Earlier today, I looked at three companies from the FTSE 100 that are involved in the flood of results expected in March. I’m now turning my attention to three growth stocks from the FTSE 250.

Darktrace

Recently demoted from the FTSE 100, cybersecurity specialist Darktrace (LSE: DARK) is first on my list of second-tier stocks to watch next month. It releases interim numbers on 3 March. 

The former market darling has now given up most of the gains it made since becoming a listed company. That’s a quite shocking reversal considering just how important cybersecurity already is and the potential growth that lies ahead. Darktrace’s undoubtedly impressive self-learning AI can be applied to multiple industries too.

Then again, I do understand why sentiment has changed. As good as Darktrace’s tech appears to be, there can be no doubt that it’s operating in a highly competitive space. Brokers also remain concerned by the company’s low level of R&D spending.

Unfortunately, the valuation of almost 11 times sales still looks rich to me as well. In fact, I wonder if the stock will fall further in March if traders continue to shun unprofitable growth stocks in favour of more traditional value plays. 

I still can’t bring myself to get involved just yet.

Greggs

The advent of higher prices at food-on-the-go retailer Greggs (LSE: GRG) makes its next update an essential read in my opinion. The sausage roll seller reports final results on 8 March.

Shares in Greggs have tumbled almost 25% in 2022 so far. Is the actual business 25% less valuable though? As a holder, I won’t be surprising anyone when I say that I don’t think it is. Yes, the departure of long-standing CEO Roger Whiteside isn’t ideal. And, no, the spread of the Omicron variant late last year can’t have helped trading.

But these are temporary setbacks. Helped by its strong brand and marketing savvy, I have no doubt Greggs can deal with pretty much anything that comes its way. I also doubt its loyal fanbase will resent a 5p price hike for long.

At less than 21 times forecast earnings, Greggs still isn’t cheap as chips to acquire. However, the price is far more palatable than it once was. Since I plan to keep the stock in my portfolio for years rather than weeks, I’d have no issue increasing my holding next month.

Computacenter

A final FTSE 250 member I’ll be watching is IT solutions provider Computacenter (LSE: CCC). While a 7% drop in the share price year-to-date is unfortunate, investors here have fared a lot better than other UK growth shares.

I can’t see full-year results on 16 March being anything less than solid. Back in January, Computacenter reported that recent trading had been ahead of expectations despite supply chain headwinds.

The question I’m asking now, however, is how much of this is already factored into the valuation. The fact that Computacenter’s share price didn’t move higher after its last update suggests quite a bit. Perhaps investors are getting concerned about just how thin margins are at the Hatfield-based business?

On the flip side, its shares currently change hands for 17 times earnings. That’s cheap compared to peers in the industry. There’s also a 2.2% dividend yield, easily covered by forecast profits.

For now, the company stays on my watchlist.

The post 3 FTSE 250 growth stocks I’ll be watching in March appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Greggs. 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.

On what has been a fairly quiet day on the London market, one company’s share price stands out to me. Springing out of the blocks in early trading was FTSE 250 member and IT services provider Computacenter (LSE: CCC). What’s got investors excited?

Beating expectations

It’s all seems to be down to an encouraging (albeit unscheduled) trading update.

Today, Computacenter announced that business in both July and August had been “robust” in all areas of the world where the company operates. The £3.5bn cap anticipates adjusted pre-tax profit being 10% ahead of analysts’ current projections. Importantly, this could be achieved “even with a flat performance in the second half of 2021 compared to the second half of last year”. That’s bullish talk!

In essence, today’s update was a nudge to the market that it was being too conservative about CCC’s prospects. We’ll get far more information when it officially reveals interim numbers on 9 September. 

FTSE 100 bound?

CCC is up 2.5% as I type, logging yet another all-time share price high for the firm. For perspective, the stock has now gained 47% in 12 months and over 300% since 2016. For me, this is yet further evidence that market-beating returns can be generated simply through spotting great companies before the herd. Just buy and hold.

No one knows what will happen for sure in the next few weeks or months for the Computacenter share price. Notwithstanding this, I’m confident that it remains a great long-term option for a (mostly) growth-focused investor such as myself. Actually, I think this FTSE 250 stock could end up being promoted to the FTSE 100 in a few years, especially when I look further under its bonnet. 

