I can see better opportunities elsewhere in the FTSE 250. Today I want to look at another 9% dividend stock that I rate much more highly.

Bovis is bouncing back

FTSE 250 housebuilder Bovis Homes Group (LSE: BVS) has delivered a textbook recovery over the last couple of years. Since taking charge in April 2017, chief executive Greg Fitzgerald has lifted pre-tax profit from £114m to £168m.

Mr Fitzgerald has also fixed the company’s reputation for sloppy finishing. Bovis’s HBF customer satisfaction rating has risen from two stars in 2017 to four stars for 2018. Despite this investment in quality, operating profit margins have risen from 12.5% in 2017 to 16.4% in 2018.

Further gains are expected in 2019, and Mr Fitzgerald expects the group’s strong cash generation to continue. For shareholders, this is expected to result in a total dividend of 102.2p per share for 2019, giving a yield of 9.5%. A similar payout is expected in 2020.

Too good to last?

I don’t expect Bovis to be able to sustain such generous special dividends forever. But with earnings expected to rise by 6% this year and by 10% in 2020, I expect the dividend yield to remain above 5% unless market conditions get much worse.

Housing always carries some cyclical risk. But I see Bovis as attractively priced and operating well. I’d buy.

Profit from the silver pound?

Building retirement homes for wealthy retirees should be a profitable business. At least, that’s probably what investors thought when they bought shares in McCarthy & Stone (LSE: MCS) shortly after its 2015 flotation.

Unfortunately, things haven’t turned out that way. The shares now trade about 40% below their IPO price and the dividend hasn’t risen since 2017. Worse still, figures released today show that the group’s adjusted operating profit margin of 7.6% is less than half the 16% figure being achieved by Bovis Homes.

Are things getting better?

Today’s half-year results are a mixed bag, in my view.

The good news is that completions rose by 11% to 845 units during the first half of the year, while the average selling price climbed 7% to £319k. These gains lifted half-year revenue by 17% to £280.5m and boosted underlying operating profit from £14.5m to £21.3m.

On the other hand, the group admits that it’s having to use “discounts and incentives, particularly part-exchange”, due to challenging conditions in the wider housing market.

What could go wrong?

On average, the company says that £27.2m was tied up in part-exchange properties during the first half of the year. This figure is expected to rise to 10% of net assets — or about £74m — during the second half, according to today’s results.

In my view, that’s too much. The figure for Bovis was just 1.6% of net assets at the end of 2018. Although McCarthy shares now trade in line with their tangible net asset value of 126p, I’d want a discount before I’d take on this level of risk.

With the stock yielding just 4.2% and profit margins under pressure, I see better value elsewhere. I’d avoid.

The post Forget the Royal Mail share price. I’d buy this FTSE 250 9% yielder today appeared first on The Twelfth Magpie.

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Roland Head owns shares of Bovis Homes Group and Royal Mail. 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.

One potential example is retirement home builder McCarthy & Stone (LSE: MCS). Shares in this former FTSE 250 firm rose by 7% in early trade on Tuesday, after the company published details of its turnaround plan. McCarthy & Stone’s share price has now risen by 30% from the sub-100p low seen in late June, during a period when the FTSE 100 has been flat.

What’s the plan?

Today’s “business transformation strategy” has been developed by John Tonkiss. The group’s former chief operating officer has been appointed as its new chief executive and will take charge of delivering the changes required to reverse the decline in group profits.

Mr Tonkiss plans to scale back the firm’s growth ambitions and focus on maximising profit margins and return on capital employed (ROCE). He’s targeting operating margins and a ROCE of more than 15% by the end of the 2021 financial year.

For comparison, the group’s ROCE was 10% over the 12 months to 28 February. Underlying operating margin over this period was 13%.

To help achieve these goals, cost savings of more than £40m per year will be made over the period. The group also plans to reduce the amount of capital employed in the business by at least £70m over the next three years.

Alongside this, McCarthy & Stone plans to broaden its assisted living services and allow prospective residents to choose whether to rent or buy their properties.

This last change is aimed at breaking the link between the wider housing cycle and the firm’s growth. If residents can rent instead of buying, they’ll no longer need to own or sell their own homes to be able to buy a McCarthy property.

My view

These changes are all fairly logical and could work. The group seems likely to become an operator of retirement communities, rather than just a builder.

