The shares currently trade at a forward P/E ratio of 9.3 and a price-to-book ratio of 0.6. If you have the patience to wait for demand to pick up, Gulf Marine could be an attractive long-term investment. 

Come fly with me

Aircraft leasing firm Avation (LSE: AVAP) has seen the value of its shares rise by around 50% since August of last year, but even after these recent gains, the shares still look cheap. Indeed, at the time of writing shares in Avation trade at a forward P/E of 7.2 and a price-to-tangible book ratio of 0.8. City analysts expect the company’s earnings per share to grow by 5.7% this year. 

Over the past five years, the company has grown earnings per share at a steady rate of 13.1% per annum on average. With a high single-digit P/E it looks as if the market is ignoring Aviation’s impressive growth record.

The post 3 small-cap value stocks set for big things in 2017 appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves owns shares of Norcros. The Motley Fool UK has recommended Norcros. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Significant progress

Sales fell by 24.7% to £67.6m at Monitise in the latest year, in line with guidance. But the group’s EBITDA loss was reduced by more than half to £19.6m, and Monitise reported an EBITDA profit of £0.6m for the second half.

Performance improved significantly during that half as cash from operations turned positive, rising to £400,000. However, the business remained heavily lossmaking, reporting a pre-tax loss of £32.6m for the period.

Net cash fell from £88.8m to £42.1m during the year, but cash consumption was reduced to £11.9m during the second half, from £36.4m in the first half. As Monitise is lossmaking, this is a key metric for investors. A lower rate of cash burn will give the group more time to become profitable.

Monitise hopes that its FINKit digital services solution will replace many of its legacy licence-based contracts. But persuading clients to agree new long-term contracts is “taking longer than we had anticipated” according to chief executive Lee Cameron, who says that Monitise “remains a business in transition.”

I was initially encouraged by today’s figures, but the group’s outlook statement has left me uncertain about the future. Group revenue is expected to decline and no mention was made of EBITDA guidance for the current year. This suggests to me that Monitise may not maintain the EBITDA profitability seen over the last six months.

Record profits boost dividend

Avation reported revenue of $71.2m last year, a 25% increase on the previous year. Operating profit rose by 35.6% to $45.6m, lifting the group’s operating margin from 59% to 64%.

Earnings per share rose by 42.5% to 34.2 US cents and the dividend rose by 8.3% to 3.25 cents. This gives the shares a trailing P/E of 6.2 and a dividend yield of 1.5%. The stock’s valuation looks cheap relative to earnings, even though the yield is low.

The main reason for this is Avation carries quite a lot of debt. When its aircraft are all leased at profitable rates, this isn’t a problem. However, in the event of a sector downturn, debt repayments could become problematic.

Avation added nine new aircraft to its fleet last year, causing net debt to rise to $567.5m at the end of June, up from $319.5m one year earlier. The group’s loan-to-value (LTV) ratio remained almost unchanged at 74%, up by just 1% from last year.

This stability is reassuring, but I think that 74% is quite high. I’d rather see LTV closer to 50%. This would reduce financing risks in a downturn and enable Avation to return more cash to shareholders — Avation paid $26m in interest payment last year, but just $1.6m in dividends.

In fairness, Avation appears to be executing well. The shares have risen by 25% so far this year. Growth is expected to continue and the shares could deliver further gains if market conditions remain favourable.

The post Two small-caps that could double after today’s results? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Sales beat forecasts

Rail and traffic management software firm Tracsis (LSE: TRCS) says it expects to report sales of more than £32m for the year ending 31 July. That’s significantly above City forecasts of £27.6m.

Tracsis says it has had a strong year.  The group’s core divisions have made good progress and acquisitions have boosted growth elsewhere. Net cash was £11m at the end of the year, despite a £7m net outflow of cash spent on acquisitions.

Earnings are expected to be in line with forecasts of 19.9p per share for last year. Forecasts suggest they will rise by 10% to 22p during the current year.

