Instead of betting on shares in the banking sector, I’d rather go for enterprises engaged in other businesses such as light commercial vehicle hire operator Northgate (LSE: NTG), which trades in the UK, Ireland and Spain.

Underperforming operations

The share-price performance has been disappointing since early 2017, down more than 40% over the period. Although revenue kept rising annually, earnings and cash flow fell behind. Nevertheless, the directors did push up the dividend a little each year, which led to the yield above 5% that we see today.

Earlier this year, the chairman bowed to pressure from the activist investor Crystal Amber Fund and stepped down from his position after more than four years with the company. So today, we have the interesting situation of change at the top, which can be a driver of better performance in some businesses. The search for a new chairperson is in full swing and there’s an “exceptionally strong” short list.

Meanwhile, today’s full-year results report to 30 April looks promising and reveals total revenue increased around 6% compared to the previous year and underlying earnings per share rose by just over 11%. The directors increased the total dividend for the year by 3.4%

Turnaround strategy

Chief executive Kevin Bradshaw said in the report the “self-help” turnaround strategy in the UK is “delivering” and there’s a “compelling” opportunity for growth in the company’s markets. Regular price increases during the year and improvements in efficiency have fuelled expectations for improving overall revenue and profits in the current trading year.

Around 57% of operating profit came from Spain during the year and 43% from the UK and Ireland, which makes the Spanish market important to the firm. Although competition is increasing in Spain, the directors believe Northgate can expand its flexible hire business to provide a “comprehensive” range of fleet hire solutions to its customers. I reckon growth abroad could work with recovery in the home market to reverse the downtrend in the shares.

The directors reckon the firm is undervalued by the market and they are looking forward to working with a new Chair “to maximise value for shareholders.” Today’s share price close to 319p throws up a forward-looking price-to-earnings rating of around eight for the current trading year to March 2020. Meanwhile, City analysts following the firm expect earnings to increase by a high single-digit percentage.

I don’t think a valuation up-rating will arrive soon, or perhaps ever, because the company does operate in a cyclical sector. However, ongoing advances in earnings could drive the shares higher and help the directors to keep the dividend growing. I’d much rather invest in Northgate than in Lloyds. 

The post I’d ditch Lloyds and invest in this recovering 5%+ yielder instead appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Lloyds Banking Group and Northgate. 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.

Unfortunately, not much has changed since I wrote my last article. The outlook for the UK banking sector is still shrouded in uncertainty and, with this being the case, I think it might be worth selling shares in RBS and investing your money elsewhere. 

Time to sell 

The good news is recent market declines have thrown up plenty of bargains for investors. Northgate (LSE: NTG) is a great example. 

This commercial vehicle hire business has, in my opinion, a much brighter outlook than RBS because it operates across the UK, Spain and Ireland. What’s more, unlike RBS, the company isn’t subject to strict regulations and is highly cash generative (it’s also quite easy to understand unlike RBS’s giant and complex balance sheet). 

That being said, if there’s a recession in the UK following Brexit, RBS and Northgate will both suffer. However, because Northgate leases its vehicles on relatively short contracts, it’s not exposed to the same kind of credit risk as RBS. Indeed, RBS recently had to put aside £100m to prepare for loan losses in the event of a messy Brexit. Some analysts have speculated that this could be just the start of what eventually could turn out to be hundreds of millions, or even billions, of pounds in loan losses, which could force the bank to eliminate its dividend, or raise capital. 

A billion pound plus loss is the worst case scenario for the bank, but I think it illustrates how damaging Brexit could be to the business. In comparison, if the UK plunges into recession after Brexit, Northgate’s Spanish division will offer some cushioning and, if history is anything to go by, the company will continue to turn out a steady stream of profit. 

Business as usual 

According to my research, even in the financial crisis, customers continued to come to Northgate to rent vehicles. The utilisation rate of the company’s rental fleet dropped to 84% in the UK in 2009, before rising to 91% across the business in 2010. A contracting economy is a mixed blessing for the group because, on the one hand, demand will fall as companies try to cut back on spending, but on the other hand, it becomes harder for businesses to borrow money to invest in new vehicles, so they turn to rental companies like Northgate to fill the void.

