Dunelm

Dunelm (LSE: DNLM) is a British home furnishings retailer that operates throughout the UK. It is one of the largest homewares retailers in the country with an ever growing market share. New director Karen Witts was appointed CFO this week and a number of Dunelm shares were awarded to her.

• Name: Karen Witts
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 9 June 2022
• Amount purchased: 73,979 @ nil
• Total value: £N/A

Investec

Investec (LSE: INVP) is an international banking and wealth management group. It provides a range of financial products and services to a clients in Europe, Southern Africa and Asia Pacific. This week, a number of director dealings were carried out in both directions.

• Name: Ciaran Whelan
• Position of director: Director
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 8 June 2022
• Amount sold: 24,037 @ £4.77
• Total value: £114,674.28

• Name: Ciaran Whelan
• Position of director: Director
• Nature of transaction: Partnership shares
• Date of transaction: 8 June 2022
• Amount purchased: 21,531 @ £4.77
• Total value: £102,702.87

• Name: Stephen Koseff
• Position of director: Director
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 6 June 2022
• Amount sold: 31,514 @ £4.82
• Total value: £151,938.67

• Name: Ruth Leas
• Position of director: PDMR
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 8 June 2022
• Amount sold: 10,179 @ £4.75
• Total value: £48,374.68

• Name: Ruth Leas
• Position of director: PDMR
• Nature of transaction: Partnership shares
• Date of transaction: 8 June 2022
• Amount purchased: 10,330 @ £4.75
• Total value: £49,092.29

• Name: Fani Titi
• Position of director: Director
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 6 June 2022
• Amount sold: 75,150 @ £4.84
• Total value: £363,996.54

• Name: Nishlan Samujh
• Position of director: Director
• Nature of transaction: Sale to cover tax liabilities
• Date of transaction: 6 June 2022
• Amount sold: 37,885 @ £4.84
• Total value: £183,499.79

Bodycote

Bodycote (LSE: BOY) is the world’s largest provider of heat treatment and thermal processing services. The service acts as a vital link in the manufacturing supply. A non-executive director purchased a decent number of Bodycote shares this week.

• Name: Nicola Susan Boyd
• Position of director: Director
• Nature of transaction: Purchase of shares
• Date of transaction: 8 June 2022
• Amount sold: 3,000 @ £6.54
• Total value: £19,620.00

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, the director dealings at Investec bought partnership shares. Employees can use a SIP to buy shares on a monthly basis or at the end of an ‘accumulation period’. If there is an accumulation period in effect, employees can buy shares at the market value at the beginning or end of the period.

The post Director dealings: Dunelm, Investec, Bodycote appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Bodycote. 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.

One way of separating the wheat from the chaff is to look for companies that have better-than-average records of consistently raising their bi-annual payouts.

Here are three examples, all of which come from the FTSE 250 and probably remain under the radar of many private investors.

Cranswick

Meat supplier Cranswick (LSE: CWK) is a great passive income stock, in my view. The company has a long history of growing its annual cash returns to investors. In fact, hikes in recent years have often been by double-digit percentages. So while no dividend stream can be guaranteed, this is exactly the sort of form I’m looking for.

Based on recent trading, I have no concerns over this trend continuing. In its most recent update, the FTSE 250 stock said trading over the festive period has been “comfortably ahead” of the same time in 2020. This was despite “unprecedented industry-wide labour and supply chain challenges” and cost inflation.

Will we still be talking about these headwinds in a few years though? I sincerely doubt it. 

As good as the dividend hikes have been, Cranswick is a fairly low-margin business. Admittedly, the 2.2% forecast yield isn’t all that generous compared to others in the UK market either. 

Still, the amount of free cash flow (essentially, what allows a company to pay passive income to holders) is looking very healthy indeed. This makes me believe the company will continue growing its dividends in the years ahead. 

Bodycote

Heat treatment and thermal processing specialist Bodycote (LSE: BOY) is another FTSE 250 member that’s been increasing its annual payouts to investors for a long time. This quality tends to be indicative of a very resilient company.  

As things stand, Bodycote is expected to yield 21p per share in FY22. That becomes a yield of 3%. Again, this fairly average return doesn’t bother me. I’d rather invest in a company where my passive income is likely to be paid and also increasing every year. 