This puts the stock on a 2016/17 forecast P/E of 23. This may seem expensive, but Tracsis shares rose by 20% last week, after the group announced a breakthrough contract in the US.

If Tracsis can become a major player in the US market, then today’s share price could look cheap within a few years.

These shares could fly

Aircraft leasing specialist Avation (LSE: AVAP) has leased a new Airbus A321-200 to Vietnamese carrier Vietjet. It’s the latest in a series of deals that has seen the group’s profits rise from $0.098 per share in 2010 to $0.24 per share last year.

However, while Avation’s earnings per share have risen by 145% since 2010, the firm’s share price has risen by just 88% since its flotation in October 2010. This means that Avation now trades on a trailing P/E of just 7.3.

One concern among investors is that the group’s net debt of $409.5m is quite high relative to the $518m valuation of the firm’s aircraft fleet.

A second risk is that airline growth may be starting to slow. A fall in fleet utilisation or a rise in interest costs could cause problems for Avation.

City analysts have trimmed their forecasts recently, but still expect earnings per share to rise by 39% to $0.32 this year. This puts Avation on a forecast P/E of just 5.6. If you remain confident about the outlook for air travel, these shares could be worth a closer look.

Rapid sales growth?

Information management group Idox (LSE: IDOX) reported its second acquisition in two months this morning. The firm spent £2m on a digital marketing agency called Rippleffect Studio, whose customers include JD Wetherspoon and Liverpool Football Club.

Idox is hoping to increase annual revenues from £62.6m to £100m over the next few years. Progress so far has been good. Revenue rose by 27% to £37.2m during the first half of this year, while pre-tax profits climbed 110%, to £6.5m.

However, while Rippleffect generated £6.3m of revenue last year, its net profit was just £34,934. Private companies usually try to minimise profits for tax reasons, but Idox shareholders need to make sure their company isn’t boosting sales figures while diluting the group’s profit margins.

Idox shares currently trade on about 19 times 2016 forecast earnings. I’d say that’s about right for now, and would rate the shares as a hold.

The post 3 top small-cap growth buys for today? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended Tracsis. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Is takeaway ordering service Just Eat (LSE: JE) the new Rightmove? Shares in the tech firm are down by 16% this year but have climbed 8% today, after management increased earnings guidance for this year from £98-100m to £102-104m.

Just Eat said that like-for-like sales rose by 41% during the first quarter, while total sales were 57% higher than during the same period last year.

The firm also said that it had increased the commission rate it charges UK takeaways by 1% in April. At the same time, the company increased the frequency with which it pays restaurants the money they are owed from twice monthly to weekly. The firm says “the initial response to these changes has been positive”.

These changes suggest to me that Just Eat’s customers (takeaway restaurants) depend on Just Eat for an increasing share of their business. They now have no choice but to accept commission rate increases without much complaint.

Just Eat now trades on about 40 times 2016 forecast earnings. This isn’t cheap, but with a PEG ratio of less than 1, Just Eat could still be a profitable growth buy.

Too late for this gold miner?

Egypt-based gold miner Centamin (LSE: CEY) has climbed by 94% so far this year, thanks to a 21% rise in the price of gold.

Centamin’s share price edged 3% higher today after it said that gold production rose by 6% to 125,268 ounces during the first quarter of the year. All-in sustaining cash costs, the most complete measure of the total cost of mining and producing, are expected to be $900 per ounce this year.

With gold currently trading at $1,296 an counce, Centamin should deliver strong profits this year. The firm has no debt and does not hedge any of its gold production, so the rising gold price will feed straight through to Centamin’s profits.

The only problem is that Centamin shares are starting to look quite pricey. This stock now trades on 17 times 2016 forecast earnings and 20 times 2017 forecast earnings. This year’s gains also mean that the expected dividend yield is just 1.6%.

In my view, the shares remain a hold, but it may be too late to buy.

Is the tide turning?