In other words, you could have a situation where RBS is turning away customers who then go straight to Northgate. With this being the case, I think Northgate could be a good investment for your portfolio in 2019.

Based on current City earnings estimates, the shares are changing hands at 10.5 times forward earnings. There’s also a dividend yield of 4.6% on offer, covered twice by earnings per share. Even though current estimates suggest RBS might be a better investment from an income perspective, with a dividend yield of 4.8% pencilled in for 2020, for the reasons outlined above, I reckon Northgate is an all-round better buy.

The post I would sell the RBS share price to buy this unloved 4.7%-yielder appeared first on The Twelfth Magpie.

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

Low IQE

IQE suffered a blow last month when it forecast a 16.4% decline in full-year profits, due to a drop in orders from a major chipmaker customer. The group now anticipates full-year revenues of around £160m, up on last year but below previous expectations.

Another concern about IQ, recently highlighted by Rupert Hargreaves, is that it is priced for rapid growth trading at a forward valuation of 37.9 times earnings and any disappointment will come as a blow. Five years of strong earnings per share growth will come to an end this year, with a massive forecast drop of 46%, although a forecast climb of 82% in 2019 should ease the pain – if it happens. 

Wafer thin

Photonics wafer revenue growth for the full year is now expected to be 11%, down from previous estimates of 35%-50% but again, 2019 looks brighter, with revenue growth expected to return to guided levels of between 40% and 60%.

Chief executive Drew Nelson says its Photonics business is building a wide customer base across multiple chip manufacturers, and customer diversification will produce better-balanced demand. I hope the group isn’t too dependent on Apple, as a number of its suppliers have issued profit warnings after iPhone sales disappointed. IQE is too risky for me but others remain convinced it offers long-term value.

Van men

Investors in van hire specialist Northgate (LSE: NTG) have had a bumpy drive since its share price peaked at 633p three-and-half-years ago against just 385p today. Today the group published interims for the six months to 31 October, but its share price has barely moved in response to a mixed set of figures.

Northgate posted continuing strong growth in the number of vehicles on hire in the UK and Spain, up 12.7% and 13.2% respectively. However, improved margins and reduction in capex due to its fleet optimisation policy were offset by a 7.4% drop in statutory profit before tax to £28.7m.

Turning round

CEO Kevin Bradshaw said Northgate is continuing to turn things around after making difficult strategic decisions in the second half of last year. “Consequently, despite strong revenue growth, our margins, profits and ROCE are lower, as expected, compared to the first half of last year.” He remained confident, about the positive trajectory of the business, which is on track to meet its full-year expectations.

Northgate, which has a market cap of £516m and operates a fleet of around 100,000 commercial vehicles, is yours for a knock-down valuation of just 10.3 times earnings. Roland Head is still pinning his hopes on a turnaround, and may have a point with earnings forecast to rise 8% in the year to 30 April 2019, and 16% the year after. The yield is currently 4.7% with cover of 2.1, rewarding you while you wait.

The post Can the IQE share price and this bargain growth stock make you a small fortune? appeared first on The Twelfth Magpie.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Northgate. 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.

To address concerns about slowing growth, the firm sold its mature UK gas distribution business in 2017. It’s now focusing on US growth and the opportunities provided by investing in power interconnectors between the UK and various European countries. These undersea cables allow us to buy and sell electricity internationally, rather than only in the UK.

In the firm’s most recent results, National Grid advised investors that the firm “is now entering a period of stronger growth”. Management expects asset growth of “at least 7%” in the near term and of 5%-7% in the medium term, compared to “around 5%” in recent years.

Why this stock could beat the market

Headline earnings are expected to fall by 3.8% to 57.2p per share this year, before rising by 4% to 59.4p per share in 2019/20. This doesn’t sound much. But I think it should be enough to support the continued growth of the dividend at about 3% per year.

Indeed, I think National Grid could even beat the market.

One way to judge the likely returns from a stock is to add together its dividend yield and expected dividend growth rate. The assumption is that the share price will rise in line with dividend growth.

