“Exceptional trading”

Shares in ten-pin bowling and mini-golf operator Hollywood Bowl (LSE: BOWL) breached the 300p barrier back in January 2020. As markets opened this morning, they changed hands for only 239p. Nevertheless, today’s update suggests this gap might soon be closed.

From reopening its doors on 17 May to the end of September, BOWL enjoyed “exceptional trading“. Like-for-like revenue grew by 29% from that achieved in (pre-Covid) FY19. To me, that’s clear evidence management’s delivering, even though trading has likely been helped by restrictions on foreign travel. 

I suspect this form will continue. After all, families will be looking for relatively cheap forms of indoor entertainment as the cold weather arrives. In preparation, BOWL has been busy refurbishing various sites. Looking further ahead, it’s planning to open 14-18 new centres by 2024.

No guarantees

This isn’t to say Hollywood Bowl is a slam-dunk investment from here. We’re already being warned that Covid-19 infection levels, assisted by the arrival of the flu season, could spike again. Even if restrictions aren’t brought back in, visitor numbers and spending could drop. Investors might also speculate that the pent-up demand for affordable activities like bowling has now passed. 

I think the current valuation takes this into account. On less than 17 times forecast earnings prior to today’s statement, BOWL shares weren’t screamingly cheap. Then again, nor were they seriously expensive, especially considering the £30m of net cash on the balance sheet.  

Of course, the time to strike was last year. Had I snapped up the stock 12 months ago (and just prior to the announcement of effective vaccines), I’d be sitting on a gain of around 70% today.

No matter. Based on today’s positive statement, I’d be happy to add the shares to my portfolio.   

On the way back?

Another growth stock I think should continue to recover well is online package holiday operator On the Beach (LSE: OTB). After wobbling like everything else recently, its shares are back in form today. This follows news that the number of countries on the UK Covid travel red list will now be dropped from 54 to seven.  

Having started building a position in this company earlier in 2021, it’s a case of ‘so far, so good’ for my investment. Notwithstanding this, I don’t pretend there won’t be challenges ahead. Like Hollywood Bowl, the company could be impacted by the re-introduction of restrictions should infection levels rise.

Regardless, travel will always be a hugely competitive space and OTB’s apparent lack of economic moat is something I was conscious of when buying over the summer. 

These concerns aside, I continue to be bullish on this UK growth stock. With its asset-light business model and very limited debt, it remains one of the best ways of playing the post-pandemic recovery that I can find. 

With the shares still roughly 40% below the all-time high of 615p set back in 2018, I’m hoping to at least double my money. As always, patience is required. Full-year numbers are due in December.

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Paul Summers owns shares in On the Beach. The Motley Fool UK has recommended Hollywood Bowl and On The Beach. 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.

Consumer confidence increased at the fastest rate in a decade in the first quarter of 2021. According to a survey of 3,000 adults, “going to a shop” was the top desired activity after lockdown restrictions end.

Shopping for the best UK shares

Fittingly, one of the best UK shares I’d buy right now is Next (LSE:NXT). This FTSE 100-listed clothing, beauty and homewares retailer runs a remarkable operation.

As restrictions end and more people venture out and about, demand for clothing should increase. Next is well-placed to benefit from this shift, in my opinion.

The crisis created several opportunities for Next, and it managed to pick up some strong brands as competitors struggled to stay afloat. It took over the spaces that had housed several beauty halls in former Debenhams stores to launch its new premium beauty chain. And it acquired a 25% stake in premium fashion brand Reiss. As the country gets back on its feet, Next could thrive in an environment with fewer competitors.

For instance, Next offers expectations of strong earnings growth, a double-digit return on capital, and an undemanding price-to-earnings ratio of 18x.

Bear in mind though, consumer sentiment could quickly reverse depending on the path of the virus. Any additional wave of infections or variants could prompt a return to restrictions. It’s a risk that should be carefully considered when investing in consumer-based stocks.

Aiming to strike

Households saved a record £238bn last year, according to figures from the Office for National Statistics. With consumer confidence returning, the UK is primed for a spending spree, in my opinion.

In addition to shopping, other areas that could see strong demand include hospitality and leisure.

Within these sectors, Hollywood Bowl (LSE: BOWL) could benefit from strong pent-up demand. Last year, trading was good when the business was allowed to open. Encouragingly, it experienced a better than expected performance during the summer, despite capacity and trading restrictions.  

