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Forget the State Pension, the Barclays share price could boost your retirement savings

Peter Stephens — Mon, 10 Sep 2018 09:30:46 +0000

With the State Pension likely to become increasingly unappealing due to the rising official retirement age, FTSE 100 shares such as Barclays (LSE: BARC) could become more important to investors in the coming years. As part of a diversified portfolio, they have the potential to deliver high returns over a long period, with the company’s low valuation being a key reason for this.

Of course, Barclays isn’t the only cheap share that could be worth buying today. One company reporting positive results on Monday could also help investors to boost their retirement savings and overcome a meagre State Pension.

Improving outlook

The company in question is communications cloud and managed services specialist Maintel (LSE: MAI). It released interim results on Monday which showed a rise in revenue of 14%, with recurring revenue at 70%. This comes at a time when the company is seeking to transition towards and cloud and managed service business, with positive momentum being recorded during the period. Cloud revenues increased by 33% to £7.7m, while managed services revenue was up 22% to £23.2m.

Looking ahead, the company is expected to post a rise in earnings of 28% in the current year, followed by further growth of 17% next year. Despite an improving financial outlook, the stock trades on a price-to-earnings growth (PEG) ratio of 0.5. This suggests that it has a wide margin of safety and could deliver strong share price growth over the medium term.

Maintel will continue to invest in the higher growth areas of its business, as well as in automation. With new business orders up by 25% and a solid pipeline of opportunities, it seems to be in a strong position to generate growth. As such, now could be the right time to buy it for the long term.

Improving prospects

The growth potential of Barclays also seems to be high, with the bank moving into a new phase under its current management team. After focusing on strengthening its balance sheet through a restructuring, it is now in a position where shareholders could reap the benefits of its improving financial performance.

Over the next two years the bank’s dividend is expected to increase from 3p per share to 7.9p per share. This puts the stock on a forward dividend yield of 4.5% for the 2019 financial year, which is over 10% higher than the FTSE 100’s dividend yield.

With Barclays expected to post a rise in earnings of 13% in the next financial year, its financial prospects seem to be improving. Despite this, it trades on a PEG ratio of just 0.7, which makes it one of the cheapest banking shares in the FTSE 100. As such, it could offer high returns over an extended time period which would help to boost its shareholders’ retirement savings. Given the rising State Pension age, this could make it a worthwhile long-term investment opportunity.

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Peter Stephens owns shares of Barclays. The Motley Fool UK has recommended Barclays. 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.

2 turnaround stocks I’d sell before Christmas

Peter Stephens — Wed, 06 Dec 2017 12:45:53 +0000

Buying shares in companies which have announced disappointing updates can be a risky business. It is normal for their shares to come under pressure in the short run, as investors price in their changed outlooks. However, in the long run they can offer turnaround potential in some cases.

Reporting on Wednesday, however, were two shares which may be worth selling at the present time. Although they have the capacity to deliver turnarounds after worse than expected periods, there may be better risk/reward opportunities available elsewhere.

Tough period

Falling by 13% on Wednesday was systems integrator and managed services provider Maintel (LSE: MAI). It had expected to recover the reduction in gross margin reported in the first half of the year, but its year-end trading update confirmed that this would not be possible. One reason for this is the migration of two legacy contracts following the acquisition of Azzurri Communications. They were higher margin contracts than the company’s other contracts, and their loss is set to mean lower revenue than anticipated.

There have also been delays to customer installations which have affected the company’s Managed Services and Technology performance. This follows the Avaya Chapter 11 process, although ordering activity from Avaya is expected to start to recover in the near term. In addition, the integration of Intrinsic Technology has been as expected. However, gross margins from the business have been lower than anticipated.

Looking ahead, it would be unsurprising for investor sentiment in Maintel to weaken somewhat. Its recent acquisitions have been rather mixed in terms of delivering financial performance as expected. Therefore, while it may be capable of a turnaround in the long run, it could be a stock to avoid or sell in the near term.

Disappointing update

Also releasing a disappointing update on Wednesday was niche manufacturer Plastics Capital (LSE: PLA). Although the company reported growth across its divisions in the first six months of the year, recent delays in the ramp-up of two significant bearings projects have meant that its pre-tax profit for the full year is now set to be below consensus market expectations. This caused the company’s share price to decline by around 3% following the update.

Clearly, the company’s full-year performance is set to be well ahead of the previous year. In the first half of the year, organic revenue growth was an impressive 13.5%, while it continues to invest in development and capacity expansion projects. They could help it to deliver sustainable growth, while project wins show that it is capable of continuing to generate high sales growth. Furthermore, its equity placing of £3.54m could provide additional capital through which to invest for future growth.

With Plastics Capital trading on a price-to-earnings (P/E) ratio of around 10.5, it seems to offer good value for money at the present time. However, with its performance being worse than expected, it seems prudent to await more positive updates before buying it.

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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.

Would Neil Woodford buy these 2 dividend turnaround stocks?

Peter Stephens — Mon, 11 Sep 2017 12:16:53 +0000

Neil Woodford is known as an investor who likes to buy dividend stocks. His funds often have a focus on income return, as well as on the long-term potential of their investments. And with two of his major holdings, Capita and Provident Financial, having experienced difficult periods which have included profit warnings, he seems to be open to the idea of holding turnaround plays within his portfolios.

With that in mind, here are two stocks which appear to have strong income prospects as well as the scope for improved income returns in the long run. Could they be of interest to Neil Woodford?

Improving performance

Reporting on Monday was telecommunications specialist Maintel (LSE: MAI). The provider of managed services and systems integration reported a rise in revenue in its interim results of 68%, with gross profit moving 50% higher. The company benefitted from the integration of Azzurri, which is now almost complete. Annualised synergies in the period were moderately ahead of those anticipated at the time of the transaction.

The business was also able to invest in its ICON cloud platforms. They generated strong growth and could prove to be a major growth path for the company in future years. Its managed services and technology performance was negatively affected by delays to customer installations. However, with the recent acquisition of Intrinsic Technology, it seems to have clear catalysts for growth.

Maintel currently yields 3.8% from a dividend which is covered 2.6 times by profit. This suggests that the company has the potential to post high dividend growth rates in future. And since it trades on a price-to-earnings growth (PEG) ratio of just 0.7, it appears to have a sufficiently wide margin of safety to record a turnaround following its 13% share price fall over the last three months.

Major changes

Also offering turnaround potential after a falling share price in the last three months is global software specialist Micro Focus (LSE: MCRO). It has recorded a share price decline of 4% in the last month, but its recent acquisition of HPE could be the catalyst to boost its profitability in the long run. Recent figures released by HPE show that the business is making progress and could prove to be a good fit with Micro Focus.

One area where the company may be able to add real value for investors is through dividends. It currently yields 3.5% from a payout of 45% of net profit. This suggests that dividends are highly affordable, and with the company having earnings growth potential, it could become a strong income play in the long run.

With a price-to-earnings (P/E) ratio of 14.2, it appears to be fairly priced given its long-term potential. A lack of large-cap technology stocks also means that there could be a scarcity value which translates into a higher valuation over the long run. As such, it appears to be a strong investment opportunity at the present time.

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Peter Stephens owns shares in Capita and Micro Focus. The Motley Fool UK has recommended Micro Focus. 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.