Using this year’s forecast yield of 5.9% as a starting point, we can see that National Grid stock is expected to provide a total return of about 9% next year.

This is slightly ahead of the long-term average return from the stock market, which is 8%.

I rate these shares as a low-risk income buy.

More risk, bigger rewards?

One company with the potential to deliver bigger gains is van hire specialist Northgate (LSE: NTG). This company operates more than 92,000 commercial vehicles, split roughly equally between its businesses in Spain and the UK.

Profits have struggled in recent years and the shares have fallen by 35% from their 2015 peak. The firm remains in turnaround mode under newish boss Kevin Bradshaw. But I think there are good reasons to be optimistic following today’s trading update.

Increasing market share

Vehicles on hire in the UK rose by 12% to 48,000 during the three months ending 31 July. Some of this growth resulted from the recent failure of Scottish hire firm TOM Vehicle Rental, from which Northgate acquired both vans and customers.

The remainder of the growth was organic, driven by increased demand for the group’s flexible long-term hire product, which allows customers to rent a van by the month.

Bedding-in this new business has taken a little time. But Mr Bradshaw expects to report rising fleet utilisation and stronger profit margins during the second half of the year.

A takeover opportunity?

I own shares in Northgate and intend to continue holding after today’s news. I think the firm’s turnaround could be quite slow, but I’m encouraged by progress so far.

I also think there’s a chance that either the UK or Spanish business could attract an outside buyer.

In either case, the stock looks good value to me, trading on 11 times forecast earnings with a 4.3% yield.

The post Are you tempted by the 30% fall in the National Grid share price? Read this first appeared first on The Twelfth Magpie.

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Today I’m looking at two companies that might help you do just that.

Unloved and underappreciated

Vehicle rental specialist Northgate (LSE: NTG) is the company investors love to hate and for good reason. Over the past five years, the stock has produced a total return of 5.9% per annum, and over the past 10 years, it has delivered a total return of -9.3% per annum — that’s including dividends.

So, why do I think the performance is going to change any time soon?

Well, Northgate is currently in the middle of a transformation programme. At the beginning of October last year, management outlined a set of self-help measures to help improve profit margins and returns on invested capital. 

And it seems as if these efforts are already starting to pay off. In a trading update issued today, Northgate announced that the number of vehicles on hire (VOH) for the fiscal quarter ended 30 April increased 7.9% year-on-year to 85,700 mainly thanks to the group’s Spanish operations (around 50% of the business) where the number of VOH during the period grew 14.1%. 

According to management, this growth reflects “the continuing success of Northgate’s cross-selling and bundled propositions.” The firm has also been able to benefit from the collapse of a competitor, which allowed it to acquire 3,200 vehicles (as well as customers) at what is likely to be a knockdown price.

City analysts had been expecting the company to report a decline in earnings per share for fiscal 2018 of 26%, but looking at the above numbers, I believe these estimates are too conservative. With this being the case, I also think Northgate’s current valuation of 11 times estimated forward earnings undervalues the business and its current prospects.

Income champion 

Another company I’m positive on the outlook for is Evraz (LSE: EVR).

This FTSE 100 constituent is already beating the broader index in 2018. The stock is up 50% year-to-date compared to a gain of just 0.4% for the FTSE 100 excluding dividends.

There could be further gains for the shares ahead as investors wake up to the opportunity here. For example, based on current City estimates, shares in Evraz are trading at a forward P/E of just 6.8, as earnings per share are expected to leap 57% this year. Unfortunately, due to the nature of the business the company operates in — the production of steel and related commodities — earnings are naturally volatile, so next year analysts have pencilled in a decline of 31% in earnings per share.

Still, Evraz has a history of returning all excess cash generated from operations to investors. The company is not expected to break from tradition this year and analysts have pencilled in a prospective dividend yield of 8.1% for the full year, followed by a 6.3% for 2019. 

Put simply, even though earnings are expected to slide, Evraz is set to remain a dividend champion, and this should help the company outperform the broader market on a total return basis.

The post These dirt-cheap monster growth stocks could crush the FTSE 100 appeared first on The Twelfth Magpie.