German airline Lufthansa said this morning that it will scale back its plans for capacity growth. In its Q1 results last week, British Airways owner International Consolidated Airlines Group said it too would moderate its growth plans.

If the airline industry has reached the end of its long-running growth cycle and is heading into a slowdown, then then outlook for airplane leasing firm Avation (LSE: AVAP) could become uncertain.

Avation issued a brief update today confirming that its fleet utilisation is currently 100%, with an average remaining lease term of 6.4 years. Avation has experienced management but has not won over the City — Avation shares trade on just 8.8 times forecast earnings, falling to 5.7 for 2017.

One reason for this is probably Avation’s net debt of $409m. Although this is covered by the value of its fleet and other fixed assets, any reduction in fleet utilisation could make it hard for Avation to generate a profit after debt costs.

In my view, the balance between risk and potential reward isn’t very attractive, so I’m staying clear for now.

The post Is now the right time to buy Just Eat PLC (-16%) Centamin PLC (+93%) & Avation PLC (+10%)? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In this article I’ll look at the investment case for three popular aviation stocks.

Avation

Shares in aircraft leasing firm Avation (LSE: AVAP) slipped nearly 5% lower on Friday morning, despite the group announcing a 14% increase in revenue for the first half of the year.

One problem may be that the costs of Avation’s debt pile are starting to eat into the firm’s profits. Pre-tax profit for the half year fell to $5.6m, a 20% drop from $7m in 2014.

The reason for the drop is that Avation’s six-monthly interest costs rose by 50% to $12.2m during the last six months. This was due to $100m of new loans in May 2015, which took the firm’s total net debt to $409m.

It’s an interesting situation, because Avation’s core business seems very profitable. The firm generated an operating profit of $17.9m on revenue of $31.5m during the first half of the year. This gives an operating margin of 57%. The problem is that two-thirds of this operating profit was consumed by interest payments.

Avation says that additional lease revenue from newly-acquired aircraft should boost takings during the second half of the year. But I’m concerned that any future dip in lease revenue could quickly cause problems for the firm.

I’m not convinced that Avation shares are the bargain suggested by their 2015/16 forecast P/E ratio of 6.3. When debt is factored-in, this business looks quite fully-priced, to me.

Dart Group

Dart Group (LSE: DTG) owns the Jet2 travel business and a major haulage company. Growth from Jet2 has been the main reason for the 470% rise in Dart’s share price since 2011.

Dart shares climbed 91% last year as the firm enjoyed a record summer season. However, current forecasts suggest that a repeat this year is unlikely. The latest City forecasts suggest that Dart’s earnings will fall from a record 52.1p per share for 2015/16, to 33.9p in 2016/17.

This gives a 2016/17 forecast P/E of 16.5, which looks high enough to me, given the uncertain outlook.

However, Dart does benefit from very low debt levels and good cash generation. The group has beaten expectations a number of times before and may do again. The shares are a solid hold, in my opinion.

easyJet

Another airline share I like is easyJet (LSE: EZJ). The group reported an 8.1% increase in passenger numbers during the final quarter of last year and its load factor (how full each flight is) rose by 0.6% to 90.3%. This was despite the disruption caused by the Egypt and Paris terror attacks.

These are solid figures, but easyJet’s shares are now down by 20% from their 52-week high of 1,916p. I suspect that this is partly because of the market downturn, but also because investors are beginning to think that airline profits might be getting close to a cyclical peak.

Airlines are notoriously cyclical and the profit growth seen in recent years won’t continue forever. However, easyJet now trades on 10 times forecast earnings and offers a 4.1% yield. In my view this may be cheap enough to make the shares worth a closer look.

The post Will Avation PLC, Dart Group PLC And easyJet plc Fly 50% Higher In 2016? appeared first on The Twelfth Magpie.

More reading

• Could now be the time to buy great UK shares at bargain prices?
• easyJet shares are up 40% in a month. Here’s why
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?
• At £5, could the easyJet share price still be a long-term bargain?

Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.