Looking ahead, this stock trades at a 10% discount to book value and on a forecast P/E of 13. Last year’s dividend of 4.3p per share will be held this year, giving the stock a prospective yield of 3.3%.

In my view, now could be a good time to buy into this turnaround story.

Printing cash

Another turnaround stock with interesting prospects is banknote and passport printer De La Rue (LSE: DLAR).

This company lost a high-profile contract to print UK passports earlier this year, but says that an increased focus on technology and modern polymer bank notes could help generate long-term growth.

Last year saw the company sell its paper banknote business for £60m. This cash paid down debt and enabled the company to enact that focus on polymer banknotes, where sales volumes doubled to 810 tonnes last year. The group now supplies 24 issuing authorities, representing “more than half” the world’s total polymer note issuers.

A long-term buy?

Analysts’ forecasts suggest that adjusted earnings will be flat this year and return to growth in the 2019/20 financial year. The stock trades on 11 times forecast earnings and offers a 5.2% yield that was covered by free cash flow last year.

Noted activist investor Crystal Amber Fund has taken a 5% stake and is agitating for change. I think the shares could be a good long-term buy at this level.

The post This dividend stock has beaten the FTSE 100 by 30% in three months. Should you keep buying? appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Of course, over the same time period, the wider oil and gas sector has enjoyed an improved performance, with the oil price moving higher. As a result, it could be argued that the stock may enjoy a tailwind from improving investor sentiment over the medium term.

Looking ahead, the company could have turnaround potential. Could it therefore be worth buying alongside another possible recovery share that reported an improving performance on Thursday?

Turnaround potential

The company in question is retirement housebuilder McCarthy & Stone (LSE: MCS). It released an encouraging full-year trading update on Thursday, which showed it’s made progress in a tough year for the company. Revenue is expected to increase to £670m, from £661m in the previous year, with a 10% increase in the average selling price reflecting continued improvements in the sales mix.

The company continued to suffer from economic uncertainty, as well as a slower secondary market. This constrained volumes so that completions were down from 2,302 units in 2017 to 2,134 units in the 2018 financial year. A strategy review means that a more measured growth trajectory will be sought over the medium term, with the company seeking to smooth its workflow in order to create a more efficient business.

Looking ahead to the 2019 financial year, McCarthy & Stone is expected to report a rise in earnings of 3%. With the stock trading on a price-to-earnings (P/E) ratio of around 12, it could offer good value for money. While its near-term performance may disappoint, it seems to have a strong position in what could be a growing sector.

Uncertain outlook

Also offering turnaround potential is the UKOG share price. The company has continued to experience negative investor sentiment in recent months, and this trend could realistically continue in the short run. Since the company is presently generating relatively little revenue, it’s difficult to place an accurate valuation on its shares. That’s especially the case since its prospects remain uncertain in terms of production potential, while further fundraisings could dilute its shares yet further.

Despite this, the outlook for the wider oil and gas sector remains upbeat. Demand may increase at a faster pace than supply over the medium term, and this could mean that the 40% rise in the price of oil over the last 12 months will continue.

Therefore, an increasing number of investors may be willing to take risks on smaller operators which offer greater risk, such as UKOG. In the long run, the returns could be significant, although a volatile share price, which could move lower at times, seems likely after a challenging year for the business. For less risk-averse investors, the company could offer appeal over an extended time period.

The post The UKOG share price performance is getting worse! Time to sell up? appeared first on The Twelfth Magpie.

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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Since this announcement, the shares have regained some composure, and today, the stock has jumped nearly 10% after the interim management statement was published. 

However, despite the recovery, I’d still dump shares in Greencore without delay.

Time to sell?

The last time I covered it (before the firm’s March profit warning), I concluded that, based on City growth estimates at the time, the shares appeared to be undervalued. Now I’m not so sure. 

Today, the company confirmed its forecast to grow earnings per share for the year (the City is forecasting growth of 18%), even though restructuring costs have taken a bite out of profit. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 9.4% in the first half, and management believes the troublesome US business is now much better positioned to deliver an improved performance in the second half. 

The group expects strong organic growth for the rest of fiscal 2018 and management is so confident in the outlook it has increased the interim dividend by 4.8%.