The leisure operator launched new initiatives including the successful debut of a mini-golf concept. And it continues to expand sites and invest in refurbishing.

Some of the best UK shares can bounce back from a crisis. Some of the hardest hit sectors in the pandemic were leisure and hospitality. As confidence returns, they could recover with strength.

That said, businesses based indoors are at greater risk from further restrictions. I’m cautiously optimistic about UK leisure businesses, but with a close eye on virus variants and vaccine progress. Also, further dilution of shares can’t be ruled out, in my opinion. Much could depend on trading progress over the coming months.

Weighing everything up, I’d happily allocate a small portion of my portfolio to this reopening stock.

The post 2 of the best UK shares to buy for a reopening economy appeared first on The Twelfth Magpie.

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Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK owns shares of Next. The Motley Fool UK has recommended Hollywood Bowl. 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.

But let’s stay optimistic. Thanks to their ability to rapidly increase revenue and profits, I think there are many small-cap growth stocks whose share prices could really shine. Here are three with strong potential. 

Drink up

Assuming bars, pubs, and sporting venues are allowed to fully open by spring, I think beverage firms such as AG Barr (LSE: BAG) could do well. Drinks companies do have a habit of bouncing back firmly after general market setbacks. This time should be no different.

That’s not to overlook just how hard the last year has been. Revenue and pre-tax profit have tumbled in 2020 due to the incredible headwinds faced by the hospitality sector. I’m also under no illusion that it will take some doing for Barr to recover back to the 950p mark it hit in 2019.

Then again, it’s got a lot going for it. In addition to its flagship IRN-BRU brand, Barr looks financially solid. The business had over £30m in net cash when it last reported to the market.

Although not currently paying out dividends, management does expect cash returns to resume in 2021 too. That’s the sort of bullish talk I like to hear.

Right space, right time

As widely expected, the share price of infection prevention specialist Tristel (LSE: TSTL) has enjoyed an excellent 2020. The £250m business is up almost 40% year-to-date. That’s despite sales being lower in early 2020 due to many operations being deferred by the pandemic.

Positively, CEO Paul Swinney revealed last week that Tristel had seen a “substantial recovery in demand” for its products since October. Pre-Brexit stockpiling by the NHS was a factor.

One reason the shares could continue rising in 2021 relates to the company winning approval from various regulatory bodies. In the US, Tristel has already spoken of “very encouraging progress” relating to its FDA test programme for its ‘Duo for Ultrasound’ disinfectant. Additional positive feedback has come from the Canadian regulator on its ‘Duo for Ophthalmology’ submission. 

Trading at 40 times forecast earnings already, at least some of this potential is already priced in. Even so, Tristel is a highly profitable, niche business with excellent finances. If another market crash presents me with an opportunity to do so, I’m backing the truck up. 

Ready to strike

For those of a risk-tolerant nature, ten-pin bowling firm Hollywood Bowl (LSE: BOWL) could also be worth backing.

While its offering is easily replicated, I think Bowl has a chance of recovering from the pandemic more speedily than, say, the UK’s battered airlines. A few games of bowling is far more affordable to families in tricky times than a holiday abroad. Even those with the means to travel when restrictions lift may adopt a ‘wait and see’ approach.

Only last week, the company reported it had seen “strong customer demand and better than expected performance” when it reopened after the first lockdown. That’s got to be encouraging.

The new tier 4 restrictions won’t help things in the near term. However, this may provide new investors an opportunity to strike on UK shares like this before the real recovery kicks in.

The post 3 UK small-cap growth shares I think could DOUBLE in 2021 appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Nichols and AJ Barr. The Motley Fool UK has recommended AG Barr, Hollywood Bowl, and Nichols. 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.

Investment platform AJ Bell (LSE: AJB) floated on the London Stock Exchange in December 2018, since when its shares have rocketed higher. The group now has a market cap of £1.7bn and is a member of the FTSE 250.

The firm’s half-year results were published on Thursday and gave us some insight into why the shares are so highly rated.

Revenue for the six months to 31 March rose by 17% to £50.1m, compared to the same period last year. Pre-tax profit for the period climbed 27% to £17.7m, leaving the group with a pre-tax profit of £32.1m for the last 12 months.

If you’re thinking that sounds like a small profit figure for a company valued at £1.7bn, then I’d agree. But I can see some reasons why AJ Bell should continue to command a high valuation.

The next Hargreaves Lansdown?