The shares have fallen 20% in 2022 so far, which highlights how even solid dividend payers can be just as volatile as more growth-focused stocks. Headwinds, such as supply chain disruption and cost inflation, won’t go away overnight either. 

Nevertheless, Bodycote seems to be trading just fine. This month’s full-year results revealed a 7.1% rise in revenues to almost £616m. Operating margins also rose to 15.4%. 

Clarkson

Shipping services provider Clarkson (LSE: CKN) strikes me as another stock that many private investors might be unfamiliar with. Similar to the other two shares mentioned here, the £1.1bn-cap company regularly lifts its annual dividend. In fact, it’s been doing this for the last 19 years! 

A forecast 2.5% yield in 2022 is expected to be covered almost twice by profit. That last bit is important. The greater the dividend cover, the less likely it is that the payment will be cut.

On the downside, shares in Clarkson aren’t a bargain, at almost 21 times earnings. This potentially makes the stock a more risky buy.

Even so, the balance sheet looks pretty solid to me. Earlier this month, Clarkson also announced record underlying pre-tax profit of £69.4m for 2021. Maintaining this kind of form should allow the passive income to keep ticking higher.

The post 3 ‘secret’ FTSE 250 stocks to buy for passive income appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Bodycote. 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.

A fiery opportunity within the FTSE 250

Bodycote (LSE:BOY) is a world-leading provider of thermal processing services. Put simply, it takes some metals, throws them into a glorified oven, and heats them under specific temperatures and pressures to manipulate their material properties. The process drastically improves the strength, toughness, and durability of metals and alloys—an essential trait for almost all machinery components today.

The FTSE 250 company has been around for almost a century. It started out as a small textiles business in 1923. After a long trail of acquisitions, mergers and demergers, Bodycote now serves over 40,000 customers with 185 facilities across 23 countries.

It has successfully built a strong reputation for excellence within the industrial sectors. Given the skill and precision required to correctly heat-treat metals, I believe its reputation has granted quite a high level of customer loyalty, as well as pricing power. Even if a competitor offers cheaper rates, I don’t believe this alone would be enough to convince existing customers to switch.

Playing with fire can be a risky business 

As previously stated, Bodycote’s brand appears to be held in high regard by its customers and the industrial sectors in general. While this has undoubtedly granted it some competitive advantages, it also adds additional pressure. 

Industrial manufacturing companies typically rely on a ‘just-in-time’ supply chain. This is particularly important since Bodycote’s services are quite dangerous to perform. Accidents can happen. And while strict safety precautions help mitigate this risk, it will always be a present threat. If such a tragedy occurs, the disruptions will likely lead to delays in orders that will compromise its reputation.

Another risk to consider is the international operations themselves. By having facilities outside the UK, the business should be quite resilient to any impact from Brexit. However, an unfortunate side effect of operating internationally is exposure to fluctuating currency prices from both a sales and expenses perspective.

Bottom line: is Bodycote a FTSE 250 share to buy now?

Treating metals is not the most glamourous sounding business. But the process is essential to industries such as aerospace, energy, and manufacturing. All of these sectors have been heavily impacted by Covid-19, and these disruptions have consequently been passed onto Bodycote. As a result, revenue and profits in 2020 took a significant hit.

But now that factories are re-opening, the demand for thermal processing services is back on the rise. And Bodycote is still a leader within this space. That’s why I think now could be the best time to add the stock to my portfolio.

The post Shares to buy: 1 FTSE 250 stock I’d add to my portfolio appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Bodycote. The Motley Fool UK has recommended Bodycote. 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.

Bodycote is a leading provider of heat treatment and specialist thermal processing. The company offers services such as case hardening (hardening the surface of a metal object) and annealing (used to reduce hardness and eliminate internal stress). It also produces tools that help with metal joining and the application of specialised coatings designed to prolong the working life of engineering components.

A good investment

This isn’t a glamorous business, but it’s an essential one and, in my opinion, this makes Bodycote an exceptional investment proposition.

You see, customers of companies like this don’t tend to shop around too much. They like to stick with trustworthy suppliers, and that’s just what the company has been since it was founded in April 1953.

Thanks to this customer loyalty, as earnings have risen, the company has been able to increase its dividend every year for more than a decade. It doesn’t look as if this trend is going to come to an end anytime soon.