Big clients

For one, it boasts a strong list of corporate customers. These include Costa Coffee, broadcaster Channel 4, cereal titan Kellogg’s and FTSE 100 firm Royal Mail. On top of this, the mid-cap provides support for public sector organisations such as the Foreign and Commonwealth Office. Its large and diverse set of clients gives me confidence that its earnings will never collapse.  

CCC also gets another tick from me for its sound finances. It has long had net cash on its balance sheet. In addition, rising free cash flow has allowed it to hike dividends fairly consistently. In a financial industry plagued by obfuscation, a firm’s attitude to its payouts is indicative of whether trading really is as healthy as stated.

Great…but not perfect

Obviously, there’s no sure thing in investing. Computacenter acknowledged this today when it reflected that earnings visibility in its line of work is “never perfect“. And while the company has done seriously well since March 2020’s market crash, there’s nothing to say that a market correction — perhaps beginning over in the US — won’t put a temporary hold on progress. 

It’s also worth acknowledging that operating margins have been, are, and will likely stay, thin. As someone who intentionally looks for businesses with low costs relative to sales, this is something I wouldn’t usually be comfortable with. 

Nevertheless, I remain bullish on this FTSE 250 stock. With a “substantial order backlog” and a commitment “to beat last year’s second half performance, not just match it”, CCC is a company I’d feel comfortable adding to my portfolio today. A valuation of 21 times earnings still looks reasonable, relative to sector peers.

The post This FTSE 250 growth stock looks FTSE 100-bound to me! appeared first on The Twelfth Magpie.

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• How to invest £288 a month in UK shares to target a £4,974 passive income for life
• £3,750 invested in the FTSE 250 at the start of 2026 is now worth…

Paul Summers 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.

Tritax Big Box

Shares of real estate investment trust Tritax Big Box (LSE: BBOX) have been in fine form of late. Anyone snapping up the warehouse provider roughly 11 months ago would have more than doubled their money.  

I’m not sure we should be surprised by this performance. After all, the boost to online shopping as a result of the coronavirus means many companies are desperately looking for warehouse space to expand their digital footprints.

In addition to this, I’ve long been bullish on Tritax as a source of dividends. Analysts are expecting the company to return 6.71p per share in the 2021 financial year. That becomes a yield of 3.7% at the current share price. That’s certainly not the highest income stream available in the FTSE 250. However, based on the firm’s growth prospects, I would think it’s one of the most secure. 

A downside to all this is that the shares are changing hands for 26 times forecast earnings. That’s not cheap, arguably making the stock riskier than it first appears. With this in mind, I can’t see Tritax moving all that much higher in value when full-year results are announced on 10 March.

Greggs

Sausage-roll seller Greggs (LSE: GRG) releases its latest set of full-year numbers to the market on 16 March. Like Tritax, its share price has been on a tear of late, helping to justify my ‘buy’ call on the stock last year. 

Is the stock now in danger of overheating? It’s a tricky one to call. As things stand, high streets are still deserted and could remain that way if Boris Johnson’s roadmap doesn’t go to plan. Then again, more positive news flow on the pandemic over the next few months could quite reasonably send the shares higher. 

As a committed long-term investor, I doubt I’ll be jettisoning my shares in Greggs next month. Even so, I’m hoping recent momentum will continue.

One reason to be optimistic is that the company has already sought to keep expectations low. Back in January, it said that profits were unlikely to return to pre-COVID levels until 2022 at the earliest. Under-promising and over-delivering is never a bad strategy in my book!

Computacenter

A final FTSE 250 share worth watching in March is Computacenter (LSE: CCC). The £2.5bn cap has been a huge beneficiary of the increased demand for IT infrastructure support over the pandemic.

CCC releases full-year results on the same day as Greggs. While I don’t expect any bad news, it will be interesting to see how the market reacts given that the shares have already doubled since the market crash.

Back in January, the company increased its guidance on full-year adjusted pre-tax profit for the second time in as many months. It also said that trading momentum since the coronavirus first began wreaking havoc showed “no sign of abating”. 

Of course, there’s a chance CCC’s valuation already reflects this.  As such, I’d be wary of assuming the shares will automatically hit another record high next month. The shares currently trade on 18 times earnings.

