“Positive start”

Today’s interim results from Vimto-owner Nichols should provide some comfort to investors. Revenue increased 13.8% to £67.4m over the first six months of 2021, with adjusted pre-tax profit moving almost 32% higher to £8.9m.

Sure, some improvement was expected due to the loosening of restrictions. Even so, news that the company’s Vimto Dilutes range significantly outperformed the UK market between January and June bodes well.

Sales of Vimto have been rebounding overseas too. International growth of 42.3% was recorded compared to the prior year. Sales in regions such as the Middle East (the drink is incredibly popular over Ramadan) appear to have held up well.

And the outlook? Well, Nichols believes that its “positive start” to 2021 should allow it to meet management expectations for the full year. However, I now wonder if the recent weather might lead to a slight increase in guidance next time around.

All told, I’m satisfied with today’s update and would be happy to add to my position today. A good recovery in sales, not to mention a strong balance sheet and solid portfolio of brands (which now includes SLUSH PUPPiE), makes me think this is one of the best stocks to buy now in this space.  

“Better than anticipated” trading

Today’s results from Nichols followed hot on the heels of fellow drinks maker AG Barr. Like the former, Barr has had to contend with the shutdown of the hospitality industry over the pandemic. Like Nichols, the company’s now showing signs of recovery.

Yesterday, Barr announced that full-year profit would now likely be ahead of expectations due to “better than anticipated” trading. This helped its previously-sluggish share price to recapture some of its lost mojo.

Again, I think Barr will do well in time and there’s more upside ahead. It’s another quality operator that’s conservatively run. It also has a good number of ‘sticky brands’ such as IRN-BRU, Rubicon and Funkin. So I’m tempted to continue accumulating the shares.

Sales tailwind

As a holder of both stocks, it’s hard for me to sit on the fence when looking at NICL and BAG. Notwithstanding this, I’m encouraged by recent trading. I also suspect the blazingly-hot summer in their home market will prove a tailwind for sales.

This isn’t to say I shouldn’t be careful. Owning multiple companies in the same sector isn’t without risk. Although no lasting damage appears to have been done, the introduction of the sugar tax on soft drinks a few years ago was proof that even the most defensive companies can face challenges.

Going forward, it goes without saying that Delta infection levels may get so bad that some restrictions may need to be re-introduced. This may hamper demand for both product stocks. 

So long as I keep my exposure in check by investing elsewhere, I think the reward will be worth it if I bought more now. 

The post UK heatwave! Here are 2 of the best stocks to buy now appeared first on The Twelfth Magpie.

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Paul Summers owns shares in AG Barr and Nichols. The Motley Fool UK has recommended AG Barr and Nichols. 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 example of the former could be Associated British Foods (LSE: ABF).

Cheap UK shares

It’s easy to see why investors have been running from the £13bn-cap owner of Primark. Like many, the FTSE 100 company was hit hard by the first lockdown and the dramatic slowdown in retail sales. The second UK lockdown just makes things worse.

When combined with restrictions elsewhere in Europe, 57% of ABF’s total selling space is now temporarily closed. This will likely lose the company an estimated £375m in sales.

Notwithstanding this, ABF would be one of the very few retailers I’d consider buying at the current time. 

For one, the FTSE 100 giant is much more than Primark. The company actually has its fingers in a number of different sector pies, including sugar, agriculture, and ingredients. Now, this diversification won’t guarantee the share price won’t have further to fall, but it does make ABF a more defensive option than your typical listed retailer. It also goes some way to making up for the fact that budget-focused Primark doesn’t sell online.

Another reason to suggest now might be a good time to buy into ABF is that finances still look pretty solid. At the end of its last financial year (mid-September), the company had net cash before lease liabilities of £1.56bn. That’s a far better position compared to others in the market’s top tier.  

Trading at under 15 times earnings, ABF hasn’t been this much of a bargain for a while. Since clothes will always need replacing (and Primark’s value offering should appeal to shoppers during recessionary times), these cheap UK shares look to be anything but a value trap.  

Undervalued

Another stock that I think is too cheap right now is soft drinks company Nichols (LSE: NICL).

Sure, recent trading hasn’t been great. Like others in the space, Nichols has seen revenue and profits tumble over 2020. This has been due to lockdowns and the closure of shops and travel concessions that sell its drinks. Seen in this context, the fall of the Vimto-owner’s share price back to where it was during March’s market crash does make some sense. 

