Homeserve News | The Twelfth Magpie

Director dealings: Marks and Spencer, Cranswick, HomeServe

John Choong — Sat, 02 Jul 2022 07:00:17 +0000

Director dealings are essentially insider transactions for shares between directors and the companies they work for. These dealings are always made public, and are often considered a good indicator of a company’s future prospects. However, they don’t get nearly as much attention as other company news due to their complex nature. Nonetheless, here I’m breaking down this week’s biggest director dealings from three FTSE firms.

Marks and Spencer

Marks and Spencer (LSE: MKS) is a major British multinational retailer that sells clothing and beauty, home, and food products. This week, three director dealings were carried out. A large number of shares were received in lieu of a cash dividend, but a portion was sold to cover tax and national insurance obligations.

Name: Stuart Machin
Position of director: Chief Executive Officer
Nature of transaction: Free shares
Date of transaction: 22 June 2022
Amount received: 203,120 @ nil
Total value: N/A

Name: Stuart Machin
Position of director: Chief Executive Officer
Nature of transaction: Sales of shares to cover tax and national insurance liabilities
Date of transaction: 22 June 2022
Amount sold: 99,121 @ Â£1.37
Total value: Â£135,805.68

Name: Sacha Berendji
Position of director: Property, Store Development, and IT Director
Nature of transaction: Free shares
Date of transaction: 22 June 2022
Amount received: 138,115 @ nil
Total value: N/A

Name: Sacha Berendji
Position of director: Property, Store Development, and IT Director
Nature of transaction: Sales of shares to cover tax and national insurance liabilities
Date of transaction: 22 June 2022
Amount sold: 67,399 @ Â£1.37
Total value: Â£92,343.37

Name: Paul Friston
Position of director: International Director
Nature of transaction: Free shares
Date of transaction: 22 June 2022
Amount received: 131,691 @ nil
Total value: N/A

Name: Paul Friston
Position of director: International Director
Nature of transaction: Sales of shares to cover tax and national insurance liabilities
Date of transaction: 22 June 2022
Amount sold: 62,264 @ Â£1.37
Total value: Â£88,048.11

Cranswick

Cranswick (LSE: CWK) is a leading UK food producer and supplier of fresh and premium food products. It’s most famous for its meat products. Four directors opted to exercise their share options this week. However, they then proceeded to sell portions.

Name: Mark Bottomley
Position of director: Chief Financial Officer
Nature of transaction: Free shares
Date of transaction: 27 June 2022
Amount received: 31,800 @ nil
Total value: N/A

Name: Mark Bottomley
Position of director: Chief Financial Officer
Nature of transaction: Sale of shares
Date of transaction: 27 June 2022
Amount sold: 16,379 @ Â£30.82
Total value: Â£504,768.02

Name: Adam Couch
Position of director: Chief Executive Officer
Nature of transaction: Free shares
Date of transaction: 27 June 2022
Amount received: 48,100 @ nil
Total value: N/A

Name: Adam Couch
Position of director: Chief Executive Officer
Nature of transaction: Sale of shares
Date of transaction: 27 June 2022
Amount sold: 24,775 @ Â£30.82
Total value: Â£763,515.95

Name: Jim Brisby
Position of director: Chief Commercial Officer
Nature of transaction: Free shares
Date of transaction: 27 June 2022
Amount received: 31,800 @ nil
Total value: N/A

Name: Jim Brisby
Position of director: Chief Commercial Officer
Nature of transaction: Sale of shares
Date of transaction: 27 June 2022
Amount sold: 16,379 @ Â£30.82
Total value: Â£504,768.02

Name: Chris Aldersley
Position of director: Chief Operating Officer
Nature of transaction: Free shares
Date of transaction: 27 June 2022
Amount received: 26,300 @ nil
Total value: N/A

Name: Chris Aldersley
Position of director: Chief Operating Officer
Nature of transaction: Sale of shares
Date of transaction: 27 June 2022
Amount sold: 13,546 @ Â£30.82
Total value: Â£417,460.628

HomeServe

HomeServe (LSE: HSV) offers low-cost home warranty and home repair options. It markets itself as the solution to expensive and inconvenient emergency home repairs. Three massive director dealings happened earlier in the week, as shares were awarded to these directors based on performance conditions.

