This FTSE SmallCap-listed £109m company isn’t a needle-in-a-haystack breakthrough biotech or disruptive digital star. It’s a thoroughly unglamorous mechanical and refractory engineering company that’s been around since 1883.

Long-term mindset

I’ve put Goodwin into a long-term context for you, because on a short-term view, with the shares having been above 4,000p just a few years ago, you might be inclined to think that the company is a distinctly unpromising prospect to make you brilliantly rich.

Having made the point that, despite the recent slump in the shares, Goodwin has delivered a tremendous return for long-term investors, let me also explain why I’m confident it will go on delivering long-term returns.

The company does significant business with the oil, gas and mining industries where capital expenditure has massively reduced over the past few years. Despite the inevitable pressure on Goodwin’s top line and gross margin, the business has remained profitable. And, in contrast to many other companies involved in, or exposed to oil, gas and mining, its balance sheet has also remained healthy. Debt has increased but net gearing is still a very conservative 31.4%.

I put its resilience down to the long-term mindset of the successive generations of the family who’ve carefully stewarded the business to negotiate the bad times as well as thrive in the good. This is the sort of company I’d happily build up a holding in by regularly investing through rain and shine. Times of rain — as now — I’d view as an ideal starting point.

Another in the same mold

AIM-listed timber firm James Latham (LSE: LTHM) has the same attractive qualities as Goodwin. It was founded in 1757, continues to be stewarded by descendents of the founding family and has delivered excellent long-term returns for shareholders.

Adjusting for a four-for-one share split in 2005, EPS has increased from 7.425p in 1999 to 56p in its latest financial year. The dividend has advanced from 2.75p to 15.35p over the same period. And the share price has climbed from 238.5p at the turn of this century to 897.5p today, valuing the business at £176m.

At its AGM today, Latham said April-to-July revenue was 6% ahead of the same period last year and that customer activity remains positive but the trading environment competitive. The company has invested in new sites for growth and efficiency but said cash reserves remain strong (there was net cash of £16.3m on the balance sheet at the 31 March year end).

One way Latham currently differs from Goodwin is that its share price isn’t depressed. In fact, its shares have made new all-time highs this year. Nevertheless, I continue to see this as a business that could deliver great rewards for long-term investors.

The post 2 small-cap stars that could make you brilliantly rich appeared first on The Twelfth Magpie.

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The Motley Fool UK has recommended Goodwin. 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

A business that provides photobooths in shopping centres, supermarkets and airports may seem a bit of a dinosaur in this world of smartphones, but Photo-Me International (LSE: PHTM) has navigated this new world with aplomb. Indeed, in the past five years shares of the company are up over 350% as management has doubled operating profits and managed to steadily increase revenue.

Yet after this greatly successful run I reckon now may be time for shareholders to begin taking some profit. The main issue for me is that as management has sought out growth, it has been forced to diversify quite far away from its core photo kiosk business into the likes of operating self-serve launderettes across Europe.

This has kept sales growth marginally positive, 3.3% in constant currency terms over the past year, even as the core photo business has turned into a slowly declining cash cow. But, it also means that investors are being asked to trust management to easily switch focus to rapidly expanding the estate of launderettes and the world of investing is filled with examples of companies struggling to successfully diversify into dramatically different industries.

That said, thus far the expansion into launderettes is going well. The group added 1,000 units in the past year and is a little over half way towards its 2020 goal of having 6,000 in operation across the world. And with a net cash position of £39.2m the company does have a buffer to fall back on.

But with its shares pricey at 18.5 times forward earnings in the midst of a dramatic shift in strategy, I’d be wary if I were a shareholder. Given management’s track record of success I wouldn’t sell my entire holding but locking in some of my gains would be too appealing to pass up at this point.

A sturdier business

Another surprising winner of the past few years is lumber merchant James Latham (LSE: LTHM). Shares of the firm are up nearly 200% over the past five years as the company has invested in growth and taken advantage of rising demand for its goods from homebuilders.