But I’m not convinced. You see, while Greencore’s top line might be growing, the group’s bottom line, or more specifically cash conversion, leaves much to be desired. Adjusted EBITDA might have increased 9.4% to £87m for the first half, but cash generated from operations for the period was only £27m. Free cash flow was negative after deducting spending on capital projects. Based on these figures, it looks as if the company’s dividend distribution to investors was with debt, which in my view is a big red flag for dividend investors.

With this being the case, I’d dump this FTSE 250 dividend stock without delay. 

Falling income 

Another dividend stock I’d avoid is McCarthy & Stone (LSE: MCS). At first glance, this retirement home builder looks undervalued. The shares trade at a P/E ratio of just 7.8 and support a dividend yield of 4.4%. However, it seems as if the stock deserves this valuation as the company is struggling to grow.

In the six months to February, the business recorded a 52% decline in pre-tax profits to £11.5m and revenues only increased by 1%, despite average selling prices rising by 15%. There is also uncertainty surrounding McCarthy’s income stream from ground rents, a valuable source of income for the group. Around 4% of revenues came from related sales in 2016, and the total is expected to rise to £33m or approximately 7% of revenues for 2018.

And while McCarthy is struggling, the rest of the home building industry is powering ahead, which is not a good situation for the business. In fact, I believe that McCarthy is one of the weakest builders in the sector, and if you are looking for income and growth, one of its peers, such as Taylor Wimpey might be a better buy.

The post 2 FTSE 250 dividend stocks I’d dump without delay appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of and has recommended Greencore. 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.

Today’s numbers show that while the company’s revenue is expected to be £240m for the half-year to 28 February, up slightly from last year’s £238m, thanks to a 14% increase in the average selling price. However during the period, the number of units completed dropped by 12%. Thanks to higher costs, margins and operating profit are expected to fall year-on-year. 

Harsh environment 

McCarthy’s problems are a result of a subdued property market. While many home builders are benefiting from the government’s Help to Buy scheme and demand for new builds from first-time buyers, at the other end of the market conditions are reportedly more “subdued.” To help try and improve sales growth, McCarthy’s management has increased “usage of part exchange” deals and commissioned a new television advertising campaign to lure buyers. 

Unfortunately, the extra spending required by these two marketing initiatives is weighing on profits. Still, it seems management believes that the company can make a comeback in the second-half. Commenting on today’s figures, CEO Clive Fenton said: “Our forward order book is currently showing a 16% increase year-on-year and this gives us confidence in our expectation that the full year outturn will be within the current range of analyst forecasts for the full year.“

However, following this upbeat statement, Fenton went on to caution that there remains “continuing uncertainty” surrounding the government’s position on ground rents, which are a vital income stream for the group. Around 4% of revenues came from related sales in 2016 and the total is expected to rise to £33m, or around 7% of revenues for 2018. 

Nevertheless, despite this uncertainty, City analysts are expecting the company to report earnings per share growth of 16% to 16p for 2018. Based on these forecasts, the shares are currently trading at a forward P/E of 7.8, which looks cheap. But if you’re looking for a cheap homebuilder, I believe Bovis Homes (LSE: BVS) is a better buy. 

Turnaround is well underway 

2017 was a bad year for Bovis after losing its boss following customer complaints about poor workmanship at some of its properties. These issues prompted a profit warning and the implementation of a turnaround plan. 

The good news is that 2018 is already looking like it will be a better year, with management targeting a “controlled increase in volume” of property output. Management is also working to recover the firm’s reputation with customers, and this seems to be working. As my Foolish colleague Peter Stephens pointed out a few days ago, Bovis is on track to recovering a 4-star rating from the House Builders Federation. 

City analysts are expecting Bovis to report a 28% rise in its bottom line for 2018, which should, they believe, support a 23% increase in the dividend payout to 98p per share. That gives a dividend yield of 8.7% — more than double the FTSE 100 average. With a net cash balance of £145m reported at the end of fiscal 2017, it certainly looks as if the group is financially secure enough to support this distribution.

The post One turnaround stock I’d sell to buy this unloved 8.7% yielder appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Record (LSE: REC) found itself trekking higher in Friday business following the release of bubbly third-quarter trading details.

The stock was trading 3% higher after news that assets under management equivalents (or AUME) swelled 4.4% during the final quarter of 2017, to stand at $63.9bn as of the close of December.

Record saw net client AUME flows boost the total by $1.4bn during October-December, while positive movements in financial markets bolstered aggregate AUME by a further $1.4bn. A $900m reverse attributed to adverse foreign exchange movements was not enough to take the shine off the results.