Name: David Bower
Position of director: Director
Nature of transaction: Free shares
Date of transaction: 27 June 2022
Amount received: 21,119 @ nil
Total value: N/A

Name: David Bower
Position of director: Director
Nature of transaction: Free shares
Date of transaction: 27 June 2022
Amount received: 10,190 @ Â£11.69
Total value: Â£119,121.10

Name: Tom Rusin
Position of director: Director
Nature of transaction: Free shares
Date of transaction: 27 June 2022
Amount received: 30,619 @ nil
Total value: N/A

Name: Tom Rusin
Position of director: Director
Nature of transaction: Free shares
Date of transaction: 27 June 2022
Amount received: 11,815 @ Â£11.69
Total value: Â£138,117.35

Name: Richard Harpin
Position of director: Director
Nature of transaction: Free shares
Date of transaction: 27 June 2022
Amount received: 34,911 @ nil
Total value: N/A

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 itâs tax-efficient for both the employer and its employees.

Types of shares within a SIP (Source: BDO.co.uk)

In this instance, all the director dealings above occurred with free shares. These shares were acquired by directors under their companies’ share plans. These were either a restricted share plan (Marks and Spencer), or incentive plans (Cranswick and HomeServe).

Share award schemes give employees actual shares rather than share options. The value of shares given to directors here is treated as employment income. This means that it may be subject to tax and national insurance contributions. That is unless the directors opt for an HMRC-approved share scheme, which has its own rules and requirements. Incentive plans give directors shares when they hit certain performance targets. For HomeServe directors, the awards were subject to the company’s earnings per share.

The post Director dealings: Marks and Spencer, Cranswick, HomeServe appeared first on The Twelfth Magpie.

More reading

John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.

I’d buy these 2 FTSE 100 growth stocks that have soared since the stock market crash

Harvey Jones — Mon, 22 Jun 2020 12:48:28 +0000

Today, the FTSE 100 enjoys a fresh injection of blood as four new companies entered the index – Avast, GVC Holdings, Homeserve, and Kingfisher.

All are enjoying the attention, with their shares jumping even though the FTSE 100 index is down. The Avast (LSE: AVST) and HomeServe (LSE: HSV) share prices are up around 4%, continuing strong recent runs. They still look tempting buys to me.

Momentum on their side

Avast calls itself “the world’s leading consumer cybersecurity company,” with 20 offices worldwide, including in London and Silicon Valley. The Czech-based company floated in London two years ago at 246p. Its share price has since doubled, trading at 525p today.

Keeping people safe online is big business as the fraud threat is, unfortunately, forever. Avast’s 2016 acquisition of rival AVG turned the FTSE 100 newbie into a cybersecurity giant. It serves consumers and small businesses, and is best known for its Avast antivirus software.

The Avast share price has momentum on its side, bouncing back sharply from the March crash. It now trades 60% higher than just three months ago.

This FTSE 100 tech play looks an attractive growth and income stock, given current momentum and the size of the market it’s pitching at. It isn’t even that expensive, trading at 19 times earnings. You also get a dividend, with the stock yielding a decent 2.3%.

The £5.4bn FTSE 100 group has almost 13m paying customers. It’s expanding into network and smart home security, and plans to grow further through targeted M&A.

Avast boasts high barriers to entry and strong competitive moats, while its subscription-based business model offers high cash and revenue visibility. The coronavirus pandemic should have little impact, as people are more dependent on their screens than ever, while fraudsters are more active.

As more established FTSE 100 names struggle, I would suggest turning your attention to the new and fast-growing kid on the block.