The post FTSE 250 stocks: 3 to watch out for in March appeared first on The Twelfth Magpie.

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• Here’s how a 40-year-old with no SIPP today could have one worth over £1,153,000 by age 67       
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• Here’s why I’m hanging onto my Greggs shares, even though they’ve fallen
• The Greggs share price has crashed 50%! Now see what it could be worth this time next year

Paul Summers owns shares of Greggs. The Motley Fool UK has recommended Tritax Big Box REIT. 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.

Does this suggest the battered airline is now a bargain? Not in my opinion.

Massive IAG loss

For its part, IAG is trying to mitigate the impact of the coronavirus by reducing costs where it can and raising €2.7bn in the market. The latter brings total liquidity to €9.3bn. Nevertheless, it’s worth pointing out the battered airline has net debt of €11.1bn.

The post IAG shares are rising after today’s news. Is this now a bargain not to be missed? 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 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.

Here are three that investors can’t stop buying. 

Top UK stock

Like nearly all stocks, IT specialist Computacenter (LSE: CCC) was hit hard by the market crash in March. Since then however, the share price has doubled. When you consider just how bullish last week’s trading statement was, it’s not hard to see why.

As a result of people needing to work from home during lockdown, Computacenter said it has seen huge demand for equipment and services. Adjusted pre-tax profit in the first six months of 2020 was consequently “substantially ahead” of that achieved over the same period in 2019.

Looking ahead, the firm now believes that adjusted profits in H2 will be “much improved” on the forecast given in April and that 2020 will turn out to be “a year of material progress“.

Of course, the usual caveats apply: no investment is ever ‘safe’ and there’s the possibility that a lot of this good news is already priced in.

Then again, concerns over a second coronavirus wave could force the share price even higher. Regardless, the growing trend of companies allowing their employees to work from home more often can surely only be a good thing for Computacenter.

At 21 times forecast earnings, this UK stock isn’t cheap. Nevertheless, I think there’s potential for more gains ahead. 

Gold price beneficiary

Back in May, I suggested that £2bn cap gold miner Centamin (LSE: CEY) could be a good hedge against a looming recession. After all, gold has historically been a great store of value in troubled times. 

Since then, of course, the precious metal’s price has rocketed to a record high. Centamin has followed suit, rising 20%. If you’d bought this UK stock in the dark days of March, you’d have pretty much doubled your capital. 

I suspect this momentum will continue for a while yet. This is especially likely if the US Federal Reserve orders another bout of money-printing. Such a move further increases the risk of inflation — something gold helps to protect investors from. 

Centamin’s shares currently trade on 16 times forecast earnings. Considering the precarious state of the global economy and the company is debt-free and still paying dividends, that still doesn’t feel excessive.

In demand

A final UK stock that investors can’t get enough of is online wine-seller Naked Wines (LSE:WINE). Again, the share price has almost doubled since mid-March. That’s a seriously good result considering most small-cap companies haven’t rallied as strongly as those in the FTSE 350. 

Then again, this shouldn’t come as a complete surprise. Like Computacenter, Naked Wines has been a huge beneficiary of people spending more time at home. Last week’s trading update revealed a 67% jump in total sales in June compared to the same month in 2019. For Q1 as a whole, sales were 77% higher.

With numbers like these, it’s becoming increasingly difficult to challenge management’s belief that Naked is “ideally positioned to be a long-term winner from the inflection in consumer demand for online wine”. 

As the potential for more local lockdowns in the UK grows, Naked’s purple patch could well be extended.  

The post Looking to protect your portfolio from coronavirus? I’d buy these 3 UK stocks appeared first on The Twelfth Magpie.

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• £3,750 invested in the FTSE 250 at the start of 2026 is now worth…

Paul Summers 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.

On a roll

At a time when most investors are scrambling for cover as companies begin reporting on trading over the coronavirus pandemic, the latest news from Avon really stands out. Revenue hit £94.7m in the six-month period. This was a rise of 28.7% on that achieved over the same period last year.   Roughly two-thirds of this growth came from the company’s acquisition of US conglomerate 3M’s ballistic protection business (Helmets and Armour) in January. Interestingly, this deal was part of the reason Terry Smith decided to jettison the latter from the highly successful Fundsmith Equity fund late last year.