In the year to March, revenue rose 6.9% to £198.8m and operating profits rose by £1m to £13.2m. Like Photo-Me, the company’s management team also takes a conservative approach to its balance sheet. It had a net cash position of £17.2m at year-end and maintained dividend cover at 3.6 times.

However, before would-be investors take the plunge, there are a few things to remember about the timber business. For one, it’s a commodity, which means relatively low margins for suppliers, a shallow moat to entry and few competitive advantages. Of course, demand for timber is also tightly correlated to the health of the domestic building trade so sales and earnings can be highly cyclical.

James Latham is a well-run business with a long history of success. But with a low 1.8% dividend yield, its shares pricey for a commodity supplier at 14.8 times earnings, and the domestic housing market looking to be at or close to peaking, I’d wait for a downturn before beginning a position.

The post Why I’d take profits on this stock after returning 350% in 5 years appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any 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.

This £167m company may not have shown up on your radar before, but today’s final results suggest to me that the stock continues to offer potential value for new buyers. Sales rose by 6.9% to £198.8m last year, while operating profit was up 7.6% to £14.2m. The total dividend was increased by 7.3% to 15.7p.

Latham’s accounts are refreshingly simple. Unlike those of so many companies, they aren’t packed with adjusted items or ‘what-if’ pro forma figures. What you see is what you get, and in this case I think it’s very attractive.

Surprisingly profitable

Operating margins were stable at 7.1% last year, and the group generated a return on capital employed of 15.1%. Both figures seem good to me, given the commoditised nature of most of the firm’s products.

Although £6m was invested in new sites, free cash flow of £3.4m was still enough to cover the payment of £2.9m in dividends. Net cash rose slightly despite the heavy spending, up from £15.8m to £16.3m.

In my opinion, the main risk facing investors is that a UK recession could cause a slump in demand for timber. This share price would probably take a big hit.

There’s no way to know how likely a recession is, but it’s worth remembering that Latham has been in the timber trade since 1757. I’d argue that a future downturn would be a buying opportunity, not a reason to sell.

In the meantime, these shares trade on a P/E of 15, with a yield of 1.8%. I’d be happy to start building a long-term position at this level, with a view to averaging down during the next market crash.

The perfect business?

Travel and insurance group Saga (LSE: SAGA) may seem a dull business. But the group’s focus on over-50s means that its customer base is expanding steadily as the UK’s population ages. These customers are also among the most affluent in the UK, with high levels of home ownership and disposable income.

In a trading statement today, the group confirmed that trading so far this year has been in line with expectations. Analysts expect the group’s earnings per share to rise by 4.3% to 14.8p this year. This puts the stock on a forecast P/E of 13.5, with a prospective dividend yield of 4.7%.

This level of growth may seem pretty average, but I believe Saga’s focus on developing a closer relationship with its customers should deliver above-average profit growth over the medium term.

To get an idea of Saga’s potential, it’s worth considering last year’s results. The group’s operating margin hit a new record of 22.2%. This resulted in improved cash flow and allowed the firm to increase the full-year dividend by 18%, while still reducing debt.

Annual dividend growth is expected to remain around 10% over the next couple of years, offering shareholders the chance to lock in an attractive yield. In my view, this stock is probably undervalued at current levels. Saga could be a stock to buy and tuck away for the next 10 years.

The post Why these boring dividend stocks could help you retire early appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Roland Head has no position in any 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.

Improving performance

The AGM statement released by niche specialist services provider Premier Technical Services Group (LSE: PTSG) shows that it continues to make progress with its current strategy. It has recorded continuing sales growth and strong levels of orders since the start of the year. They are in line with expectations, while working capital utilisation and profit levels are likewise as per previous guidance. Furthermore, contract wins have been secured across all disciplines, with the company’s contract renewal rate continuing to be high.

The acquisition of Nimbus Lightning Protection in January could act as a positive catalyst on the company’s future performance. It has been successfully integrated into the company, with it contributing sales and profit to the business. More acquisitions could be ahead as the company seeks to achieve sector dominance, although its organic growth rate remains impressive.