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

Looking at the figures published by the company this morning for the three months to the end of January, I believe that this valuation undervalues the group and its prospects. 

Improving returns 

The company reported this morning that it managed to increase its number of vehicles on hire (VOH) for the first time in three years in the last fiscal quarter. During the period, the number of VOH ticked higher by 0.7%, which, considering the lack of growth over the past three years, is an impressive achievement. The firm expects this trend to continue for at least the first half of 2018. 

This turnaround follows the introduction of some self-help measures outlined by management during the Capital Markets Day on 4 October 2017. As well as improving sales trends, the firm is also looking to optimise its capital base by selling vehicles only when they have reached an age which maximises cash returns for shareholders. 

This should lead to an improved return on capital — a measure of how much profit a business makes for every £1 invested — for the group as it squeezes more life out of its asset base. Getting more life out of its vehicles will also mean lower levels of capital spending, which could translate into higher returns for shareholders, great news for dividend-seeking investors. 

Overall, with cash returns likely to increase going forward and growth returning, shares in Northgate look absurdly cheap right now.

Market rebound 

Another small-cap income stock that I believe looks too cheap to pass up is Braemar Shipping Services (LSE: BMS). Over the past few years, this shipping company has struggled as a glut of large transport ships has depressed the market. From a net profit of £6.8m in 2012, Braemar crashed to a loss of £0.5m in 2017. Nonetheless, analysts expect earnings to recover for 2018 with a net profit of £6.5m pencilled in and earnings per share of 21.4p. 

And it looks as if the company is on track to hit these figures. Alongside the firm’s interim numbers, chairman David Moorhouse said, “We are well placed to deliver a stronger second half business performance compared with the first half of our financial year, as Braemar’s improving momentum continues.” 

Still, despite management optimism, the market is unconvinced. The shares currently trade at a discount forward P/E of 9.4 and support a dividend yield of 6.4%. The payout is covered 1.5 times by earnings per share and is also backed up by £6.4m of cash on the balance sheet. 

The post 2 small-cap dividend stocks that look absurdly cheap right now appeared first on The Twelfth Magpie.

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

Low IG

Today’s update said that IG has built on its “strong first quarter,” continuing to perform well in Q2 with net first-half trading revenue expected to rise 9% year-on-year. Operating costs excluding variable remuneration should fall around 7%, primarily due to lower advertising and marketing spend. IG maintains July’s guidance that full-year operating costs are expected to be similar to FY 2017’s.

The main source of uncertainty is the timing of potential regulatory changes in the UK and EU, which management says remain unpredictable this year and beyond. In January, the European Securities and Markets Authority delivers its review of the leveraged trading market, with the UK Financial Conduct Authority deferring its own proposals in order to harmonise any changes.

January moves

This uncertainty is partly reflected in the price, with the stock trading at a discounted forecast valuation of 13.2 times earnings. The income on offer is an impressive 5.3%, covered 1.4 times. Operating margins are healthy at 43.8%. Earnings per share (EPS) are forecast to rise 6% in the 2018 financial year, but watch out, City analysts are pencilling in a 4% drop in 2019. IG has delivered five consecutive years of steady EPS growth but January might give us more clarity, and a better buying opportunity. Alternatively, you might find better bargains elsewhere today.

Commercial vehicle hire company Northgate (LSE: NTG) has also gone into reverse lately, its share price falling 21% in the last six months. The £553m company suffered a nasty prang in June on publication of its full-year results which showed pre-tax profits falling almost 7% from £77.6m to £72.2m. Management pinned the blame on a lower number of vehicles on hire and an adverse impact of £5.7m from changes in depreciation rates.

Northgate star

Its stock is trading 2.12% lower today on publication of its interim results for the six months to 31 October, despite reporting strong growth in Spain and a slowing decline in vehicles on hire in the UK, plus “good progress against strategic initiatives”. 

Northgate’s revenue increased 10.4% to £349.7m but underlying profit before tax fell more than 16% to £33.8m, partly due to the adverse impact from previous changes in vehicle depreciation rates. Profit before tax also fell 22% to £40m and underlying basic EPS were down almost 20% to 20.7p. Looking at these numbers, I am surprised the market response was not harsher. Other soaring growth stocks could be more exciting right now.