Like ABF however, I think there are reasons to be optimistic. The reinstatement of dividends back in June certainly smacks of confidence. I think it’s unlikely new CEO Andrew Milne would want to reverse that decision when he takes over the reins in January. The small-cap’s balance sheet is also in great shape. Nichols had almost £47m net cash in June.

A forecast price-to-earnings ratio of 16 for FY21 might not scream value but it’s important to put this in perspective. For years, Nichols traded far above this level, and justifiably so. Operating margins and returns on capital employed have long been consistently high.

Admittedly, I’m biased. I’ve held the stock for years. But I see the current price weakness as an opportunity rather than something to ruminate on. News of a falling infection rate and/or vaccine breakthrough could see these cheap shares fizz back to form.

The post Cheap UK shares: this FTSE 100 company looks a bargain to me appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Nichols. The Motley Fool UK has recommended Associated British Foods and Nichols. 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.

Tonic water specialist Fevertree and Vimto-maker Nichols are recent examples of seemingly temporary setbacks have caused sentiment to sour. 

Today, it was the turn of Hemel Hempstead-based Britvic (LSE: BVIC) to update the market. Based on early trading, it would seem investors were very relieved by what the company had to say. 

Going pop

Revenue over the first quarter of the financial year fizzed 2.6% higher to just shy of £370m. That’s far from explosive but it’s good enough, at least in my view, for such an established business.

As a result of this performance, the £2.3bn market cap firm stated that it was confident of meeting analyst expectations for the full year while cautioning that conditions would “remain challenging“.

The only other news worth mentioning related to the sale of some of its troublesome French assets to independent bottling firm Refresco. Britvic now believes the deal will be completed at some point this year, assuming regulatory approval is received. 

Considering the relatively defensive nature of its business, I continue to like this company’s valuation. A forecast price-to-earnings (P/E) ratio of 14 (at least before markets opened this morning) doesn’t seem too steep for a firm that boasts a portfolio of brands such as Robinsons, Tango, and J20 and also holds the licence to produce and sell PepsiCo products in the UK and Ireland.

Britvic’s income credentials shouldn’t be overlooked either. A likely total dividend of 33.5p per share in the 2020 fiscal year gives a yield of 3.7%. That’s higher than the 2.8% or so you’d receive from buying an exchange-traded fund that tracks the FTSE 250 index of which it is a member. 

Taking all this into account, I continue to think that the mid-cap warrants attention from investors looking for a mix of steady growth and decent income from their stocks. 

Buy the dip?

The reaction to today’s update from Britvic (+4%) is in complete contrast to yesterday’s response to the latest interim results from FTSE 100 spirits giant Diageo (LSE: DGE).

Due to “increased levels of volatility” in parts of the world including India and Latin America, the owner of brands such as Johnnie Walker whiskey and Smirnoff vodka said that organic net sales growth for the year would now be at the lower end of its 4-6% mid-term target.

Compounding investors’ fears, CEO Ivan Menezes also mentioned “ongoing uncertainty in the global trade environment”, and added that the company “would not be immune from further policy changes”. Shares duly fell.

Of course, one should avoid judging a specific stock based on a short period of trading or macroeconomic issues. Investing is a long game. Diageo remains a global leader in what it does, is hugely cash-generative, and delivers reliably good returns for shareholders on the money it invests.

It’s also a consistent dividend-hiker, further evidenced by yesterday’s 5% increase to the interim payout (to 27.41p per share). The consensus from analysts is that the company will return 72.9p per share to its owners in this financial year, giving a yield of 2.4%.

With shares almost 20% lower in value now than they were in September last year, I’m very tempted to get involved.

The post This FTSE 250 stalwart isn’t the only stock I’d buy for growth and income appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. The Motley Fool UK has recommended Diageo. 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 mid-cap’s shares were up a stunning 15% this morning as the company reported that adjusted pre-tax profit for the 2020 financial year (which ended on 25 January) would be “at the top end of current market expectations, just ahead of £37m.”

Despite facing “a combination of challenging trading conditions during the year,” Barr said revenue was likely to come in around £255m. While this may be 9% lower than the £279m achieved in 2018, investors were clearly comforted by news that sales of its flagship drink returned to growth in the fourth quarter after consumers had previously baulked at management’s decision to increase prices. Elsewhere, the company’s Funkin cocktail solutions continue to win fans and issues relating its Rockstar and Rubicon brands appear to have been resolved. 

The outlook is also positive. Although the market “remains challenging,” Barr predicted that the “encouraging trading momentum” witnessed towards the end of its financial year is likely to continue in 2020.