Based on fiscal 2018 figures, the dividend is covered nearly three times by earnings per share. The dividend yield currently stands at 2.2%, which is below the market average. But considering Bodycote’s dividend track record, I reckon it is worth accepting the lower distribution as a trade-off for dividend safety.

Analysts reckon management will hike the payout by 19% this year, taking the yield to a more attractive 2.7%. So, if you’re looking for an FTSE 250 dividend hero, I highly recommend taking a closer look at this British engineering success story.

Highly profitable

Another dividend champion I wouldn’t hesitate to add to my portfolio today is soft drinks group AG Barr (LSE: BAG).

Barr has an excellent dividend track record, having paid out some portion of its profits to investors every year for decades. Recently, the payout has grown at a compound annual growth rate of around 9% since 2010, and it doesn’t look as if this trend is going to change anytime soon.

The company is highly profitable and, at the end of its latest financial period, it reported a net cash balance of around £22m. For fiscal 2019, Barr’s return on capital employed — a measure of profitability for every £1 invested in the business — came in at 19%, putting the business in the top 25 most profitable businesses in London.

Unfortunately, Barr’s success is no secret, and as investors have flocked to the business, its valuation has exploded. The shares are currently changing hands at an eye-watering forward P/E of 28.

Still, even though this is above what I would usually be willing to pay for any business, I think this multiple is acceptable for such a profitable, well-managed enterprise. It currently supports a dividend yield of 1.9%, and the payout is covered twice by earnings per share, leaving plenty of room for further growth in the years ahead.

The post 2 FTSE 250 dividend heroes I’d buy right now appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Bodycote. 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.

The analysts believe short-term political uncertainty is putting investors off, although they also go on note as saying this could be a tremendous opportunity for long-term investors.

I agree with Morgan’s view. Yes, the outlook for the UK economy is uncertain, but there are plenty of other companies in the FTSE 250 with an international focus, such as BBA Aviation (LSE: BBA) for example.

British success story

BBA is a great British success story. Founded in 1897 and public since 1964, today the company is one of the largest providers of aviation support services globally. 

This business isn’t glamorous, but it’s essential. The group is separated into two divisions, Flight Support, and Aftermarket Services, which keep planes in the sky and heading in the right direction. And rather than focus on the general aviation market, BBA’s primary business is managing private jets, which I believe gives the company an edge over others in the sector. 

Over the years, BBA has built itself up through a combination of organic growth and bolt-on acquisitions, the latest of which is Firstmark Corp, an aftermarket service provider, for a consideration of $97m.

In my mind, BBA’s niche but essential business gives it great dividend credentials. Organic growth topped up with select acquisitions should support dividend growth. Meanwhile, the essential nature of the business should ensure no sudden drop in income, which is usually why companies are forced to slash distributions.

City analysts have the company paying out $0.14 per share for 2018, rising to $0.15 for 2019. These estimates give a dividend yield of 3.7%, which isn’t that exciting. However, it’s the longevity of the payout that excites me. For the reasons listed above, I believe you can rely on BBA for income for many decades to come.

Steady growth 

Another FTSE 250 income stock that I believe has exciting long-term prospects is Bodycote (LSE: BOY). 

Once again, Bodycote is not a household name, but it’s good at what it does, namely providing thermal processing services in countries around the world. These processes are essential in manufacturing industries such as aerospace and defence, where precision and reliability counts for everything.

Bodycote’s position in the industry has helped the company grow net profit by 52% over the past six years. Analysts are expecting earnings per share (EPS) growth of 13% this year, followed by an increase of 6% next year.

As earnings have grown steadily over the past decade, management has rewarded shareholders with steady dividend growth. Since 2012, the group’s dividend payout has increased at a compound annual growth rate of 7.2%. 

Unfortunately, like BBA, the dividend yield disappoints because shares in Bodycote only yield 2.2% at the time of writing. Nevertheless, it’s the company’s established reputation and steady growth that gets me excited about its prospects. 

It seems management is also optimistic about what the future holds. CEO Stephen Harris recently made his first acquisition of the company’s shares, spending £100,000 to snap up just over 11,000 shares.

Bodycote is a stock to buy today and hold for years, in my opinion.

The post These 2 FTSE 250 dividend stocks could help you quit your job appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of and has recommended BBA Aviation. The Motley Fool UK has recommended Bodycote. 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.

With the company’s share price hitting record highs, should investors pile in and ride the momentum?