Motoring on

Northgate’s current lowly valuation of 9.4 times earnings may explain why. Investors have already discounted a van load of bad news. City analysts have been forecasting a 5% drop in earnings per share in 2018, but the future looks brighter with a predicted 7% rise in 2019. The yield is a forecast 4.4%, covered 2.5 times, and a healthy cash balance sheet and strong cash generation bodes well for future progression. It could make you richer, given time.

The post These 2 bargain growth stocks could make you rich appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Northgate. 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.

Dividend cover

Let’s face it, £1,000 worth of dividends in 10 years’ time, won’t have anywhere near the same purchasing power as £1,000 generated today. That’s why dividend sustainability and growth should be of paramount importance to those looking to generate regular and reliable income from their investments.

As ever, it all boils down to earnings, i.e. the profits a business generates from normal operations or activities. As long as profits can adequately cover shareholder payouts, then dividends should be relatively safe. Generally speaking, the wider the margin between profits and payouts, the safer the dividend, and the higher the probability of future increases. That’s why it’s vital that dividend cover is taken into account when analysing potential investments.

Progressive dividend

One London-listed firm that’s always had plenty of dividend cover is commercial vehicle hire company Northgate (LSE: NTG). The Darlington-based group is now the leading light commercial vehicle hire business in the UK, Ireland, and Spain by fleet size. The group’s core business is the hire of light commercial vehicles to businesses on a flexible or term basis, giving customers the ability to manage their vehicle fleet requirements in a way which can adapt to changing business needs without the requirement to enter into a long term commitment.

Northgate remains in a strong financial position, with healthy cash generation and a robust balance sheet, all of which help to underpin a progressive dividend policy which has seen payouts rise by 137% in just four years. The shares trade on a bargain valuation of just 9.7 times earnings for the current year to April, and offer a healthy yield of 4.2%. With payouts covered more than twice by forecast earnings, there’s plenty of room for further growth.

Advertising behemoth

Meanwhile, blue-chip investors could be forgiven for thinking that the FTSE 100 couldn’t possibly offer such high levels of dividend cover at such an attractive price, given the relentless bull market of the last few years. But they’d be wrong.

The world’s largest advertising group WPP (LSE: WPP) has been out of favour with investors recently, as global growth has slowed. But the resulting share price slump has not only made the shares look cheap, but also boosted the yield on offer.

Having lost a quarter of their value over the past year, the group’s shares are now trading on a price-to-earnings multiple of 11, and offer a generous yield of 4.4%. The advertising and public relations giant has an excellent track record of dividend growth, and shareholder payouts have doubled since 2012. What’s the outlook for the ad industry? While certain categories of brand advertising may have slumped, digital ads are expanding fast so overall company adspend remains healthy meaning WPP has upbeat prospects. With forecast dividends covered twice by expected earnings, I certainly wouldn’t bet against them doubling again.

The post 2 attractive dividend stocks whose dividends could double appeared first on The Twelfth Magpie.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Northgate. 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 news could hasten or delay that process, depending on your point of view. Northgate shares fell by 11% this morning, after the firm said its underlying pre-tax profit fell by 10% to £75m last year. The main problem was a slump in UK demand — a total of 39,500 vehicles were on hire in the UK at the end of April, down from 42,400 at the same point last year.

This weakness hasn’t prevented the board recommending an 8% hike to the full-year dividend, which rises to 17.3p per share. But it does raise questions about the group’s outlook against a backdrop of slow economic growth.

Here’s the plan

The first bit of good news is that Spain’s economic recovery is driving extra demand for vans. Vehicles on hire in Spain rose to 37,700 at the end of April, up from 35,700 at the same point last year.

The second piece of good news is that Northgate has an ambitious new boss, with clear plans for the firm’s growth. CEO Kevin Bradshaw’s last job was as UK managing director of car hire group Avis Europe. So he’s no stranger to the rental industry and should have a good understanding of market conditions in both the UK and in Spain.

Mr Bradshaw says that the company is lumbered with outdated IT systems and inefficient sales and marketing. Addressing these weaknesses should defend Northgate’s 31% share of the flexible rental market and enable it to expand more aggressively into the fast-growing contract hire market.