Celebrating the solid quarter four performance chief executive James Wood-Collins said: “This quarter saw further growth in AUME and in client numbers, with growth in particular from existing client mandates as well as new business.” The asset manager had 60 clients on its books at the close of the year versus 59 three months earlier.

And the Record head painted a positive picture looking ahead, commenting: “Volatility in currency markets linked to political and economic uncertainty continues to create opportunities for engagement with existing and potential clients on risk management, return-seeking and combined strategies.”

6% yields? Yes please

City analysts agree that there remain plenty of opportunities for Record to exploit looking ahead, and they have pencilled in earnings expansion of 7% and 6% in the years to March 2018 and 2019 respectively.

These forecasts leave the business dealing on a forward P/E ratio of 13.9 times too, great value under most circumstances but particularly so given Record’s exceptional momentum.

However, great profits growth is not the only thing that shareholders can look forward to as Record offers up market-mashing dividend yields too. This year a predicted 2.7p per share reward yields a large 6.3%. And the dial moves to 6.7% for next year thanks to an anticipated 2.9p dividend.

Build a fortune

Retirement property builder McCarthy & Stone (LSE: MCS) offers plenty for share pickers to sink their teeth into as well.

Possible changes to leasehold legislation in the UK to address the ground rent scandal is casting a cloud over the business right now. Having said that however, the City does not expect this to issue to stop earnings from galloping into the distance — far from it, in fact. Bottom-line rises of 16% and 23% are currently being forecast for the years to August 2018 and 2019.

Such predictions of rampant profits growth feed through to expectations of sprightly dividend growth as well. An anticipated reward of 5.5p for fiscal 2018 yields 3.8%, and a projected 6.4p dividend for the next period yields 4.4%.

What’s more, investors can put their faith in these estimates becoming reality, McCarthy & Stone’s dividend coverage standing at a bulky 2.9 times and 3.1 times for this year and next.

The Bournemouth business reported back in the autumn that forward sales were up 11% year-on-year as of November 10, at £277m, underlining the brilliant earnings possibilities afforded by the country’s ageing population. I reckon a forward P/E ratio of 9.1 times represents unmissable value, particularly as McCarthy & Stone is taking steps to supercharge  build rates to capitalise on this positive structural backcloth.

The post Why I believe this 6% yielder could make you a fortune 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 no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The shares slumped after the developer warned investors that its 2017/18 profits could fall significantly if it fails to win exemption from a government plan to reduce ground rents on new long leases to zero.

A hidden weakness

This summer saw a scandal emerge relating to new-build homes being sold under leasehold agreements. Doing this enabled housebuilders to boost their profits by selling the freehold separately to a third-party investor. In some cases the ground rents charged to homeowners have risen rapidly after an initial period.

Of course, flats are usually sold leasehold, so buyers of McCarthy & Stone properties are unlikely to have questioned this aspect of their purchase. The problem is that the company appears to have become dependent on the profits it makes from selling freehold reversions.

Analysts expect the company to generate a profit of £89m in 2017/18. In this morning’s statement, it said that it expected to make a profit of £33m from the sale of freehold reversions. If the ban on ground rents goes ahead, I believe the group’s profits could fall sharply.

My view

McCarthy & Stone believes retirement properties should be exempt from the ground rent ban. But in my opinion such developments are no different to regular apartment complexes, which also require centralised maintenance and services.

I’m not convinced that the firm will win its plea for exemption. In my opinion, today’s news simply highlights this group’s weak underlying profitability.

Today’s fall follows the slump seen in September, when management warned that profit margins would be hit this year by higher levels of incentives. These appear to include paying buyers’ electricity bills and service charges for several years.

Offers like this have supported higher sale prices. This supports revenue growth, but doesn’t disguise the reality that the group’s 2016/17 return on capital employed (ROCE) was just 12.5%, well below the housing sector average.

In my view, these shares are best avoided. I believe there are better opportunities elsewhere.

My personal pick

My top choice among housebuilders is FTSE 250 group Redrow (LSE: RDW), a share that I own myself.

Redrow has reportedly already stopped selling leasehold homes. So the firm’s future profitability shouldn’t be affected by yesterday’s ban. There are a number of other things I like about this stock that’s led me to favour it over some rivals.