I’d buy this FTSE 100 stock too

Home emergency repairs company HomeServe is another FTSE 100 new entry that’s looking to accelerate growth. Its share price has also jumped 60% in just three months. Over five years, it’s up an impressive 200%. The home emergency cover specialist has also weathered the coronavirus in decent shape, as it was declared an essential service. Staff worked on throughout. No firings, no furloughs.

International expansion should drive future growth and revenue prospects. The FTSE 100 new entry already has more than 8m customers in the US, more than half of its total, and is targeting Japan next.

It’s growing fast, with sales up 10% in the year to 31 March while underlying profits rose 12% to £181m.

The £4.3bn FTSE 100 group currently yields around 2%. The one sticking point is that it is expensive, trading at around 30 times earnings. That shows just how well the HomeServe share price has done, and how highly investors rate its prospects.

You won’t find many better growth stocks on the FTSE 100 than these two right now.

The post I’d buy these 2 FTSE 100 growth stocks that have soared since the stock market crash appeared first on The Twelfth Magpie.

More reading

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Homeserve. 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.

£2k to invest? I’d buy this FTSE 250 growth stock and FTSE 100 falling knife Centrica

Harvey Jones — Tue, 19 Nov 2019 12:15:59 +0000

Home repairs business Homeserve (LSE: HSV) is cementing its reputation as one of the fastest-growing stocks on the FTSE 250, jumping more than 6% this morning after posting a rise in interim revenues and setting its sights on further expansion in the US.

Up and down

The Homeserve share price is up a stonking 238% over the past five years, and with a market cap of £4.27bn, it is knocking on the door of the FTSE 100. It’s only slightly smaller than British Gas owner Centrica (LSE: CNA), which is clinging on to its place in the FTSE 100, after seeing its share price fall 50% over the last year alone.

Homeserve is a momentum stock that seems to have further to run, while Centrica is a falling knife that just won’t stop. Both look tempting, but for opposing reasons.

Homeserve’s revenues jumped 13% to £457.7m in the six months to 30 September, while statutory profit before tax climbed 2% to £19.7m. In North America, continued profitable growth saw customer numbers rise 13% to 4.2m and adjusted operating profit jump 24% to $23.4m. The group has now acquired a controlling stake in US-based home experts business eLocal for around $140m.

Its core business is home assistance membership in the UK, US, France and Spain, which offers protection against an unexpected plumbing, heating or electrical emergency. It therefore appeals to risk-averse customers, who I suspect are also relatively older and financially solid, giving protection against a downturn.

Some like it hot

Homeserve aims to underpin its growth with strong cash generation and a robust balance sheet, and it has maintained its progressive dividend policy, hiking the dividend 12% to 5.8p today, which reflects “continued confidence in the group’s growth prospects”. The current forward yield is 2%, covered 1.7 times.

The danger is that Homeserve is priced for growth, trading at 28.1 times forward earnings, so any setbacks could knock that. However, earnings are forecast to grow 9% this year and 11% next. It looks like a buy to me, especially if we get a correction at any point.

Things are so bad at Centrica, by contrast, that it has been selling off as much of its business as it can, including its stakes in wind farms, power stations, nuclear plants and oil and gas firm Spirit Energy, while taking an axe to costs.

In July, it reported a pre-tax loss of £446m for the six months to June, down from a £704m profit the year before, so nobody was surprised by the whopping 60% dividend cut.

Risky bargain buy

The Centrica share price peaked at 400p over five years ago, but today you can pick it up at just 75p, around 10 times forward earnings. On the positive side, City analysts reckon those earnings could rise 36% next year.

By then, the forward yield will be 6.9%, covered 1.9 times by forecast earnings (despite that 60% cut). The group is looking to deliver more stable, streamlined earnings and a more resilient balance sheet. If it can manage that, now could be a good time to buy, although you need to be brave given the punishment Centrica has dished out to shareholders lately.

The post £2k to invest? I’d buy this FTSE 250 growth stock and FTSE 100 falling knife Centrica appeared first on The Twelfth Magpie.