AJ Bell is very profitable, and it’s growing fast. There’s also a third attraction — investors are hoping the firm will replicate the success of its larger rival Hargreaves Lansdown, whose share price has risen by 1,077% since its flotation in 2007.

Here’s how the two companies compare on some key metrics at the time of writing:

You can see that AJ Bell has roughly half the assets under administration, but its market value is only 16% that of Hargreaves.

The main reason for this is that AJ Bell is much less profitable — at the moment. My calculations suggest that AJ Bell’s operating margin and return on equity are about half those of Hargreaves.

However, its operating margin has risen from 31.5% to 33% in the last six months alone. If the group can continue to expand, then I’d expect economies of scale to lift this margin even higher.

Time to buy? AJ Bell shares now trade on 60 times 2019 forecast earnings, compared to a multiple of 43 times earnings for Hargreaves.

Although I expect AJ Bell to continue growing, I think that’s quite expensive. At this level I’d continue to hold, but I’d wait for a better opportunity to buy.

I really like this business

One business I’ve rated highly since its flotation in 2016 is bowling alley operator Hollywood Bowl (LSE: BOWL). The firm’s shares have gained 35% since 2016, compared to a gain of 6% for the FTSE 100.

Sales have risen by 20% since 2016 as the group has invested in new locations and revamped existing centres. Figures released on Thursday confirmed that growth remains strong.

Like-for-like sales rose by 4.4% during the six months to 31 March, while average profit from each centre rose by 4.7% during the period. These figures suggest to me that costs are under control and that customer spending remains strong.

Keep buying?

After a strong performance over the last six months, the shares now trade on about 17 times 2019 forecast earnings, with a 3.3% dividend yield.

I think the stock could still be worth buying at this level. Although it’s not as cheap as it was, this business is highly profitable and should profit from growing consumer demand for experience-led activities.

The post These rampant growth stocks are crushing the FTSE 100 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 has recommended Hargreaves Lansdown and Hollywood Bowl. 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.

Share pickers seem to be reluctant to take the plunge because of the weak UK economy and fears that this will rock profits growth at the recruitment giant. I’m afraid this argument doesn’t hold water with me, though, as thanks to the tearaway performance of its foreign operations total profits continue to surge.

Last year, for example, SThree saw gross profits at group level swell 12% even as the bottom line in its UK and Ireland territory fell 5%. Less than 20% of the small-cap’s profits are now derived from home shores and so I’m confident that it can continue to thrive even if Brexit has bad implications for its domestic operations.

City analysts expect the bottom line to keep rising too, creating a dirt-cheap P/E ratio of 9.2 times for fiscal 2019 and expectations of more dividend growth to 15p per share. This results in a jumbo 4.9% yield.

Strike now

Hollywood Bowl Group (LSE: BOWL) isn’t as cheap as SThree. In fact, its forward P/E ratio of 16.6 times sits outside the widely-considered value watermark of 15 times and below. But I would consider this rating to be a very attractive entry point given its hugely exciting growth strategy.

The British tenpin bowling renaissance continues to go from strength to strength and through its busy expansion programme — it’s looking to cut the ribbon on two new centres each year — the leisure giant is setting itself up to capitalise on this trend.

Thanks to a 13% pre-tax profits boost last year, Hollywood Bowl continued to raise the ordinary dividend and to fork out special payouts. City brokers expect more significant bottom-line growth in fiscal 2019 to push the ordinary dividend to 7.6p per share, yielding an inflation-mashing 3.3%, and investors can probably look forward to more delicious supplementary rewards too.

The biggest yielder of all

If you’re on the hunt for particularly explosive yields then Go-Ahead Group (LSE: GOG) might be more to your liking.

The Square Mile suggests that the bus-and-rail-service operator will keep the full-year dividend locked at 102.08p per share for another year. The good news is that this projection yields a stunning 5%.

Adding some sheen to the Go-Ahead investment case is its low, low forward P/E ratio of 13 times, a rating that’s far too little in my opinion given the rate at which it has been winning contracts at home and particularly abroad over the past year.

The transport titan has recently added maiden contracts in Australia and Norway, for example, as well as additional accords within the German rail network. And the fruits of its endeavours were shown in half-year financials last week in which it advised that group revenues rose 5% during July-December despite tough conditions in the UK. With its contract pipeline packed with more opportunities I’m tipping it to flip back into strong profits growth soon enough and to get back to lifting dividends too.