Expectations-beating

At £234m, group revenue was 7% higher (or 10% at constant currency) year-on-year over the four months to the end of April. 

Broken down, revenues at its Aerospace, Defence and Energy (ADE) division climbed 5% to £94m.  Although income connected to civil aerospace was impacted by lower demand in France, overall growth of energy revenues hit 24% over the reporting period (thanks to a strong performance in North America). 

Elsewhere, Bodycote’s other arm — Automotive and General Industrial (AGI) — saw a 9% increase to £149m with car and light truck revenues rising 8%, partly thanks to “strong growth in Emerging Markets“.

Pleasingly, the £1.8bn cap’s balance sheet continues to look robust with a net cash position of £45m at the end of the reporting period — £5m higher than at the end of the last calendar year. While its growth credentials mean that it’s unlikely to be a priority investment for income seekers, confirmation that management had approved a 25p per share special dividend in addition to the final payout of 12.1p per share will no doubt be welcomed by its owners. 

Looking ahead, Bodycote believes full-year revenue will now come in higher than expected and that operating profit will slightly exceed analyst predictions.

At 18 times earnings before today, however, its stock was already looking pricey relative to industry peers. So, while today’s positive numbers suggest that investors should expect to pay a premium, I’d be tempted to wait for a likely period of profit-taking to subside before moving in. 

Is the recovery on?

Another riser today was banknote designer and manufacturer De La Rue (LSE: DLAR) — a company which made headlines earlier in the year after losing the tender to produce the new, post-Brexit blue passports to Franco-Dutch competitor Gemalto.

Having grown accustomed to profit warnings, investors appeared relieved with the mid-cap’s latest set of full-year numbers.

In the 12 months to the end of March, group revenue rose 7% to slightly below £494m. As expected, adjusted operating profit fell (by 11% to £62.8m), although this rose 7% when its now-sold paper business is excluded from calculations. 

De La Rue’s goal to evolve into “a less capital-intensive, more technology-led business” appears to be going well with CEO Martin Sutherland stating that its non-printing divisions — focusing on areas such as security, product authentication and traceability — now contribute more than a third of total revenue and over 50% of operating profit. 

News that net debt had reduced by £71m to just under £50m was also cheered. It was the lowest for five years and was thanks to the Basingstoke-based business receiving £60.3m cash from the aforementioned sale. 

With the full-year dividend unchanged at 25p, the 12-month order book 6% up (to £363m) on the previous year, new strategic partnerships, and increased R&D investment, I wouldn’t be surprised if value hunters and contrarians were to begin reassessing the company.

At 12 times forecast earnings for the new financial year and continuing to register excellent returns on the capital it employs, today might just mark the beginning of a sustained recovery for De La Rue. 

The post Why I’d consider buying this FTSE 250 growth stock alongside this battered mid-cap appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Bodycote. 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.

A powerful underlying trend in the market

On balance, I think the long-term growth story remains attractive and I see weakness in the stock price now as an opportunity to invest with better terms. As I write, the shares have settled around 8% down. Yet the figures are encouraging. Revenue rose 45% compared to 2016 and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) is up 42%, although the firm is yet to make a statutory profit.

Ordering takeaway food for delivery is a way of life for many and no longer just an occasional treat. I think that trend will continue and accelerate to underpin the growth opportunities for Just Eat and its competitors. But should we worry about the competition? Maybe, but last year’s acquisition of Hungryhouse strengthened the UK-facing part of the business and Just Eat could go on to take over more competing firms if it can keep the cash flowing in. Encouragingly, the firm said: “Strong cash flow leaves us in a position of great strength, enabling investment in significant new opportunities.”

Big investments to defend and grow

In order to “insulate” the business from competition, Just Eat plans to plough big money back into technology so that the customer-facing websites and phone apps provide the best possible customer experience. There will also be “considered investments” into the delivery operations in the UK, Canada, Australia & New Zealand, and into building businesses in the company’s developing markets, which offer “significant growth potential.”

I reckon there’s more to come from Just Eat and consider the firm well worth your research time right now along with thermal processing services provider Bodycote (LSE: BOY), which also released full-year results today showing good progress. Revenue at constant currency rates lifted almost 10% compared to 2016 and earnings per share shot up 33%. The directors signalled their confidence in the outlook by pushing up the ordinary dividend 10% and paying a special dividend of 25p.