The first is that the firm remains under the chairmanship of founder Steve Morgan, who owns a 25% stake that’s worth around £600m at current prices. I believe Mr Morgan’s interests should be well aligned with those of shareholders.

Although the group’s dividend yield of 3.4% is fairly average, this payout is expected to be covered 3.5 times by earnings this year. This should reduce the risk of a dividend cut if markets stumble.

Redrow’s ROCE has increased every year since 2012 and reached 21% last year. That’s nearly double McCarthy’s figure of 12.5%. Despite this, the firm’s shares trade on a forecast P/E of 8.3 and a price/book value of 1.9. That’s cheaper than several comparable rivals.

I continue to hold Redrow and believe further gains are possible in 2018.

The post Why I’d avoid McCarthy & Stone plc after 10% drop and buy this stock instead appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head owns shares of Redrow. The Motley Fool UK has recommended Redrow. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I’m not so sure. McCarthy remains the largest operator in a niche market that should experience a significant increase in demand over the medium-to-long term as life expectancy continues to rise and more people downsize. Moreover, the business seems to be performing well enough based on today’s full-year trading update.

While the number of completions over the last 12 months was similar to the previous year (2,302), the average selling price of each property rose by 3% (to £273,000), allowing revenue to increase 4% to a record level of £660m. As an indication of the demand, it saw a 21% increase in its order book at year-end to £141m. On the downside, full-year margins are still expected to be lower than in 2016 due to the increased use of incentives, despite a “strong recovery” in operating margin over H2.

Over the reporting period, the company opened 52 new sales outlets. It also developed a strategic partnership with property manager Places for People, allowing the former access to the rental market and new “untapped” locations. 

As far as its outlook is concerned, the firm stated that demand for its homes “remains strong” and that it is confident of delivering on its medium-term goal of building and selling 3,000 properties per annum. The expected “strong upward momentum” seen in average selling prices over H2 is encouraging and McCarthy thinks this is likely to continue into the next financial year.  

Share price aside, I’m fairly happy with the way things are going and will stick with the stock for now. The balance sheet is solid (£30m net cash despite ongoing investment) and the 3% yield — while unlikely to attract dividend hunters on its own — is hardly inadequate.

Another option

Of course, McCarthy & Stone won’t be to all investors’ tastes. Those disinclined to invest in small(er) companies could opt for Barratt Developments (LSE: BDEV) — the UK’s largest housebuilder — instead. 

Today’s annual results for the year to the end of June detailed “another year of strong performance“, according to the £6.2bn cap. Total completions hit 17,395 — its highest volume for nine years. Revenue climbed just under 10% to £4.65bn and pre-tax profit came in at £765m — a rise of 12%. Return on capital employed (ROCE) — often used to judge the quality of a business — continues to increase. At just under 30%, this is now roughly double what most would consider to be an acceptable figure.

Despite operating in a cyclical industry, Barratt also offers considerable appeal to income seekers with today’s corking 39% increase in the final dividend — from 12.3p per share to 17.1p — being accompanied by a 17.3p special dividend.

Although the recent slowdown in the housing market isn’t desirable, CEO David Thomas believes the company starts 2017/18 in a “good position“, with forward sales up almost 14% to £2.75bn. This, combined with Barratt’s solid balance sheet (net cash up 22% to £724m) and the “positive mortgage environment” should see the share price momentum experienced over the last year (+29%) continue for a while yet.

The post Why I’d still buy and hold this stock after its 40% decline appeared first on The Twelfth Magpie.

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Paul Summers owns shares in McCarthy & Stone. 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.

Castleton now boasts more than 750 customers, it advised, more than a third of which take out more than one product or service. The company signed a number of multi-year contracts during the period, including a 10-year deal with Clúid Housing Association in Ireland.

And the business has hit the ground running in the current year, chief executive Dean Dickinson commenting that “the new financial year has started in line with expectations, with a large, engaged customer base, a strong order pipeline and the right structure in place to maximise this significant market opportunity.” Castleton has inked two further multi-year deals since the close of the year, it advised.

Great value

Having flipped back into the black last year, City analysts expect further progress and have chalked in a 20% bottom-line advance for the current fiscal year.

And this projection makes Castleton stellar value for money. A forward P/E rating of 14.1 times falls below the widely-considered value benchmark of 15 times or below. A prospective PEG multiple of 0.7 — below a reading of 1 — also suggests the Cambridge firm could be too cheap to miss.