Elsewhere, decent market conditions also led to a strong revenue performance from the company’s milkrite/InterPuls business. On top of all this, the FTSE 250 stock has inked two big body armour contracts with the US Department of Defence over the period. Adjusted pre-tax profit came in a superb 67% higher at £14.7m.  Given the above, it’s perhaps no surprise the interim dividend has been raised. Even so, a 30% increase to just over 9p per share reflects just how confident management is on the company’s progress. 

Naturally, Avon’s quality is reflected in its valuation. A price-to-earnings (P/E) ratio of 30 for the current financial year means new investors will need to dig deep.

Nevertheless, the bullish tone of today’s statement and robust balance sheet mean I’ve no intention of selling my stake just yet.  

Another rising FTSE 250 star

Another FTSE 250 stock also experiencing great trading at the moment is Computacenter (LSE: CCC). A company perhaps unfamiliar to many private investors, the business provides IT infrastructure services to firms. Like Avon, recent updates from the company have been very positive. 

Having already informed investors that trading over the coronavirus pandemic had been better than expected, the £1.8bn-cap announced it had also secured “some substantial Technology Sourcing contracts” in recent weeks. As a result, Computacenter believes the first half of its financial year will now be “considerably ahead of the same period of last year.” 

This surely bodes well for the share price. Despite bouncing hard recently, the FTSE 250 stock still trades 17% below the all-time highs it hit in February. 

The valuation isn’t excessive either. Right now, Computacenter can be yours for 18 times forecast earnings. That looks a good deal to me. There’s net cash on the balance sheet. It also makes consistently great returns on the money it invests in the business.

If you can look past the company being “unable to provide meaningful guidance” on business over H2, I think Computacenter could be a great long-term buy for growth-focused investors.

The post This FTSE 250 growth stock just hit an all-time high. Here’s why I’m not selling yet appeared first on The Twelfth Magpie.

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• £3,750 invested in the FTSE 250 at the start of 2026 is now worth…

Paul Summers owns shares of Avon Rubber. The Motley Fool UK has recommended Avon Rubber. 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.

Computer whizz

The stock is up a thumping 125% over the past five years and, after dipping last year, has staged a dramatic recovery to grow 45% year-to-date.

The group, which offers technology expertise to corporate and public sector organisations, is up 3.5% today despite reporting a 2.3% fall in reported interim pre-tax profits. Investors preferred to focus on bullish comments from CEO Mike Norris, who said the board “expects that the full year 2019 profit growth, in monetary value, will be the best in the company’s history.”

Norris said 2018’s first half “presented a very difficult challenge to beat,” whereas “the opposite is true of the second half.” So if the group delivers a good H2, the Computacenter share price could fly even higher.

Acquisition happy

First-half revenues did increase 20.8% to £2.43bn, while adjusted profits before tax rose 2.7% to £53.5m. However, these year-on-year figures included £416.8m of revenues and £1.3m of adjusted profit before tax from acquisitions made since 30 June 2018.

The £1.66bn group’s UK operations disappointed, with revenues down 7.8%, but France delivered 18.9% growth, and Germany grew 4%. Last year’s US acquisition underachieved, which Norris put down to rising operational costs and investment, and a decline in operating margins. However, he expects a more significant second half contribution.

Norris added that industry momentum remains positive as more businesses invest in technology to digitalise, and this is helping the group improve its operational capacity.

Computacenter has a history of delivering steady earnings growth and City analysts expect 8% this year, followed by a more modest 4% in 2020. It’s a little bit pricey, trading at 16.5 times earnings. The forward yield is 2.4%, but generously covered 2.5 times and management is progressive, with the interim dividend per share hiked 16% from 8.7p to 10.1p today. As Kevin Godbold recently pointed out, the dividend has increased 50% in the last five years.

All systems Red

You can get more generous dividends on the FTSE 250. For example, housebuilder Redrow (LSE: RDW) has a whopping forecast yield of 8.9%, nicely covered 1.8 times by earnings. That kind of payout is par for the course in the sector, as is the low valuation, heavily discounted due to Brexit fears. Overly discounted, I would say, because I think demand for UK residential property is so strong, given the rising population, it can survive even a no-deal departure.

With the Redrow share price trading at just six times forward earnings, any problems seem to be very much in the price.