Taking the above into account, I remain bullish on the FTSE 250 stock and continue to rate it as a decent addition to most quality-focused portfolios. At 20 times forecast earnings even before today’s news, the shares are hardly cheap.

As one of the UK’s most successful fund managers recently remarked, however, the assumption that value stocks will deliver superior returns has been misplaced for a while now. But the fact that there’s also minimal debt on the balance sheet may prove hugely beneficial if/when sentiment on the economy sours and this great bull run finally comes to an end.

Next to pop?

AG Barr isn’t the only member of the drinks industry to have found things tough recently. Tonic water specialist Fevertree‘s troubles are well publicised. Less talked about is Vimto-maker Nichols (LSE: NICL).

Shares in the business have been under pressure of late following news that Saudi Arabia and the UAE have implemented a 50% tax on sweetened drinks, regardless of the sweetening method used by the companies manufacturing them.

This means the latter can’t simply reformulate their products (as they have in the UK following the introduction of the sugar tax). As a result, the company warned in December that FY20 pre-tax profit may come in “materially below current expectations.“

While clearly a setback for Nichols, I wonder if the market might be overreacting. At roughly £7m, sales in these countries represent only a small proportion of its total revenue. Moreover, the full impact won’t be known until after Ramadan (April 23-May 23).

Given the popularity of the Vimto brand, there’s always the possibility that things won’t turn out quite as bad as investors think. Aside from this, it’s worth mentioning Nichols continues to do just fine in its core UK market with sales hitting £117.7m in 2019, despite strong prior year comparatives. 

Factor in the relatively defensive nature of its business, consistent hikes to the dividend, a bulletproof balance sheet, and high returns on capital, Nichols still justifies its P/E ratio of 19, in my view. I have no hesitation in retaining (and potentially adding to) my holding in 2020.

The post This FTSE 250 stock has fizzed 15% higher today. I think there could be more in the can appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Nichols. The Motley Fool UK has recommended Nichols. 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.

Based on this rather brief statement (and in contrast to one of its peers), it would appear the FTSE 250 constituent is holding its own.

Confident outlook

Revenue came in at £360.1m over Q3 — a fall of 1.5% at constant currency compared to the same period in 2018.

Geographically, performance was mixed. Sales grew in Britain, despite the market “declining in value and volume” as a whole over the three months to 7 July. Oversea revenue growth also continued to be “solid“, but the French and Irish markets showed signs of “further softening since the half-year.”

While today’s statement hasn’t seen the shares fizz higher, the fact the company is still confident of meeting analyst forecasts for the full-year in spite of “a more challenging backdrop” may be considered something of a victory for holders. Especially after what happened over at Irn-Bru-maker AG Barr last week.

To recap, the latter’s share price dived on 16 July after it reported that sales and profits would likely drop 10% and 20%, respectively in the current financial year as a result of poor weather and issues with some of its brands such as Rockstar and Rubicon.

While management certainly can’t be blamed for the lower temperatures in 2019, it’s clear Barr’s decision to increase prices after focusing on raising volumes in 2018 has backfired. Steps to resolve the brand-related issues have apparently been taken, but it will take a while to see the benefits.

To rub salt into the wound, interim results from AIM-listed peer and Vimto-maker Nichols were far more reassuring. Last week, the business reported growth in both the UK and overseas with revenue and pre-tax profit up by 10.2% and 2%, respectively. 

In my opinion, Nichols represents the standout quality pick of the three since it consistently generates the highest operating margins and returns on capital employed and also boasts a net cash position.

That said, its valuation of 23 times forecast earnings makes it the most expensive stock to buy. Despite a long history of increasing cash payouts to holders, the 2.3% yield is unlikely to whip dividend seekers into a frenzy either.

As things stand, AG Barr is the least investable, in my view. At 21 times forecast earnings, the shares still aren’t cheap enough, considering the uncertain outlook and the likelihood of further exceptional costs being announced later this year. On the flip-side, I suppose any further pressure on the share price could make the company an attractive takeover target. 

For value and income hunters, however, Britvic looks the clear winner. The stock trades at just 15 times earnings FY19 and comes with a best-in-class forecast yield of 3.5%, covered almost twice by profits.

Considering its market-cap, big portfolio of brands, and the fact it holds the licence to distribute Pepsi and 7Up in the UK and Ireland, I also think the company could be the most defensive option for those concerned by the volatility of smaller stocks and the susceptibility of these firms to things outside of their control.

