Usually, when a stock’s valuation drops to this level, it is a sign that something is wrong with the business, and the market is avoiding the company because it believes earnings are going to fall substantially.

We can’t predict the future, so at this stage, it is impossible to tell if this is the case, but based on what we know today, OneSavings is still expanding. 

Results show growth

According to the bank’s interim earnings report for the six months ended 30 June, underlying profit before tax increased 6% in the first half of 2019 to £96.9m. Underlying basic earnings per share increased 5% to 29p.

Even though the lender’s net interest margin — the difference between what it pays out to depositors and receives from lenders — declined from 301 basis points (bps) to 278bps year-on-year, the group was able to report an increase in profitability thanks to net loan book growth of 10% “driven by 13% growth in organic originations with high demand across our core market segments.“

Management doesn’t expect this trend to come to an end any time soon, even with Brexit on the horizon. “Despite ongoing uncertainty around Brexit,” the trading update notes, given the strong growth already achieved this year and the “current strong pipeline” of loan applications, the company expects to “deliver high-teens net loan book growth in 2019 at attractive margins.” 

Merger of equals

OneSavings’ management believes the company’s all-share merger with Charter Court Financial Services Group plc (LSE: CCFS), which received approval from shareholders at the end of July, will only bolster growth.

Charter and OneSavings both offer relatively similar credit products. They specialise in buy-to-let mortgages and specialist residential lending. Considering the growth in OneSavings’ loan book during the first half of 2019 looks as if the demand for these products is moving.

Charter also reported strong lending growth during the first half of the year. The company grew its loan book 23.8% to £7bn on originations of £1.5bn. Unfortunately, profits dipped slightly, from £93m to £83m for the six months ending 30 June, due to higher costs associated with the merger. 

Boost to growth 

While OneSavings’ takeover of its smaller rival still has to receive the green light from regulators, I think the deal will be an excellent outcome for shareholders of both businesses. By combining, the two challenger banks should be able to reduce operating costs, funding costs and improve efficiency, leading to overall increased profitability.

Right now, shares in both businesses are dealing at forward P/Es of less than six and support dividend yields of 5.2%. In my opinion, these multiples undervalue the companies and their prospects, and I would be quite happy to buy both of these FTSE 250 income stocks for my portfolio today.

The post I think these FTSE 250 dividend stocks yielding 5% are going cheap appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no stock 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.

However, right now, shares in the business are trading at such a low valuation that I think investors buying today could pocket substantial profits even though Dixons’s earnings are not expected to return to growth perhaps until 2021.

Indeed, at the time of writing, shares in the company are changing hands at a forward P/E ratio of around 5 compared to the market average of 12.7. This implies that when growth returns, the stock could rise 100% from current levels. Granted, it is going to be some time before turnaround starts to bear fruit. Last week the firm said it expects to report overall headline profit before tax for the current year of £210m, down from £298m last year. Nevertheless, management seems confident that growth will return in the second half of the next decade. 

In the meantime, shares in this consumer electronics business will pay a dividend of 6.75p per share this year, giving a dividend yield of 6% at current prices. 

Surging profits

Another undervalued FTSE 250 stock that I think could double from current levels is OneSavings Bank (LSE: OSB). This challenger bank has carved out a niche for itself in the buy-to-let lending market over the past nine years. As the company has won over new customers with its refreshing lending proposition, net profit has increased at a compound annual rate of 39% since 2013, rising from £27m to £140m for 2018. City analysts are expecting this trend to continue for the next two years. Net profit is expected to hit £172m in 2020, which implies the bank will report earnings per share of 65.8p for the year, giving a 2020 PE of 5.8.

In my opinion, this valuation severely undervalues the bank and its prospects. Considering OneSavings is one of the fastest growing banks in the UK, I think it deserves a premium valuation to the rest of the banking sector, which is currently dealing at a median P/E multiple of 7.6.

And as well as the discount valuation, the stock supports a dividend yield of 4.4%, which analysts believe will hit 5% in 2020 as the group increases its distribution to shareholders in line with earnings growth.

Boring but essential

TI Fluid Systems (LSE: TIFS) isn’t the most exciting business on the market, but when it comes to undervalued growth, this company looks to me to be a steal. The firm manufactures fluid storage, carrying and delivery systems primarily for vehicles, and over the past few years, revenues have increased at a compound annual rate of 7%.

Net profit has risen from just €13.4m in 2014 to €138m for 2018 and City analysts are expecting the group to report €151m of net profit in 2019. However, despite this explosive growth, shares in the company are currently dealing at what I believe to be a discount valuation of just 6.4 times forward earnings.