The post 3 top (and cheap!) dividend stocks I’d buy right now 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 recommended Hollywood Bowl. 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.

Given the ongoing uncertainty regarding Brexit, the US/China trade spat and concerns over global growth, one could quite reasonably argue that these kinds of stocks will come into their own in 2019.

Here are three examples that I think could be worth holding for the next year and beyond. 

Strong and stable

With its huge portfolio of brands, drinks maker Britvic (LSE: BVIC) is always a company worthy of consideration when the going gets tough. The fact that shares in the Hemel Hempstead-based business have remained relatively stable over the last few months is a testament to this.

Recent positive trading has no doubt also helped sentiment. Full year numbers, released at the end of November, included a 5.1% rise in revenue to just over £1.5bn and 5.4% increase in adjusted earnings to £206m.

Available for 14 times forecast earnings in the current year, Britvic’s stock looks reasonably priced for the stability the company offers and comes with a 3.6% yield. The latter may look fairly average compared to the payouts on offer at other companies but the fact that the mooted 29.2p per share cash return is covered twice by profits suggests investors shouldn’t fear a cut any time soon.

It may not get pulses racing but global distributor and outsourcer Bunzl (LSE: BNZL) is, in my view, another great stock to hold when things are uncertain. Like Britvic, the FTSE 100 company’s share price has remained relatively stable over the final few months of 2019.

Its latest trading statement — released mid-December — stated that performance has been in line with expectations and that group revenue for the full year is now expected to be up between 8% and 9% at constant currency, thanks to decent organic growth and the impact of Bunzl’s never-ending penchant for acquisitions. 

At almost 18 times earnings, the shares are neither screamingly cheap nor ridiculously expensive and come with a 2.2% dividend yield next year based on the current price. The latter won’t make income investors salivate but I think the predictability of the company’s earnings is far more important right now. 

I’ll confess to being somewhat sceptical on bowling operator Hollywood Bowl‘s (LSE: BOWL) chances on the stock market, for the simple reason that its business model is fairly easy to copy. So far, however, the small-cap has done rather well. Its stock is up 12% since the start of the year, 39% since listing in 2016 and now changes hands for 16 times earnings. 

Full-year results released this month were encouraging, with revenue up 5.8% to £120.5m and pre-tax profit up by 13.4% on the previous year to £23.9m.

While we can’t predict the future with any degree of certainty, it’s also interesting to note management’s belief that our forthcoming EU departure will not have an impact on the underlying performance of the business. The promise of a special dividend of 4.33p per share, on top of the final payment of 4.23p per share, would seem to back this up. That brings the total dividend to 10.59p per share, equating to a trailing yield of 4.6%.

The post 3 quality stocks I think are worth holding in 2019 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 owns shares of and has recommended Britvic. The Motley Fool UK has recommended Hollywood Bowl. 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 figures are good. Revenue came in 5.8% higher than the year before and 1.8% of the increase came from advances in like-for-like sales, which suggests the company’s offer is resonating well with its customers. Profit before tax rose 13.4% year-on-year and earnings per share lifted 2.9%. And those profits were backed up with tangible cash inflows with the net-cash-from-operations figure rising 5.7%.

Strong cash flow and special dividends

The good trading is undeniable and the directors celebrated by pushing up the ordinary total dividend for the year almost 8.9% to 6.26p. But they also announced a special dividend of 10.59p, which is almost 17% higher than last year’s. This is the second consecutive year that the firm has paid a special dividend, and chief executive Stephen Burns said in the report that the payments have been funded from cash inflow. The cash coming into the business is real and there’s more evidence of its effects in the net debt figure, which has fallen just over 69% to £2.5m. I have no doubt whatsoever that Hollywood Bowl is making fantastic financial progress.

I reckon the firm’s business model supports robust cash flow. Customers pay for the service just before they receive it, which contrasts with, say, the construction sector where goods and services are often delivered first and then firms often must wait for months before being paid for the work. Indeed, the construction sector is riddled with cash flow problems in a way that firms such as Hollywood Bowl aren’t. And we can see in today’s report what a difference timely cash flow can make to a business and therefore the options that the directors have, such as paying investors fat dividends!

A decent pipeline for growth

During the period, Hollywood Bowl has been busy with its refurbishment programme and rebranding sites it has acquired. It opened new bowling centres in Dagenham and Yeovil and plans two more centres in the current trading year to September 2019. The expansion pipeline is committed to the end of 2022 with the firm planning to open two new centres each year.