The post Why I remain bullish on this FTSE 250 dividend stock after today’s news appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Nichols. The Motley Fool UK owns shares of and has recommended Britvic. The Motley Fool UK has recommended Nichols. 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.

But £5 per day is £150 per month. And as I’ll explain, I think this could be enough to build a profitable stock market income fund.

How does this work?

A typical dealing charge of £10 would wipe out 6.6% of your £150 monthly budget in one trade alone. That’s no good. The secret to investing small amounts in stocks is to use regular investing plans. These allow you to buy the same stocks on a scheduled day each month, for a much lower fee.

Of course, this discount doesn’t apply to selling stocks, where the full dealing charge will apply. So our mission is to buy stocks we’re unlikely to want to sell. Difficult, but not impossible.

Here are three stocks I’d be happy to spend £50 on each month, to build a long-term passive income.

Generous payout funds 6% yield

My first choice is home and motor insurer Hastings Group (LSE: HSTG). Like most insurance companies at the moment, growth is slow but the business generates plenty of spare cash. Most of this is returned to shareholders through generous dividends.

Hastings’ 2018 results show that the number of active customer policies rose by 2.5% last year, while net profit rose by 3% to £130.6m. The company expects more of the same in 2019, and has decided to increase its dividend payout ratio to reflect limited growth opportunities.

For 2019, the dividend payout ratio will increase to between 65% and 75% of earnings. Based on current forecasts, I estimate that this will gives the stock a forecast yield of 6.6% for 2019. I’d be happy to buy and hold the shares for income at this level.

Profit from China growth

My next pick is luxury fashion brand Burberry Group (LSE: BRBY). This company can trace its history back to 1856 and remains popular and highly profitable today. One particular attraction is that investing in this business provides direct exposure to growing wealth in Asian markets, especially China.

Another attraction is that this firm’s upmarket appeal means that historically, it’s always bounced back quickly after recessions.

The final reason why I’d buy is that this business is very profitable, with a return on capital employed of about 25%. This helps to secure strong cash generation to support dividend growth.

The shareholder payout has grown by an average of 7% each year since 2013, well above inflation. Although the starting yield seems low at 2.2%, I expect continued long-term growth.

A drink that’s loved by millions

My final pick is soft drinks group Nichols (LSE: NICL), which makes Vimto, Sunkist and a range of other popular soft drinks. Vimto was invented 110 years ago by the grandfather of company chairman John Nichols.

Like Burberry, this family firm enjoys high profit margins thanks to the strength of its brands. An operating margin of 22% helped to lift pre-tax profit by 4% to £31.8m in 2018. Strong cash generation meant that the company was able to increase the dividend by 14% to 38.1p per share last year.

If people have been drinking Vimto for 110 years, I suspect they will continue to do so. The starting dividend yield of 2.5% may seem modest, but this payout has doubled in six years. A stock I’d buy and tuck away.

The post 3 dividend stocks I’d buy with just £5 per day appeared first on The Twelfth Magpie.

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

That said, there’s also something about paying more (but not too much) for quality companies that don’t require constant monitoring and just letting them get on with things. 

I’d put Vimto-maker Nichols (LSE: NICL) firmly in the latter category, alongside industry peers AG Barr and Britvic. Don’t get me started on Fevertree. 

Reassuringly expensive

Today’s results for 2018 from the mid-cap were further evidence of just how reliable the company is. Revenue was up 7% to £142m and pre-tax profit, before exceptional items, rose 4% to £31.8m.

Commenting on results, non-executive chairman John Nichols said the company’s performance in the UK — where total sales increased 12.7% to £114.6m — had been “driven by the strength of the Vimto brand” which was “continuing to outperform the wider soft drinks market.” Helping to justify recent investment in this part of the company, sales from Nichol’s Out of Home channel also increased by 15.2%.

Performance overseas was more mixed with progress in Africa offset by weaker sales in the Middle East, as a result of the ongoing conflict in Yemen and issues over shipments to Saudi Arabia. All told, international sales were almost 12% lower (£27.4m) than in 2017. A temporary blip, I think.

Looking ahead, there’s little to make me think that Nichols will encounter any serious difficulties in the rest of 2019 (although the aforementioned conflict will need to be monitored). It’s debt free, has loads of cash, a portfolio of excellent brands, generates high margins and returns on capital and, considering our forthcoming exit from the EU, isn’t completely reliant on the UK market for its success. 

Aside from the above, there’s also the fact that Nichols consistently hikes its cash returns to shareholders. Today’s 14.5% increase to the final dividend (26.8p) brings the total for the last financial year to 38.1p — up 13.7% and representing a trailing yield of 2.4% based on the share price at the time of writing. That may look average but, as mentioned here, regular hikes to small dividends are often better than large but stagnant returns. 