Trading well and growing

Chief executive Stephen Harris told us that Bodycote achieved its strong growth in the year via contributions from contract wins on automotive and aerospace programmes, “excellent” progress in Emerging Markets, and “broad-based” advances across the general industrial sectors, “an element of which was due to some customer restocking.”

Although the business has “limited forward visibility,” Mr Harris said that 2018 got off to a good start and Bodycote is trading in line with the directors’ expectations. Meanwhile, at today’s share price around 932p, the forward price-to-earnings ratio for 2019 sits close to 17 and the forward dividend yield is just over 2%. City analysts following the firm expect earnings to grow around 8% during 2019, and to cover the dividend payment almost three times, which looks healthy. I reckon the valuation is fair and the firm warrants close attention with a view to adding the stock to a balanced and diversified portfolio.

The post Should you pile into these 2 potentially millionaire-making stocks right now? appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Bodycote and Just Eat. 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.

Low energy

Chief executive Mark Lewis blandly said: “With current trends in our Energy trading, we expect the full-year outlook for adjusted operating profit to be at the lower end of the consensus range.” The market response was far from bland, as the news overshadowed a steady 3% rise in adjusted operating profit for the period to £55.2m.

Other financial highlights included a 5% rise in group revenues to £165.3m, a 6% rise in profit after tax to £40.3m, and a 4% rise in adjusted earnings per share (EPS) to 8.1p. Net cash rose 65% to £17.7m, while the interim dividend was increased 3% to 2.84p. Today it yields 3.07%.

Compare and contrast

Lewis was keen to accentuate the positive, pointing out that the group helped more people take control of their household bills than ever before, saving customers £1.1bn, while insurance switching grew an encouraging 18%. However, there was deflating news here too, with Lewis admitting that “the lack of blockbuster energy deals from providers meant we didn’t collectively switch as many people as last year”.

The analyst consensus suggests that Moneysupermarket’s adjusted operating profits should range from £112.6m to £117.4m in 2017. We now know they will be at the lower end of that scale, which is a concern, given that the company is priced for growth at a meaty 22.89 times earnings. It may help crystallise fears that the comparison site sector will struggle to build on its early triumphs.

Money, money, MONY

The sector as a whole needs to keep existing customers switching, and tempt newbies to seek cheaper household services The consumer squeeze should give them added incentive, alongside double-digit price hikes in motor insurance, and utility bill concerns. Sites face the added challenge of differentiating their services from each other. Moneysupermarket has built a strong position, but this is a highly competitive market. The stock is up 25% over one year and 170% over five. Profits are still forecast to hit £123.99 in 2018, although after today’s news, bruised analysts may now revise that estimate downwards.

Body talk

Heat treatment and specialist thermal processing company Bodycote (LSE: BOY) is another growth flyer, up 37% in the last year, and 165% over five years. As a result it also trades at a hefty valuation, of 22.12 times earnings, but with no profit warnings to worry about.

The group, which operates in the automotive and general industry, and aerospace, defence and energy sectors, recently posted 18% revenue growth for the four months to 30 April of £227m, up 7.1% at constant exchange rates. Net cash jumped from £1.1m to £10.6m, thanks to strong cash flow, cost control and managed working capital flows.

Powder burns

Today its launches its new ‘Powdermet’ technology product, which combines with 3D printing to cut manufacturing time and production costs when making parts. EPS are forecast to rise 12% this year and 7% in 2018, while the yield is forecast to climb to 2.2%. The FTSE 250 company may prove a tempting alternative for disappointed Moneysupermarket investors. Let’s hear it for the BOY.

The post Moneysupermarket.Com Group plc slumps 10% on profit warning appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Bodycote and Moneysupermarket.com. 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

Impressive performance

Reporting on Wednesday was thermal processing services specialist Bodycote (LSE: BOY). The company has experienced a solid start to 2017, with its revenue increasing by 18%. However, the majority of this was due to weaker sterling. On an underlying basis, its top line rose by 7.1%. Like-for-like (LFL) revenues moved 3.9% higher, with Aerospace, Defence and Energy business revenues moving up 10.8% (0.6% at constant exchange rates). Automotive & General Industrial business revenues increased by 23.2% (11.8% at constant currency), which shows that the company’s overall strategy seems to be working well.