Looking ahead, Premier Technical Services is expected to record a rise in its bottom line of 7% in the current year. Given that its shares trade on a price-to-earnings (P/E) ratio of 15.4, it appears to offer fair value for money at the present time. Its growth rate could improve in future if more acquisitions are made, while its dividend is covered 5.1 times by profit. This suggests a higher level of shareholder payout could be achievable in order to boost the company’s yield of 1.4%. As such, now could be the right time to buy it for the long term.

Strong track record

Also offering upbeat total return potential is timber and panel products distributor James Latham (LSE: LTHM). It has recorded three consecutive years of double-digit earnings growth, with its bottom line rising at an annualised rate of over 23% during the period.

Despite this, it trades on a P/E ratio of just 15.9, which suggests that it could offer upside potential. That’s even after a 32% share price rise during the last year. Investor sentiment appears to be relatively strong, although there could be scope for further improvements should the company continue to deliver on its current strategy and post rising profitability in future.

Even though James Latham currently yields just 1.7%, it could become a more attractive income stock in future. Its dividends are covered 3.8 times by profit, which suggests shareholder payouts could increase at a faster rate than profit over the long run without compromising the financial health of the business. Therefore, against a backdrop of rapidly-rising share prices, James Latham appears to offer a mix of growth, value and income potential for the long term.

The post Is this growth stock a bargain after today’s results? appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Peter Stephens has no position in any 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.

Boxing clever

Packaging giant DS Smith (LSE: SMDS) was one of the Footsie’s largest risers in otherwise-subdued Thursday business, a terrific trading update sending shares 5% higher on the day. The company said that revenues leaped 6% during the 12 months to April 2016, to £4.07bn. This propelled adjusted pre-tax profit 12% higher, to £332m.

The boxbuilder witnessed terrific demand for its products across Europe, it advised, with five acquisitions during the period bolstering its position in 13 countries. And the proposed purchase of Portugal’s corrugated packaging business Gopaca should bolster the top line looking ahead.

The City certainly buys into DS Smith’s strong momentum, and earnings are expected to rise 8% in the year to April 2017. I reckon a consequent P/E rating of 12.5 times — combined with a 3.6% dividend yield — makes the stock a steal at current prices.

Wooden woes

Panel and timber distributor James Latham (LSE: LTHM) also enjoyed a boost in Thursday trade, the stock moving further away from recent seven-month lows as bubbly financials of its own pushed the stock price 3% higher.

The company  saw revenue climb 6.3% in the year to March 2016, it noted, to £185.9m. As a result pre-tax profit shot 27.7% higher from fiscal 2015, to £12.9m.  However, growth slowed during the second half of the year, as falling wood and panel prices weighed. And the company also had to nurse higher overheads due to “extra volumes and longer warehouse hours.”

These problems are expected to continue into the current period, at least according to the number crunchers, and a 12% earnings duck is currently pencilled in. Sure, a P/E rating of 13.4 times may be attractive on paper. But I reckon James Latham’s slowing momentum does not make it a compelling ‘buy’ at the present time.

Fossil fears

Investors in fossil fuel plays like Premier Oil (LSE: PMO) have been encouraged by Brent’s ability to hang around the $50 per barrel marker, despite the huge uncertainty surrounding the outcome of today’s EU referendum.

And yesterday’s EIA stockpile data from the US assuaged enduring fears over the state of the oil market’s long-term supply outlook. Inventories fell by a further 900,000 barrels last week, reducing total stocks to 530.6m barrels.

But this total still stands a whisker away from recent record highs. And while recent supply outages in Nigeria and Canada can be thanked for recent stock reductions, signs that US producers are picking up their tool-belts again casts a shadow on the oil sector’s already-precarious supply/demand imbalance.

Premier Oil is already expected to keep punching losses through to the end of 2017 at least. And I expect bottom-line pain to persist beyond this period, making the producer an unappealing stock pick at present.

The post Should you buy Premier Oil plc, DS Smith plc and James Latham plc following recent news? appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

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