Changing hands for 21 times forecast 2019 earnings before this morning, Nichols is one of those companies that very rarely goes on sale. Those who already hold should continue doing so, in my opinion.

Dividend hiker

Another share that could be worth paying up for is gas mask supplier and milking point solutions provider Avon Rubber (LSE: AVON).

The small-cap’s shares possess many of the attributes boasted by Nichols, including a bulletproof balance sheet (no debt and £46.5m in cash at the end of the last financial year), high returns on capital, and regular double-digit hikes to the annual dividend.

The firm recently reported that its Protection arm had “enjoyed a solid start to the year” after securing a new contract from the US Department of Defense. The first order relating to this — 7,000 mask systems worth $17.8m — has now arrived. As a result (and despite “tougher dairy market conditions” impacting on its milkrite/InterPuls business), Avon’s management remains confident of achieving its expectations for the full year.

At almost 17 times forecast earnings, this stock isn’t screamingly cheap, but is still very reasonable considering the company’s solid track record.  

The post 2 high-quality dividend-hikers I’d buy and hold for the long term appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Nichols. 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 business, which produces soft drinks under the Vimto brand, as well as the Feel Good, Starslush, Levi Roots and Sunkist brands, has a record of turning out steady growth for investors year after year. Indeed, over the past six years, earnings per share have grown at a steady compound annual rate of just under 10%.

Slow and steady

It looks as if Nichols is on track to repeat this performance for 2018. In a trading update published today, the company announced that group sales for 2018 totalled £142m, up 6.9% year-on-year and significantly above the City’s projection for revenues of £139m. Despite the fact that some analysts have warned that the firm might see a downturn in sales due to the introduction of the sugar tax in the UK, this side of the business has managed to defy expectations. The UK, which is its largest market, reported sales growth of 12.6% to £114.6m.

These numbers are highly impressive, especially at a time when so many other UK consumer-focused businesses are struggling. Nichols seems to be outperforming the pack.

In some respects, this performance isn’t surprising. Nichols is still managed by the founder’s grandson who owns more than £30m of shares. He has so much skin in the game, the chairman is highly incentivised to provide a positive result for all investors.

I’m highly attracted to Nichols for all the reasons above, but the one thing that’s stopped me from jumping in is the current valuation. The shares are changing hands today at a forward P/E of 19.9. I’m happy to pay for quality, but this is a little too expensive for me. However, if the price drops significantly over the next 12 months, I won’t be able to resist adding Nichols to my portfolio.

High-quality income

Nichols is a bit too pricey for my tastes, but another high-quality stock I’m eyeing up is Coca-Cola HBC (LSE: CCH). From a valuation perspective, these two businesses are similar. Indeed, Coca-Cola HBC is trading at a forward P/E of 20.2. Nevertheless, I think the company is worth this multiple because of its size and association with the Coca-Cola brand. On top of this, with its international diversification (the business operates across Europe), I think it provides the perfect hedge against Brexit uncertainty.

That’s why I’m picking the company as one of my top FTSE 100 dividend stocks for 2019. The dividend yield of 2.3% might not seem immediately attractive, but the distribution has nearly doubled over the past five years and analysts believe it will continue to expand for the foreseeable future. The balance sheet is relatively clean, with a net gearing ratio of only 20.2%. Last year, the enterprise produced to free cash flow of €390m, easily covering the total dividend payout of €160m, leaving plenty of room for further distribution growth.

Put quite simply, this stock has all the qualities I look for in a dividend play. If it’s income you’re after, I believe you won’t waste your time taking a closer look at Coca-Cola HBC. 

The post My top FTSE 100 dividend stock for 2019 appeared first on The Twelfth Magpie.

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

However, while BT’s size might make it attractive from an investment perspective, it has attracted the ire of regulators. At the same time, customers are becoming fed up with the company’s shoddy service, high prices and lack of investment. 

Struggling for growth 

I think these factors could hold back the company’s growth for some time. Not only is BT struggling with its own problems, but it also has to fight against a wave of new entrants to the telecoms market.

These businesses are seeking to capitalise on BT’s weakness by offering customers a better service, at a lower price. And in a world where most people have mobile phones, and you can compare the prices of broadband providers at the click of a button, BT is at an extreme disadvantage to the rest of the industry. 

The problem is, the company just doesn’t have a unique product, unlike soft drink producer Nichols (LSE: NICL). 