Bargain price

The £2bn group has just delivered four consecutive years of high double-digit earnings per share growth, ranging from 22% to 54%, although analysts are anticipating a 2% drop this year, and just a 1% increase the next.

Yes, the government-funded Help to Buy is set to be scaled back in 2021. Yes, house price growth is finally slowing. Yes, Brexit. However, I still believe the housebuilding sector represents a terrific bargain at today’s price, and I’m not the only one. Royston Wild reckons Redrow is one hell of a profits and cash creator. Isn’t that what we’re all after?

The post The State Pension isn’t enough! I’d top it up with these 2 FTSE 250 growth and income stocks appeared first on The Twelfth Magpie.

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• How to invest £288 a month in UK shares to target a £4,974 passive income for life
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Redrow. 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.

Size matters

The legendary growth investor Jim Slater once said that elephants don’t gallop. He was making the point that it’s much easier for small companies to double in size than big companies.

History suggests Slater was right. Take a look at how the FTSE 250 index of mid-sized companies has performed against the FTSE 100 in recent years:

If you’d put £10,000 into a FTSE 250 tracker fund five years ago, you’d have about £18,700 today, plus dividends. If you’d played safe with a FTSE 100 fund, you’d only have about £10,800, plus dividends.

The extra profit enjoyed by FTSE 250 investors has been achieved without any extra effort or difficult stock picking.

Admittedly, the 4.4% dividend yield from the FTSE 100 is higher than the 3.2% annual payout from the FTSE 250. But this isn’t enough to make up for the smaller gains delivered by the big-cap index. The FTSE 250 has smashed the FTSE 100 over the last five years — and over much longer time frames.

Is this a sure thing?

I can’t guarantee that the FTSE 250 will continue to outperform the FTSE 100. Between about 1996 and 2002, the FTSE 250 failed to beat the big-cap index. This may happen again.

Despite this, I do believe by investing in the kind of successful mid-sized companies found in the FTSE 250, you can increase your chances of finding big winners. At the same time, you aren’t exposed to the kind of speculative, unproven businesses found at the bottom end of the market.

If you’ve left it late to start retirement saving, I think putting your cash into a FTSE 250 tracker fund could be the best investment you’ll find for a five-to-10 year timeframe. To avoid any future tax bills, I would invest inside a Stocks and Shares ISA, if possible.

Reliable top performers?

To finish off, I’ve selected three stocks from the FTSE 250 I’d be happy to buy and hold forever. All three are proven performers and, together, I think they should provide a good mix of income and growth.

Britvic: The soft drinks firm owns brands including J2O, Robinsons and Fruit Shoot. It’s a reliable performer that generates high returns and has increased its dividend payout from 10p to 28p per share since 2006.

Computacenter: This IT infrastructure firm builds data centres, networks and much more for its clients. It’s profited from the long-term growth trend in online services. The shares have gained 50% in two years and has a great track record of paying out surplus cash to shareholders.

Jupiter Fund Management: Active fund managers are out of fashion at the moment, but Jupiter has a good track record, in my view, and is very profitable. A forecast dividend yield of 6.4% for 2019 is double the FTSE 250 average. I think Jupiter could be a good choice for income seekers.

The post No retirement savings at 60? Here’s how the FTSE 250 could help appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. 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 FTSE 250 IT infrastructure and services provider has an impressive record of generally rising revenue and adjusted earnings backed by robust incoming operating cash flow. The directors have channelled the firm’s success into the dividend, which is up more than 50% over the past six years.

More great performance

But that’s not all. The share price has risen around 55% over five years, even after falling back in the general market weakness since last summer. It now sits about 27% down from its peak, and I think this could be an attractive entry point.

Today’s full-year results demonstrate the kind of performance we’ve come to expect from the firm. In 2018, revenue rose almost 15% compared to the year before, net cash from operations increased nearly 9%, adjusted pre-tax profit lifted just over 11% and adjusted diluted earnings per share moved more than 16% higher. The directors expressed their ongoing confidence in the outlook by pushing up the total dividend for the year by a little over 16%. There’s no doubt about it, the numbers are good.

If you hold the shares, you’ll get exposure to Computacenter’s international operations. Around 46% of adjusted operating profit came from Germany in the period, 40% from the UK, 5% from France and the rest from a number of countries including the USA. The company is expanding geographically with a combination of organic growth and targeted acquisitions.