More reading

Two FTSE 250 stocks I think could make you a million

Rupert Hargreaves — Tue, 02 Jul 2019 09:41:33 +0000

There are only a few stocks in the FTSE 250 that I would recommend as ‘strong buys.’ One of these is the online stockbroker and fund management platform AJ Bell (LSE: AJB).

The company only listed its shares in London at the beginning of September last year, but since then the stock has nearly doubled in value.

Customer service

As a client of the business, it’s easy to see why. AJ Bell’s simple-and-easy-to-use platform might not have all the bells and whistles of a more expensive competitor, but it offers excellent service at a market-leading low price. For many investors, this is all they need.

With this being the case, I’m not surprised the group’s net profit has more than doubled since 2016, and that City analysts expect earnings per share to grow at around 22% per annum for the next two years.

Growth outlook

Having dealt with a range of investment management platforms throughout my investing career, I can see why AJ Bell has been so successful in attracting assets to its platform. It’s easy to use, fuss-free, offers a wide range of assets to invest in, and is, above all, cheap. And as long as the company continues to maintain its slick, low-cost offering, I don’t think its growth is going to slow down.

That’s why I’m bullish on the outlook for this stock even though it’s much more expensive than the type of companies that would usually interest me.

At the time of writing, the stock is trading at a forward P/E of around 55, falling to 45 for 2020. But at the current rate of growth, earnings are set to double every three-to-four years, suggesting shares in AJ Bell could rise in value at a similar rate as well. That’s why I’m so bullish on this unique business.

Serial acquirer

Another FTSE 250 company that’s proven itself to be a slick and skilled operator is home services group HomeServe (LSE: HSV). The last time I covered this stock was at the end of October 2018 and, since then, it’s gone on to rise in value by 25% as City analysts have hiked their forecasts for growth.

Over the past five years, this company has grown rapidly through a series of acquisitions around the world. Net profit has increased tenfold since 2014, and based on current City forecasts, income is projected to rise 35% during the next two years.

However, despite this explosive earnings growth, the stock is trading at a relatively undemanding forward P/E of just 28.9. If management can double earnings again over the next five years (I see no reason why they can’t based on their historical track record), then I think there’s an excellent chance the stock could double again from current levels.

Only adding to the appeal is a 2% dividend yield. The payout is covered 1.7 times by earnings per share and has grown steadily in line with earnings over the past five years (it is up 100% since 2015). HomeServe’s combination of income, income growth, and earnings growth is why I believe this stock could help you make a million.

The post Two FTSE 250 stocks I think could make you a million appeared first on The Twelfth Magpie.

More reading

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

Is the Premier Oil share price the best-value stock in the FTSE 250?

Peter Stephens — Thu, 04 Apr 2019 10:45:27 +0000

While the FTSE 100 and FTSE 250 have made strong gains so far in 2019, a number of shares could still offer good value for money. Among them is mid-cap oil producer Premier Oil (LSE: PMO). Even though it has risen by 47% so far in 2019, it continues to trade on a low ratings multiple.

Therefore, could it be worth buying at the present time? Or, is another growth share that reported a positive trading update on Thursday more appealing for the long term?

Improving prospects

The company in question is home repairs and improvements business Homeserve (LSE: HSV). Its performance in the 2019 financial year has been encouraging, with its adjusted profit before tax expected to be at the upper end of market expectations.

In its Membership business, the company continues to grow strongly in the US, which helped to offset a decline in customer numbers in the UK. A group customer retention rate of 82% suggests that its performance has been relatively strong, with net income per customer continuing to rise.

In the company’s Home Experts division, revenue at Checkatrade increased by over 30%, while trades recruitment grew strongly. Consumer web visits increased, while a new management team could catalyse the performance of the division in the long run.

