A cyber-security firm

Darktrace (LSE: DARK) has had a mixed start to life as a public company. After soaring to around 1,000p, the UK share has since dropped back to under 400p. But after today’s excellent trading update, and some other recent positive developments, the shares have managed to climb back to over 500p. I think they can continue to soar.

Even as a current shareholder, the trading update exceeded my expectations. In fact, revenues in the six months to 31 December 2021 reached over $192m, over a 50% year-on-year increase. Even more impressive was the fact that the company saw an operating profit of over $8m, mainly due to the pandemic-related suppression of some key costs. This is a change from the consistent losses the company has been seeing. While I don’t believe this is a sign of consistent profitability, especially as the costs are likely to return soon, it’s still a promising sign.

Even more promising is the updated forward guidance. For FY22, the company now expects year-on-year revenue growth of over 45%, updated from previous guidance of 43%. The recent acquisition of Cybersprint should also boost revenues in the longer term.

There are a couple of risks that must be pointed out though. For example, it has a high valuation, with a price-to-sales ratio of around 10. This implies that revenue growth is already expected to be very high. Further, share-based compensation is expected to increase over the next year, potentially leading to share dilution.

Despite these risks, the potential of Darktrace certainly seems too strong to ignore. This is a UK share I’ll continue to add to my portfolio.

A packaging UK share

Mondi (LSE: MNDI) is a FTSE 100 share that has delivered consistent growth over the past few years, while also paying a sustainable, and fairly high, dividend. Its recent results also demonstrated its consistent growth.

For example, in 2021, revenues were able to grow 16% year on year to €7.7bn, while operating profits grew 23% to over €1bn. This gives Mondi a price-to-earnings ratio of just 11. Considering that it’s managing to deliver strong growth, this seems very cheap. It also raised its full-year dividend 8%, reaching 65 cents. This equates to a yield of around 4%, far higher than many other UK shares.

Even so, the current conflict between Russia and Ukraine is a severe problem for Mondi, because it has significant operations in both countries. In fact, Russian revenues equate to around 12% of the group’s total. Loss of these revenues would, therefore, have a significant impact on the Mondi share price. As such — and also for the sake of an end to the suffering — I hope that a ceasefire is not too far away.

Despite this risk, Mondi is not a Russian company and will not be targeted by western sanctions on Russia. It should be able to mitigate the impacts of the conflict through its other operations. This is why it remains a stock I’m happy to have in my portfolio.

The post 2 UK shares to buy today after excellent trading updates appeared first on The Twelfth Magpie.

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Stuart Blair owns shares in Darktrace and Mondi. 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 FTSE 100 is full of established UK companies, and while it has a reputation for being boring in comparison to US tech stocks, but boring can also mean bargains. These two FTSE 100 stocks have fallen back recently. But in both cases, business performance remains strong. As such, I think that both have significant upside potential heading into 2022.

A defensive FTSE 100 stock

BAE Systems (LSE: BA) is defensive in both senses of the word. Firstly, it operates in the defence and aerospace industry, and is one of the global market leaders. Secondly, due to several recurring contracts with governments around the world, revenues are fairly secure. This means that it normally holds up quite well in the event of a stock market crash. Even so, the BAE share price has fallen over 6% in the past month, a disappointing end to a year in which it has managed to rise around 8%. I feel this slight dip offers a great time to buy.

Indeed, in the forward guidance offered in the half-year report, things certainly looked positive. For example, the group said that it expected sales growth of 3%-5%, and underlying EBIT growth of around 7%. This has also been forecast based on an exchange rate of $1.35 to £1. However, in recent months, the pound has weakened, and the exchange rate is currently $1.32 to £1. This should benefit BAE, because it earns a significant amount of revenue in US dollars yet reports in British pounds.

I am also tempted by the company’s dividend, which rose another 5% this year. As such, it currently yields close to 5%, far higher than other FTSE 100 stocks. A recent share buyback programme of £500m also demonstrates that it’s in a strong financial position.