When the company gets its customers through the door and playing bowls, the name of the game is to maximise spend per customer. The average-spend-per-game figure rose just over 6% year-on-year, driven by initiatives such as the firm’s rollout of a new diner menu, which pushed the spend-per-game figure for food up 5.4%. There’s a new ‘i-serve’ lane ordering system, which makes buying food and drinks easier and is now in all the firm’s centres and should help to keep add-on sales growing.

There must be a fair degree of cyclicality in the firm’s operations because it would be easy for customers to forego expenditure on bowling during tough economic times. But Hollywood Bowl is growing and the cash is rolling in. I think the chunky dividend yield is attractive and the company is well worth your further research. With £1,000, I’d be tempted to buy some of the shares.

The post Why I’d invest £1,000 in this dividend-growing share 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 Hollywood Bowl. 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.

Bowling a winner?

Last time I looked at 10-pin bowling operator Hollywood Bowl Group (LSE: BOWL), I was impressed. The UK’s largest operator of bowling alleys appeared to have a repeatable formula for growth and high profit margins.

What’s changed? Nothing really, as its trading update published today suggests the picture remains attractive. Like-for-like sales rose by 1.8% during the year to 30 September. New sites lifted total sales by 5.8%.

These are good numbers, although it’s worth noting that sales growth appears to have slowed slightly this year. In 2016/17, like-for-like revenue rose by 3.5% and total revenue rose 8.8%.

Happily, profits are expected to be in line with market expectations. According to the company, pre-tax profit should be 10% higher, at about £23.2m. Broker forecasts suggest that this will translate into adjusted earnings of 12.4p per share, putting the stock on a P/E of about 16.8.

Keep buying?

During the first half of this year, the average customer spend per game rose by 5.5% to £9.20. The number of games played rose by 3.6% to 6.9m. This organic growth helped to increase the group’s operating margin from 22.2% to 23.6%.

High margins and low debt mean that cash generation is very strong. The company said today that it’s considering additional shareholder returns this year, on top of the regular dividend.

City analysts expect profits to continue rising next year. They’ve pencilled in earnings growth of 10%, which puts Hollywood Bowl on a 2018/19 forecast P/E of 15, with a 3.6% yield. I’d keep buying.

Tasty treat or yesterday’s news?

One company I’ve been less confident about is casual dining firm Restaurant Group (LSE: RTN), whose biggest business is “American Italian” family restaurant chain Frankie & Benny’s.

Restaurant Goup’s share price has fallen by another 21% since I last wrote about the shares in March 2017. At the time, I warned that it might still be too soon to buy. Is that still true today?

The firm’s latest results show that sales fell by 2.1% to £326m during the 26 weeks to 1 July. Adjusted pre-tax profit was 20% lower, at £20.1m.

Management says that trading was hit by cold weather at the start of the year, and by the World Cup in the early part of the summer. In support of this claim, like-for-like sales rose by 2.4% during the six weeks to 26 August.

One big risk

The main problem I can see is that Restaurant Group is cutting prices to boost sales, despite rising costs. The company’s numbers show that its adjusted operating margin fell from 7.9% during H1 2017, to 6.4% during the first half of this year. To put this into context, the group’s operating margin was 12.7% in 2014.

I suspect that this turnaround will succeed, but that the group’s profit margins may have to stay low to enable the group to compete against newer rivals.

Restaurant Group shares currently trade on a 2018 forecast price/earnings ratio of 14.8, with a prospective yield of 5.3%. I’d rate this as a potential turnaround buy although, personally, I remain cautious.

The post Have £1,000 to invest? 2 dividend stocks that could beat the FTSE 100 appeared first on The Twelfth Magpie.

More reading

• 3 quality FTSE 250 stocks to consider with dividend yields above 4.5%
• How are these FTSE 250 growth and dividend stocks so cheap?
• Analysts think this growth share could rally a further 26% in the next year

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. 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.

But now, there seems to be a wide margin of safety on offer. This could provide the potential for high returns in the long run. And while volatility may be above average, the value investing prospects on offer could make it a worthwhile buying opportunity.

Difficult period

Dignity is currently experiencing highly challenging trading conditions. Competition within its various segments has increased in recent periods and this has placed pressure on pricing. In response, the company has decided to make changes to its pricing structure as it seeks to maintain what is a relatively dominant position within its key markets.