With Homeserve forecast to post a rise in its bottom line of 12% in the current year, it seems to have a bright future. However, with a price-to-earnings (P/E) ratio of 27, it appears to lack a margin of safety at the present time. Therefore, it may be a stock to avoid until such a time that it offers better value for money relative to the wider FTSE 250.

Low valuation

By contrast, the Premier Oil share price appears to offer excellent value for money. It trades on a P/E ratio of just 4, which suggests that investors are still unsure about its long-term financial prospects.

This, of course, is somewhat understandable. The company continues to have a relatively large amount of debt on its balance sheet, which means it may be a riskier proposition than some of its FTSE 100 and FTSE 250 sector peers. Although the oil price has moved significantly higher since the turn of the year, the industry’s outlook can quickly change as a result of poor economic data. Investors, therefore, may continue to price in a wide margin of safety over the medium term.

In response to what has been a difficult period pre-2019 for the oil price, Premier Oil has cut costs, increased production and started the process of reducing debt levels. Although there is still some way to go in this process, it is nevertheless making encouraging progress according to recent updates released by the company. They show that its cash flow is moving higher, while net debt is moving lower.

While the company may be risky relative to the wider FTSE 250, it could offer high rewards over the long run as a result of its low valuation. For less risk-averse investors, it may be an appealing investment opportunity.

The post Is the Premier Oil share price the best-value stock in the FTSE 250? appeared first on The Twelfth Magpie.

More reading

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Homeserve. 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.

I think this Warren Buffett-type FTSE 250 stock could be a top buy in the next market crash. Here’s why

Edward Sheldon, CFA — Tue, 20 Nov 2018 11:01:13 +0000

While many investors like to chase ‘hot’ growth stocks in an attempt to get rich quickly, the funny thing about investing is that it’s actually possible to make huge profits from boring, dependable businesses that people rely on.

Take FTSE 250-listed HomeServe (LSE: HSV), for example. This is a business that provides services to protect people’s homes in the event of an unexpected plumbing, heating, or electrical emergency. Not exactly the world’s most exciting business, but one that generates fairly consistent profits, and one that has been a fantastic investment for shareholders over the last five years. Had you picked the stock up for 250p five years ago, you’d now be sitting on a gain of around 260%, plus dividends.

So, what’s next for HSV? Can the shares keep generating gains for investors?

Half-year results

Half-year results, released this morning, look pretty solid in my view. For the six months ending 30 September, revenue climbed a healthy 10% to £404.3m, and adjusted earnings per share rose 10% to 7.5p. Debt was reduced by 4% to £291.9m, and the company also declared an 11% hike in the dividend, which is great news for dividend investors.

Richard Harpin, HomeServe founder and group chief executive, was upbeat about the company’s future, stating: “We have delivered a strong first half and remain confident in our growth prospects for the full year. I am as excited as ever by the opportunities to continue to build our business so that we can help homeowners with every job, in every home.”

These results suggest that HomeServe has momentum at present. But is the stock a ‘buy’ right now?

Buffett qualities

Looking at HSV’s financials, there’s a lot I like about the company. For example, revenue climbed 65% between FY2013 and FY2018, while net income surged 130% in that time. Return on equity (ROE) – one of Warren Buffett’s favourite metrics – has averaged 20.2% over the last three years, which shows management is good at generating a profit on shareholders’ funds. Dividend growth has been strong as well in recent years, with the company lifting its payout from 11.5p per share three years ago, to 19.1p per share last year. Furthermore, debt (another thing Buffett always analyses closely) looks manageable, as the stock’s debt-to-equity ratio is 54%, and its interest coverage ratio last year was 12.4.

The only issue that does concern me slightly is that the stock’s P/E ratio is a little high. With analysts expecting earnings per share of 36.7p for the year ending 31 March 2019, the forward-looking P/E ratio is 25.4. To my mind, that valuation doesn’t leave a significant margin of safety.

On my watchlist

As such, I believe HomeServe is a stock to watch closely going forward, with a view to picking it up when volatility returns to the market and high-quality companies are on offer at attractive prices. I definitely like the look of the company, but I’d prefer to buy it at a slightly lower valuation.