Exciting expansion in the US

There’s something of a celebratory tone to today’s report because revenue exceeded £4bn for the first time during 2018 having increased by £559m in the past 12 months alone. Some of the advance came from the acquisition of a company called FusionStorm in September, which contributed £3m of adjusted operating profit in the last three months of the year. The acquired company provides IT solutions in the USA and Computacenter is integrating it with the existing US business.

The move increased the employee headcount in the Americas region by around 50%. The directors explained in the September acquisition announcement that Computacenter can now offer a full range of services in the US similar to the firm’s offerings in Europe. Although fledgeling, I think the US business has tremendous potential for further expansion and could be a decent driver of profit growth in the years to come.

Maybe the company can replicate in the US the rip-roaring success it is enjoying in Germany, where revenue grew another 8.3% in 2018 driving a 14.5% surge in adjusted operating profit. Yet results were impressive in the UK and France too. Computacenter seems to be firing on all cylinders – the outlook is bullish, and I reckon it could sit well in my portfolio for years to come.

The post Why I’d buy and hold shares in this FTSE 250 company forever appeared first on The Twelfth Magpie.

More reading

• Around £41 now, here’s where this undervalued newly-promoted FTSE 250 tech provider ‘should’ be trading today
• How to invest £288 a month in UK shares to target a £4,974 passive income for life
• £3,750 invested in the FTSE 250 at the start of 2026 is now worth…

Kevin Godbold has no position in any share 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.

The good news is that I think the market is now offering a much wider choice of decent buying opportunities. If you have cash to spare that you won’t need for a few years, then I believe the two companies I’m writing about today could be profitable buys.

A tough competitor

Home electrical and technology retailer Dixons Carphone (LSE: DC) has faced tough trading conditions over the last year. The mobile phone market is changing and the wider market for white goods and consumer electronics is brutally competitive.

Dixons shares have fallen by about 30% so far in 2018 and are now worth about 60% less than when the groups merged in 2014. I think this sell-off may have gone too far, so I recently added the stock to my own portfolio as a recovery play.

This turnaround plan could work

My Foolish colleague Kevin Godbold covered Dixons’ half-year results here last week. Today I want to take a closer look at chief executive Alex Baldock’s turnaround plans.

Mr Baldock wants to use the group’s size to create a retail service that takes customers from product discovery through to repair and trade-in. However, he expects the main area of growth to be customer credit. The firm already makes 8% of sales on credit and Mr Baldock hopes to see this figure “at least double”.

Cheap at this price?

Dixons’ dividend was cut this week, but the firm’s profit forecast for the year was left unchanged. Debt remains low relative to earnings and cash generation is still good.

I can live with the reduced dividend, if it means that company can protect its balance sheet. Although there is a risk that trading will continue to worsen, the shares now trade on just 7 times forecast earnings. I estimate that the shares offer a forecast yield of 4.7% following last week’s cut.

In my view, this could be a good long-term buying opportunity.

Here’s what I might buy next

One company I’ve admired for several years is IT services group Computacenter (LSE: CCC). This company provides software and hardware solutions such as data centres and networking.

What I like most about this business is that it’s highly profitable. In 2017, the firm generated a return on capital employed of 21.8%. That means an operating profit of £218 for every £1,000 invested in the business. That’s a pretty decent return on investment.

These high returns mean that the group generates a lot of spare cash. Much of this is returned to shareholders, who’ve seen the ordinary dividend rise from 7.3p per share in 2006 to 27.4p per share last year.

Director shareholdings

As I write, Computacenter shares trade on 13.5 times 2018 forecast earnings with a 2.9% dividend yield. That may not seem very cheap, but I think it’s a fair price for a company that generates such attractive shareholder returns.

There is some risk of a slowdown if the UK, Germany or France fall into recession. But I think it’s worth noting that the CEO and finance director own almost £30m of shares between them. That reassures me that the firm is likely to remain carefully managed.

In my view, now could be a good time to start buying this stock.

The post Two FTSE 250 dividend stocks I’d buy before Christmas appeared first on The Twelfth Magpie.

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Roland Head owns shares of Dixons Carphone. 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.