As such, the financial performance of the business is due to decline dramatically in the short run. In fact, in the current year it is forecast to report a reduction in earnings of 47% on a per share basis. This could hurt investor sentiment and should similar trading conditions continue over subsequent periods, additional declines in the stock’s price cannot be ruled out.

Margin of safety

However, after its significant share price fall, Dignity now appears to offer a wide margin of safety. For example, it trades on a forward price-to-earnings (P/E) ratio of around 13. This takes into account its expected fall in earnings in the current year and suggests that investors have factored-in the difficulties which the business is expected to face.

Looking ahead, the company is due to report a flat EPS growth rate in the next financial year. Beyond that, a recovery could be ahead, since the business seems to have a strong position in what remains a relatively robust industry. And with volatility in stock markets expected to remain high, its low valuation and turnaround potential could appeal to an increasing range of investors.

Resilient performance

Also facing difficult trading conditions at the present time is Hollywood Bowl (LSE: BOWL). The tenpin bowling company reported a strong update on Monday despite the challenges facing UK consumers. Its revenue grew by 9.3% in the first half of its financial year, while like-for-like (LFL) revenue was 4% higher. This shows that its refurbishment programme and focus on improving customer service levels seems to be working well.

Looking ahead, Hollywood Bowl is forecast to increase its bottom line by 9% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of just 1.7, which suggests that it offers good value for money. And while consumer confidence in the UK may be at a low ebb right now, the company’s business model appears able to overcome further difficulties. This could mean that its share price performance improves so as to deliver a high level of capital growth in the long run.

The post Why I believe the Dignity plc share price is now too cheap to ignore appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. 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 market likes today’s full-year results from Hollywood Bowl Group (LSE: BOWL) and the shares are up almost 8% as I write. The numbers are good. Revenue rose almost 9% compared to a year ago with like-for-like sales up an encouraging 3.5%, suggesting the firm’s offering is hitting the spot for customers.

The firm is making money and earnings are rising. Net cash from operations increased more than 16% and adjusted underlying earnings after tax rose 30%, but adjusted diluted earnings per share eased by 8% due to an increased share count. The directors underlined the progress by declaring the first-time appearance of a meaningful full-year dividend that produces a yield a little over 1.9%, and a special dividend taking the yield up to more than 3.5% at today’s share price around 205p.

Strong growth

One of the things I like about the company is its narrow focus operating as the UK’s largest ten-pin bowling provider with 58 bowling centres across the UK under the Hollywood Bowl, AMF and Bowlplex brands. I reckon firms that specialise stand a better chance of doing things well than those that try to diversify their operations.

As well as rolling out its refurbishment and rebranding programme, the company opened three new centres during the period, which it says are performing “strongly.” Since the end of the trading year a fourth centre opened, suggesting that 2018 will be another good year for growth. Chief executive Stephen Burns reckons the rebrands and refurbishments “have delivered significant returns,” and he says new centres opened in the year “have performed ahead of expectations.” 

There’s a “healthy” pipeline of new sites to feed ongoing expansion and the firm has plans to grow with “selective new openings and acquisitions.” One of the great things about the business is its healthy cash inflow. Customers pay before using the service so the firm gets to reinvest this flow of cash straight away. To me, the growth proposition with Hollywood Bowl looks robust and I’m more likely to buy some of the firm’s shares than I am those of UK Oil & Gas Investments (LSE: UKOG), for example.

Big potential

The oil and gas exploration firm is onshore UK-focused and raised £16.5m during 2017 to fund its four-well drilling and testing programme for 2018. With key regulatory permits already in place, the aim is to further appraise “the wider Kimmeridge continuous oil deposit plus the Horse Hill Portland oil discovery.” The directors’ lofty ambition is to provide stable commercial production and cash flow by early 2019. They reckon a positive outcome would give the company a solid base for further drilling and development of the “significant untapped Kimmeridge resource-base,” which underlies the firm’s extensive licence interests.

But as with all oil exploration, nothing is certain and there’s no guarantee that significant cash inflows will result. That’s one reason why investors have endured such a wild ride. The share price went as high as 9p in September but is near 3.5p today, and falling. Speculation drives these wild swings, but I reckon we’ll see less of that with Hollywood Bowl due to its strong and consistent cash flow, so I’d rather take my chances there than with UKOG’s make-or-break outcomes.

The post Why I’d shun falling knife UK Oil & Gas Investments plc for this growth star 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 Hollywood Bowl. 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.