As such, although there are the risks of inflation, and the fact that government defence spending is not increasing at a similar rate, I still believe that BAE is well-equipped to deal with these. I may add more BAE shares to my portfolio at its current price.

Paper and packaging company  

Mondi (LSE: MNDI) is another FTSE 100 stock that has dipped recently, falling by around 12% in the past three months. Over the past year, it is up 7%, however. But I still think the stock is too cheap.

Indeed, the company has been performing well this year. This included revenue for the first half of the year rising around 5% to over €3.6bn. Further, in the most recent quarter, underlying EBITDA was up 27% from the previous year, reaching €388m. This signals that there is significant demand for Mondi’s products, which are recognised for their sustainability. So, as e-commerce continues to rise in popularity, I feel that demand will increase further.

There are some risks, however. For example, the company has recently highlighted rising costs due to inflationary pressures. There are also planned maintenance costs for the fourth quarter of 2021, and although these will hopefully benefit Mondi in the long term, this is likely to have a substantial impact on profitability in the short term. Nonetheless, I see these as short-term issues, and I’m generally optimistic. Therefore, I may also add more Mondi shares to my portfolio in the new year.

The post 2 bargain FTSE 100 stocks to buy in 2022 appeared first on The Twelfth Magpie.

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Stuart Blair owns shares in BAE Systems and Mondi. 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.

Packaging company

Over the past month, Mondi (LSE: MNDI) has fallen around 10%, currently priced at 1,880p. But I think this is a great time to buy the packaging company on the dip. Here’s why.

Firstly, the company’s half-year trading update was positive. In fact, it reported revenues of over €3.6bn, an increase of 5% from the same period last year. It also generated operating profits of €503m, which although marginally lower than the same period last year, represents a strong performance.

This good performance also enabled the company to declare an interim dividend of 20 cents, an increase of over 5% from last year. As such, Mondi has a full-year dividend yield of nearly 3%. Although this is by no means incredible in comparison to other FTSE 100 stocks, it’s still an appealing aspect of the company.

Furthermore, the dividend is extremely sustainable, and covered over two times by earnings. This allows plenty of money for investment, and Mondi is doing just that. This has included a €125m investment into its mill in Kuopio, which will increase its capacity by 55,000 tonnes per annum. It’s said that this has been done to “meet growing consumer demand”. As such, I feel that profits will be able to increase over the next few years.

As such, even though rising input costs and planned maintenance factory closures are headwinds moving forwards, I think the outlook remains positive. That’s why I may add more Mondi shares to my portfolio.

A defensive FTSE 100 stock 

BAE Systems (LSE: BA) is the other FTSE 100 stock I think is a ’no-brainer’ buy. The defence specialist has proved extremely resilient during the pandemic, and while other companies recorded huge losses last year, BAE was able to see its operating profits rise 2% in the period.

The company’s strong performance has continued this year. In fact, in its half-year results, operating profits were 60% higher than the same period last year at £1.3bn. As such, operating profits for 2021 are expected to be far higher than last year. Underlying EBIT, a key measure of profitability, is also expected to increase around 7%. This has enabled the firm to increase the dividend by 5%, giving it a strong yield of 4.5%. It has also initiated a share buyback programme of up to £500m.

Accordingly, I feel like BAE can overcome the challenges that it faces, namely the fact the US defence budget increased just 1.6% this year, far lower than inflation. A price-to-earnings ratio of around 12 also shows that the firm is not overpriced, especially as it’s not currently seeing falling profits. Therefore, this is another FTSE 100 stock that I may add more of to my portfolio.

The post 2 ‘no-brainer’ FTSE 100 stocks I’d buy on the dip appeared first on The Twelfth Magpie.

More reading

• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• 1 FTSE stock tipped to handily outdo Rolls-Royce shares by 2027
• Forget SpaceX, here are 3 UK tech stocks to consider buying without the high price tag
• Should investors consider buying BAE Systems shares now they’re back below £20?
• BAE shares are falling: opportunity or warning?

Stuart Blair owns shares in BAE Systems and Mondi. 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.