Today’s fall leaves the stock trading on a P/E of 10, with a dividend yield of 3.6%. I’m tempted and have added the stock to my watchlist for further research.

High street health test

Investors expecting carpet retailer Carpetright (LSE: CPR) to bomb after its results were given a surprise this morning. At the time of writing, the group’s shares are up by 11% at 200p, despite underlying pre-tax profit falling by 21% to £14.4m last year.

This surprise gain may be because today’s figures suggest that Carpetright’s efforts to revamp and update its stores are paying off. UK like-for-like sales (LFL) rose by 1.8% during the second half of the year. Management says the average LFL increase in refurbished stores was 6.8%.

Performance in Europe was encouraging too. This region accounts for less than 20% of sales, but contributed £5.7m — or 35% — of last year’s underlying operating profit of £16.4m.

The main risk I can see is that Carpetright’s profit margins appear to be under pressure. Revenue was broadly flat at £457.6m last year, but the group’s gross profit margin fell from 60% to 58.8%. Operating margin, which includes overheads such as staff costs, fell from 4.4% to 3.6%.

Investors will need to hope that the sales boost provided by revamped stores translates into stronger profits this year. With the shares trading on 11 times 2018 forecast earnings with no dividend, I’d argue the stock is priced about right for now.

The post Are these value stocks bargain buys after full-year results? appeared first on The Twelfth Magpie.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended Northgate. 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.

Safe and sound

At first sight, today’s interim results for the six months ending 30 April 2017 looked solid to me, and also to chief executive Frederic Vecchioli, who said they put the company in a strong position and nicely on course to meet full-year expectations. However, investors clearly had even greater expectations, as its share price is down 3.38% in early trading.

Safestore is the UK’s largest and Europe’s second largest provider of self storage solutions, with 109 stores in the UK, and a further 25 in Europe. Today’s results showed a 15.7% rise in group revenue, reduced to 12.4% at constant exchange rates. Like-for-like revenue rose 3.9% in the UK, and 2.9% in Paris. Cash tax adjusted earnings per share rose 15.6% to 10.4p, while investors were rewarded with a 16.7% increase in the interim dividend to 4.2p.

Trouble in storage

The group also reported that all five recently opened stores are trading well, with a new site at Combs-la-Ville in Paris opening this month. Last month it announced a new refinancing deal that should save £3m a year. Vecchioli hailed a good first half as the company built on strong earnings and dividend growth over the last four years, and continues to generate a record number of enquiries despite the uncertain macroeconomic backdrop.

One note of caution. Although today’s value of around 10 times earnings looks attractive, that is forecast to increase to 20 times, due to an anticipated drop in earnings per share (EPS). So those are reason why today’s investors are holding back, especially after recent strong share price gains.

North star

Commercial light van renter Northgate (LSE: NTG) has also been motoring lately, up 50% in a year and 228% over five years. Despite that, it currently trades at a forward valuation of just 11.2 times earnings, which looks modest given its improving dividend prospects, now trading on a forecast yield of 3.3%.

News flow has been slow since Northgate, which operates in the UK, Spain and Ireland, released a disappointing half-year report last December, which included an 11.9% fall in profits due to lower UK rentals. That evidently hasn’t deterred investors, especially with chief executive Bob Contreras assuring them the company is still on track to achieve full-year expectations, with overall revenue growth and Spain and Ireland doing well.

White van men

EPS dipped 4% in 2016 and 5% in 2017 but look set to recover, with forecast rises of 1% and 4% over the next couple of years. Northgate could be hit by a UK slowdown as political and Brexit uncertainty grows, although it does have something to offer cash-strapped companies, as they can trim their costs by using Northgate’s fleet rather than running and maintaining their own.

This allows companies to get on with running their core business, and also protects them from wide uncertainties such as a drop in used van prices. Revenue, profit and EPS growth forecasts all look steady, provided the Brexit-wary UK economy avoids bumps in the road.

The post Two spectacular FTSE 250 climbers trading at bargain valuations appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Northgate. 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.