Looking ahead, Bodycote has an upbeat outlook. It is expected to report a rise in its bottom line of 11% in the current year, followed by further growth of 7% next year. While this is an above-average rate of growth, it trades on a valuation which is perhaps more reflective of a growth stock, rather than a company with modestly above-average growth potential.

For example, it has a price-to-earnings growth (PEG) ratio of 2.7. This suggests there is a narrow margin of safety on offer. At a time when there are still a number of enticing stocks trading on low valuations, Bodycote may be a company to avoid for now.

Solid growth

Clearly, there is uncertainty ahead for investors, despite the rising share price levels recorded in recent weeks. Political risk in the US and Europe could cause investor sentiment to come under pressure. Therefore, shares which have proven track records of consistent growth could become increasingly popular. One such company is information services business Experian (LSE: EXPN). It has a long track record of profit growth, with its business model offering stable returns which have generally been in line with the wider index.

While reliable growth companies may be worth a premium to the wider index, Experian’s current valuation suggests it is grossly overvalued. It trades on a price-to-earnings (P/E) ratio of 23.2, which when combined with its 8%-9% earnings growth forecasts over the next two years equates to a PEG ratio of 2.1. This suggests that there could be some disappointment ahead – especially if the macroeconomic outlook deteriorates.

Clearly, Experian is a high quality company with a proven business model. However, its yield of 2% suggests there is a lack of income appeal right now. Alongside average growth and a high valuation, there do not seem to be catalysts to push its share price significantly higher.

The post These FTSE 350 growth stocks look dangerously overvalued appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Bodycote and Experian. 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.

The electric share price ascent at Bodycote (LSE: BOY) received a further shot in the arm in late February, as signs of progress in its key markets sent investors into something of a frenzy.

The engineer has now added 29% in value since the start of 2016, and I believe it has what it takes to surpass April’s all-time tops of 836.5p per share.

At first glance Bodycote’s full-year release in February may not have appeared much to shout about. While revenues rose 5.9% to £600.6m, the thermal processor manufacturer saw like-for-like sales slump 3.5%.

Still, stock pickers cheered news that “excluding energy, revenues at constant exchange rates were flat, with momentum building throughout the year.” Revenues at constant currencies were actually 6% lower at the mid-year point, illustrating Bodycote’s robust sales improvement more recently.

Rosy outlook

At its aviation operations, the engineer noted that “civil aerospace in Western Europe was strong [in 2016], particularly in the second half,” and it advised that it expects “continued modest growth” from its commercial division in 2017.

Not only does the prospect of rising civil build rates bode well for Bodycote’s aerospace operations, but President Trump’s desire to rebuild the US military could provide its defence arm a huge dose of rocket fuel too.

Meanwhile, a resolute auto market also provides Bodycote with strong sales opportunities. The firm saw car and light truck revenues growth double to 6% in the second half of 2016 from 3% in the prior six months, thanks to a strong global market and new contract successes.

So while uncertainty surrounding the oil and gas markets could remain a headache for Bodycote’s energy operations (the firm expects “no near-term improvement in the oil & gas sector”), I believe the structural opportunities afforded by its other core markets, allied with ongoing efforts to improve its business mix, should deliver strong earnings growth.

The City expects Bodycote to generate bottom-line expansion of 11% and 7% in 2017 and 2018 alone. So while looking slightly toppy on paper, I reckon a forward P/E ratio of 22.1 times is fair value given the engineer’s robust long-term outlook.

A delicious pick

Investors have also been piling into Hilton Food Group (LSE: HFG) with gusto over recent weeks, the stock gaining 15% during the past month alone and hitting new record tops around 750p in the process.

Hilton was buoyed by a positive reaction to late March’s full-year financials, with a strong performance in the UK driving volumes and like-for-like revenues 7.4% and 7.2% higher respectively in 2016. And the business has also been a beneficiary of heavy sterling weakness over the past year (at actual currencies sales rose 12.8% last year).

With the City expecting revenues to keep on rising, Hilton’s hot growth story is anticipated to continue with bottom-line expansion of 7% and 6% in 2017 and 2018.

Such forecasts result in a high prospective P/E multiple of 20.3 times. But I believe the huge investment Hilton is making to expand its international footprint should help deliver meaty earnings expansion and help it merit such a premium. For instance, work is due to start later this year on its most expensive investment to date, the colossal Queensland facility. 

The post 2 great growth stocks with stunning momentum appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Bodycote. 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.