The post I think this Warren Buffett-type FTSE 250 stock could be a top buy in the next market crash. Here’s why appeared first on The Twelfth Magpie.

More reading

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Homeserve. 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.

3 reasons why I think these FTSE 250 growth stocks could keep falling

Rupert Hargreaves — Mon, 29 Oct 2018 10:31:50 +0000

Shares in two of the FTSE 250’s hottest growth stocks, HomeServe (LSE: HSV) and Metro Bank (LSE: MTRO), have plunged over the past month, at a far faster rate than the rest of the index as investors have jumped ship.

Shareholders of have been left wanting as HomeServe has underperformed the FTSE 250 by 5% since the beginning of the month, and Metro has skidded 32% since the beginning of August.

And while I think these companies still have bright prospects, there are three reasons why I believe there could be further declines on the cards before confidence returns.

Sell, sell, sell

First off, shares in both of these companies still command a premium valuation even after their recent performance. Metro is trading at a forward P/E of 41 while investors will pay 25 times earnings for HomeServe today.

If we factor in growth, these valuations look a little more acceptable. Indeed, Metro is expected to chalk up earnings per share (EPS) growth of 265% this year, and 90% for 2019. While HomeServe is targeting EPS growth of 22% for fiscal 2018.

However, in this risk-off market, investors are not prepared to wait around and see what might happen in the future. As volatility continues, I wouldn’t be surprised if both of these companies fell to more subdued valuations.

Buy, buy, buy?

As well as premium valuations, both of these businesses are aggressively expanding, which has sparked some concerns among investors. Metro asked shareholders for more than £300m through a new share placing earlier this year to fund growth, igniting speculation that the firm is growing too fast for its own good.

Meanwhile HomeServe, which has been growing for years using the same buy-and-build model, (and indeed today announced the completion of another acquisition) has seen its debt explode in recent years.

According to my numbers, total debt as a percentage of tangible assets has risen from 35% to 52% over the past five years. Investors have been willing to support this strategy as the market has trotted higher, but now that volatility has returned, I reckon shareholders are taking a more skeptical approach to this strategy.

Weak income

Finally, I think investors will continue to avoid these companies because they lack income.

Defensive income stocks tend to outperform during market crashes as dividends cushion the blow from falling stock prices. Unfortunately, when it comes to income, Metro doesn’t offer a dividend (and analysts don’t expect one anytime soon), and HomeServe only offers a token yield of 2.3%.

As the home services company’s payout is only covered 1.8 times by EPS, it doesn’t look as if there’s any further room for growth here either.

The bottom line

Overall, it looks to me as if these two FTSE 250 growth stocks could fall further as volatility continues. But if they meet City growth expectations, I think this decline might be short-lived.

In other words, now could be the perfect time for Foolish investors with a long term outlook to get involved with these FTSE 250 growth champions.

The post 3 reasons why I think these FTSE 250 growth stocks could keep falling appeared first on The Twelfth Magpie.

More reading

Warning: Why these FTSE 250 dividend stocks could make you poorer

Roland Head — Tue, 16 Oct 2018 13:20:21 +0000

Every stock market transaction involves two people with opposing views. The buyer thinks the shares they’re purchasing are likely to increase in value. But the seller thinks their money can be used better elsewhere.

Today, I’m going to look at two FTSE 250 stocks I think are too risky to buy at the moment.

Storm clouds gathering

The UK housing market always divides opinion. But some problems, such as affordability, seem real enough to me. The average house price in England and Wales was 7.8 times the average income in 2017, according to government statistics.

For new-build homes only, this average house price was 9.7 times average earnings in 2017.

It’s no wonder that house-builders are keen to encourage politicians to extend the Help to Buy scheme beyond its planned 2020 end date. Without these cheap government loans, new house prices might start to fall.