Nichols is, in many ways, an overlooked gem. This £550m market-cap company produces soft drink Vimto, which is sold in 85 markets around the world. It also owns the Feel Good Drinks brand, and the rights to produce Levi Roots beverages in the UK, as well as Sunkist. 

Small but mighty 

Nichols is small but mighty. City analysts are expecting it to report revenues of £139m for 2018, which pales in comparison to BT’s £23.4bn.

Nevertheless, Nichols’ strength is its unique products, which customers love and are willing to pay a premium for. For the last financial period, the group reported an operating profit margin of 22%, and return on capital employed — a measure of profit for every £1 invested in the business — of 27.5%. In my opinion, these figures show the strength of the business. 

BT, on the other hand, reported a return on capital employed of 10% for 2018, and operating profit margin of 14%. 

Nichols also beats its larger peer on other growth metrics as well. For example, over the past five years, BT’s earnings per share (EPS) have hardly grown. With its unique portfolio of brands, Nichols as reported average EPS growth of 8.7% for the same period. 

So, while Nichols might only be a fraction of the size of BT, the company is punching above its weight. 

Steady growth 

Analysts expect this trend to continue. The company’s range of low sugar and healthy drinks is helping it win over more customers, who are increasingly becoming more health conscious. 

Finally, the company has much better dividend credentials than its FTSE 100 peer. At the end of fiscal 2017, the firm reported a net cash balance of £36m, and the dividend for full-year 2018 will be covered twice by EPS, according to analysts. In comparison, BT has over £12bn of debt and dividend cover is falling. 

For me, there’s no question. With its fat profit margins, unique products, strong balance sheet, and record of growth, I think Nichols is a better buy than BT.

The post Forget the BT share price, I’d buy shares in this firm instead appeared first on The Twelfth Magpie.

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

At times like these, it’s worth remembering that severely punished stocks can be the ones to stage the biggest comebacks when markets regain their composure.

Here are three quality businesses I’m considering buying if sentiment continues to weaken.

Losing its fizz

Thanks to the consistently high returns on capital it invests (ROCE) and a penchant for hiking dividends by double-digits, I’m a big fan of soft drinks maker Nichols (LSE: NICL). The only problem is that the stock has usually been expensive to buy. 

Following the recent market sell-off, however, the owner of the much-loved Vimto brand has seen its share price fall 13% in October alone. It’s now down 37% since peaking in value in April 2017.

Despite its small size when compared to industry peers like AG Barr and Britvic, Nichols is very much a global company with a presence in 85 countries. It won’t shoot the lights out in terms of revenue and profit growth, but this is compensated for by the stability offered by its portfolio of ‘sticky’ brands that consumers find hard to move away from.  

Trading on 18 times earnings for the current financial year, Nichols is still far from being screamingly cheap but most quality stocks rarely get to bargain bin levels. Should it continue falling, I’ll be all of out excuses not to buy.

Assets up

I became bullish on £107m cap investment manager Miton Group (LSE: MGR) this time last year. Unfortunately, I neglected to purchase its stock. By the beginning of October, the shares had almost doubled in value and now change hands on 15 times earnings.

When you take into account recent results, this shouldn’t come as a surprise. At the close of play on 30 September, Miton had a little under £4.87bn in assets under management, representing a rise of 38% on that held at the same time in 2017. Total net inflows soared almost 200% in the first nine months of 2018 to £927m. Given that index funds continue to gain support at the expense of active funds, that’s really rather impressive. 

With many investment managers seeing their shares hit, I’m prepared to continue sitting on my hands for a while longer in order to see whether ongoing weakness provides a cheaper entry point. 

Going cheap

My final pick is both the smallest company and biggest faller in recent months. 

Since reaching a high of 86p in July, shares in £62m cap freight manager Xpediator (LSE: XPD) have almost halved in value. I’m struggling to identify any specific reason for this. Perhaps early holders are merely banking some profit on the back of general market jitters.

Boosted by acquisitions, Xpediator’s revenue jumped 60.7% in the first half of 2018 with adjusted operating profit 44.2% higher at £2.1m. Margins are low, but it’s worth highlighting that, like Nichols, the Braintree-based firm generates very decent returns on the money it invests.

Xpediator’s stock now trades at a little over 10 times forecast earnings for the current year. There’s a 3.4% yield on offer at the current price, a fair return while owners await a recovery. 

The post 3 small-cap growth stocks I’m considering buying after the latest market crash appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Nichols. 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.