I reckon Castleton is worthy of serious consideration at these prices, particularly as recent acquisitions begin to bed in, and given its encouraging top-line momentum.

Profits powerhouse

McCarthy & Stone (LSE: MCS) is another stock tipped for great things on the earnings front.

Following last year’s modest 3% uptick, the City expects profits to detonate in the years ahead and have chalked in rises of 11% and 22% for the years to August 2017 and 2018 respectively. And it is not difficult to fathom why the number crunchers are so optimistic.

McCarthy & Stone chief executive Clive Fenton said this month: “The market for high-quality retirement housing remains strong notwithstanding any potential uncertainty as a result of the UK general election outcome.” He added that “the underlying housing market continues to be supported by low interest rates, good mortgage availability and low levels of unemployment.”

As a result, McCarthy & Stone affirmed its target of building and selling 3,000 units each year by the end of the decade.

While the business has seen sales slow more recently following the Conservatives’ ballot box disaster in June, the long-term outlook remains robust as Britain’s ageing population drives demand for retirement properties. And I reckon the prospect of any near-term turbulence is more than baked-in at current share prices.

Current forecasts leave McCarthy & Stone dealing on a mega-low forward P/E ratio of 11.1 times. And a PEG ratio bang on the bargain watermark of 1 times underlines its corking value relative to its projected earnings momentum.

Meanwhile, the firm’s brilliant bottom-line outlook, combined with its exceptional cash-generative qualities, is expected to keep launching dividends skywards. The 4.5p reward of fiscal 2016 is predicted to jog to 5.2p in 2017 and to 6.1p in 2018, driving a yield of 3% in the current period to 3.6% the next year.

I reckon McCarthy & Stone remains a compelling pick for long-term investors.

The post 2 stunning growth stocks for shrewd investors appeared first on The Twelfth Magpie.

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• 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?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Royston Wild 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.

For 2017 City analysts are expecting the company to report a pre-tax profit of £12.6m on revenues of £81.7m. For 2016 it reported a pre-tax profit of £11.7m on revenues of £90.4m so profits are growing steadily. Earnings per share, however, are set to rocket higher by 34% this year, following growth of 44% for 2016. Since 2013 earnings per share have risen 180%. 

Lucrative returns 

As Quixant has grown, shareholders have reaped the benefits. Over the past five years, shares in the company have gained 370% significantly outpacing the wider market. 

Quixant is an interesting business. The company is a leading provider of specialised computing platforms and monitors for gaming and slot machine applications. Management is extremely optimistic about the firm’s outlook as the market for gaming continues to expand and the company leverages its existing position in the industry to grow sales and margins. City analysts are similarly excited with earnings growth of 18% pencilled-in for 2018 following 2017’s growth surge. 

Attractive valuation 

Growth shares such as Quixant tend to trade at a high valuation and the gaming company is no different. The shares currently trade at a forward P/E of 24.2 and only yield 0.7%. Nevertheless, when you consider the firm’s projected and historic growth, it looks as if it is worth paying a premium to get your hands on the shares. 

Growing market 

McCarthy & Stone (LSE: MCS) is the UK’s leading retirement housebuilder and is well positioned to grow rapidly in the years ahead. The UK’s ageing population presents a huge challenge for homebuilders. There’s a structural shortage of suitable housing options for older people and this group of customers tends to require a more specialised offering than first-time buyers.

McCarthy has a virtual monopoly over this market being the only nationally recognised brand. This monopoly puts the firm in a prime position to continue its growth and at the time of writing, shares in the group offer exposure to this growth at a knock-down price. 

City analysts are expecting McCarthy to report earnings per share of 15.4p for the fiscal year ending 31 August, up 11% year-on-year. Further growth is expected for the following fiscal year. For the year ending 31 August 2018, the City is projecting earnings growth of 22%. Based on these estimates, shares in the company are trading at a forward P/E of 10.7 falling to 8.3 for fiscal 2018. 

Considering the company’s growth rate, as well as the size of the market McCarthy has available to it, this valuation seems to seriously undervalue the group and its prospects. As well as the depressed valuation, the shares also support a dividend yield of 3.1% and the payout is expected to grow by around a fifth next year. 

Overall, McCarthy looks to be a interesting undervalued opportunity. 

The post 2 hot value and growth stocks that could help you retire early appeared first on The Twelfth Magpie.

More reading

• 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?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves 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.