Great results again

Today’s full-year results from Bellway (LSE: BWY) show how dependent the company is on Help to Buy. During the year to 31 July, 39% of the group’s completions used the scheme, up from 35% during the previous year.

Sales during this period rose by 15.6% to £2,957.7m, while operating profit was 14.2% higher, at £652.9m. Although the group’s operating profit margin fell by 0.2% to 22.1%, this remains a very impressive figure.

However, net cash was a relatively modest £99m at the end of July. Because of this, this house-builder’s dividends are less generous than those of some rivals. This year’s will rise by 17.2% to 143p, giving a dividend yield of 5%.

Buy, sell or hold?

Bellway stock trades on 6.3 times 2019 forecast earnings. It could be cheap. But the shares also trade at 1.5 times their book value, and the dividend yield of 5% isn’t especially high. These ratios suggest to me that the stock is already fully priced.

I think the risks are greater than the potential rewards. I wouldn’t buy Bellway at this level.

Woodford has been selling this stock

When I last wrote about home repair service provider Homeserve (LSE: HSV) in November 2017, I was cautious about the outlook for growth. The shares are now worth about 10% more than they were then, so my caution may have been premature.

However, I was interested to note that fund manager Neil Woodford has been selling his funds’ stakes in this firm. On 12 October, Woodford’s funds reduced their holding in Homeserve from 7.52% to under 5% — the minimum level where disclosure is required.

This means that he may have sold all of his Homeserve shares. We don’t yet know.

Why I’d sell too

What I do know is that Homeserve shares look expensive to me. Although this business boasts an attractive 15% operating margin and manageable levels of debt, I’m not comfortable with the valuation.

The stock currently trades on 24 times 2018/19 forecast earnings, with a dividend yield of just 2.4%. In my view, this valuation leaves no room for disappointment if earnings growth slows.

A second risk is that if interest rates continue to rise, investors may want higher dividend yields. I’d be more interested in Homeserve if the stock yielded 3%. That would require the shares to fall to about 700p — around 22% below today’s level.

Like Bellway, Homeserve just isn’t cheap enough to attract my cash.

The post Warning: Why these FTSE 250 dividend stocks could make you poorer appeared first on The Twelfth Magpie.

More reading

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

Have £2,000 to invest? Here are two growth stock to consider for September

Rupert Hargreaves — Sat, 01 Sep 2018 08:00:31 +0000

Today, the average interest rate available on savings is less than 1%. So if you’ve suddenly come into some money, it’s probably better to invest your funds instead.

Here are two growth stocks I reckon are worth considering adding to your portfolio in September.

A price worth paying

You might not have heard of research tool provider Abcam (LSE: ABC) before, but this company provides a vital service to biotech laboratories around the world. The group provides research outfits with research-grade antibodies that they need to conduct experiments.

This is a highly specialist market, and Abcam is taking it over. Growth has been explosive over the past six years. Revenue has expanded from £98m in 2012, to £217m for 2017. Analysts are expecting sales to hit £234m in 2018 and £261m in 2019. Profit has grown just as fast. Since 2012, net profit has doubled and is expected to triple by 2019.

The one thing that puts me off this company is its valuation. Right now, shares in Abcam are changing hands for 48 times forward earnings. Usually, I wouldn’t recommend a stock that commands this kind of premium. However, I believe Abcam’s unique business model is worth coughing up for.

Indeed, the long-term growth potential of the business could be tremendous. It is only just starting to break into the Chinese market, and nearly £100m of cash on the balance sheet provides plenty of firepower for acquisitions. Sales in China only accounted for 13% of total group revenue in 2017, but expanded 24% year-on-year in the first half — this gives some idea of how big the Chinese opportunity could be for the firm.

With demand for Abcam’s services exploding, now might be the time to consider adding this stock to your portfolio.

International expansion

My other growth pick for September is Homeserve (LSE: HSV). Like Abcam, Homeserve’s growth over the past five years has been astounding. Net profit has leapt from just £10m in 2014, to £96m for fiscal 2018. And analysts are expecting further growth in 2018 and 2019. Earnings per share (EPS) are projected to rise 22% in 2019 and 11% in 2020. If the firm hits these targets, net profit will have grown by 1,220% in five years.

I believe there is also plenty of scope for the company to grow further after 2020. The group, which provides home emergency, repair and heating installation services, has only just started to expand in the United States where management sees plenty of scope for growth through acquisitions.

It has only really scraped the surface of the global home care market. For the year to the end of March 2018, the company reported 8.4m customers worldwide. With a total of 126m households in the US alone, the sky is the limit for Homeserve’s growth.

With this being the case, I reckon that even at a P/E of 28, shares in Homeserve are worth snapping up. There’s also a dividend yield of 2.2% on offer.

The post Have £2,000 to invest? Here are two growth stock to consider for September appeared first on The Twelfth Magpie.

More reading

3 of the best growth stocks of 2018 (so far)

Royston Wild — Sat, 28 Jul 2018 08:08:08 +0000

Looking for top growth stocks to buy today? Well I reckon the three shares described below are set to add to the colossal gains they have already racked up so far in 2018.

Softcat

A 54% share price rise has made Softcat (LSE: SCT) one of London’s biggest winners in the year to date.

A slew of perky trading statements has kept the FTSE 250 software business well bought in recent months, its latest market update this month revealing that the company expects full-year profits to bash through its prior projections. Softcat said that “market conditions have been very favourable,” and added that “growth against [the] prior year has accelerated” since last updating investors at the end of May.

City analysts are expecting the Neil Woodford favourite to follow earnings growth of 33% in the year to July 2018 with an extra 6% rise in the upcoming fiscal year. I can see fiscal 2019’s estimates receiving hefty upgrades as we move through the rest of the year and into the next, taking the edge off a conventionally-expensive forward P/E ratio of 27 times.

Dechra Pharmaceuticals

It isn’t a surprise to see Dechra Pharmaceuticals (LSE: DPH) take off in 2018, either, its share price storming 43% higher since the turn of the year.

The FTSE 250 company, which provides pharmaceutical products for companion and farm animals, has continued peppering the market with a steady stream of positive trading updates, the last of which this month revealed a 14% increase in group revenues (at constant currencies) in the 12 months to June.

Dechra Pharmaceuticals’ acquisition-led growth strategy which has boosted its product pipeline and geographic footprint has proven integral in sending profits skywards in recent years. And so news of further significant acquisitions in January, i.e. those of Netherlands-based AST Farma and Le Vet, have been greeted with fanfare by the investment community.

Indeed, City analysts have been upgrading their forecasts in recent months and an 18% earnings jump is currently forecast for fiscal 2019, matching the expected increase for last year (results are due on September 3).

A forward P/E ratio of 33.2 times may be expensive on paper, but I don’t see this as an obstacle to further stock price gains in the weeks and months ahead.

Homeserve

I also reckon Homeserve (LSE: HSV) should continue the exceptional share price run that has seen it gain 25% in value since the turn of the year.

The home emergency specialist didn’t get off to an auspicious start in 2018 but investor appetite came alive following a blockbuster trading update in May in which it announced that sales jumped 15% in the year to March, a result that pushed pre-tax profit up by a quarter. As a consequence Homeserve decided to hike the annual dividend by 25% too.

The newsflow has remained positive since then, the FTSE 250 firm reiterating its prediction of “continued strong organic growth” in North America last week, with recent acquisitions likely to give sales at group level an extra leg-up.

With revenues exploding across all of the company’s territories, the City expects earnings to jump 9% in fiscal 2019 and 11% in the following year. In my opinion Homeserve’s rising might across the globe makes it worthy of its premium valuation, a forward P/E multiple of 27.2 times.

The post 3 of the best growth stocks of 2018 (so far) appeared first on The Twelfth Magpie.

More reading

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Homeserve. 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.