On top of this attractive multiple, the stock supports a dividend yield of 4.5%, which analysts believe will increase to 4.8% next year with scope to rise above 5% by 2021 as management continues to hike the dividend in line with earnings growth. The payout is covered 3.3 times by earnings per share, leaving plenty of room for further increases in the years ahead as well.

The post 3 FTSE 250 dividend stocks with yields over 5% I think could double 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.

In my opinion, the merger with Charter Court should only solidify its position in the market as the company’s bigger scale will allow it to compete more effectively with the mainstream banks, attracting savers and borrowers. That’s not to say the bank is having trouble attracting customers already.

Loan book growth

During the first three months of the year, OneSavings’ loan book grew 5% with net loans and advances growing by £448m to £9.4bn during the quarter. Organic originations i.e. advances made to customers directly from the bank (rather than through a third party) hit £799m, up nearly £100m year-on-year.

However, despite this growth, shares in the bank are changing hands today at just 7 times forward earnings, and they also support a dividend yield of 3.9%. As the payout is covered 3.7 times by earnings per share, there’s also plenty of room for this distribution to grow in the years ahead in my view.

I think this combination of income, growth and OneSavings’s current valuation, is too good to miss and I highly recommend considering adding this bank to your stocks and shares portfolio today.

Revitalising the business 

Another dirt-cheap FTSE 250 income champion I think is worth adding to your stocks and shares ISA today is Investec (LSE: INVP).

Investec is one of the largest asset managers in the world, with operations around Europe, Africa and Asia. The company has grown steadily over the past five years, with earnings per share up by a compound annual rate of 9.1% since 2013 as the group has capitalised on rising stock markets around the world and the burgeoning middle class in its key markets in Africa and Asia.

However, as the company’s earnings have expanded, Investec’s stock price has gone nowhere. In fact, today the stock is trading at roughly the same level as it was five years ago, even though earnings per share have increased by 69% over this time frame.

The stock’s performance over the past five years seems to suggest that investors don’t trust Investec’s growth, or if they do, they don’t seem to believe it’s going to continue, but I think this is incorrect. Investec is currently in the process of streamlining and simplifying its operations, building operations where the company is most active and selling off non-core businesses.

And the strategy seems to be working. For the financial year ended 31 March 2019, management estimates third-party assets under management increased 5.8% on a currency neutral basis to £163.7bn, and customer deposits increased 8.1% to £31.3bn on a currency neutral basis.

In other words, it doesn’t look as if the company is struggling to grow and with this being the case, I think it could be worth snapping up shares in this financial services business today as they are trading at only 9 times forward earnings. For income seekers, there’s also a dividend yield of 5.1% on offer. 

The post 2 dirt cheap FTSE 250 income stocks I’d add to my Stocks and Shares ISA today 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.

First of all, there was a merger between Virgin Money and CYBG. Then shares in Metro Bank, the first high-street bank to be granted a new banking licence for 150 years in 2010, plunged after it admitted a mistake in calculating the value of loans on its balance sheet. And now, challenger banks OneSavings (LSE: OSB) and Charter Court Financial (LSE: CCFS) have announced they are exploring a merger.

Banking tie-up

The OneSavings/Charter merger has been announced officially today. The initial proposal says that for each Charter share, holders will receive a 0.8253 chunk of a new OneSavings share which, when all said and done, will give Charter investors 45% of the combined group immediately after completion. 

Managers believe the deal will unlock £22m in annual pre-tax cost savings in the three years after the transaction. Around 30% of these cost savings are expected to be achieved in the first 12 months after a merger. 

The two banks, both of which specialise in lending to buy-to-let investors, should be able to use their enhanced size both to attract new customers and offer better deals to existing borrowers. They are already firing on all cylinders. Today, OneSavings reported a 15% increase in underlying profit before exceptional items to £193.6m for the full-year. Meanwhile, Charter announced a rise in pre-tax profit of 42% for the year ending 31 December 2018. A strong demand for buy-to-let and residential mortgages helped the company increase its loan book by 24% during the period, to £6.7bn.

Taking market share 

Using today’s numbers, when combined, OneSavings and Charter will have a loan book worth around £15.7bn. This is tiny in comparison to the UK’s largest banks, such as Lloyds (£444bn of loans and advances to customers outstanding at the end of 2018), but with the size of the loan book growing at 20%+ per annum, the combined group should quickly be able to scale up.

And when the deal is complete, I think shareholders will be well rewarded as both of these companies have plenty of scope to increase their cash returns to investors. 

Today, Charter announced its inaugural dividend of 12.7p per share, (on earnings per share of 50p) giving a dividend yield of 3.8%. OneSavings hiked its distribution to investors to 14.6p for the full year, (on earnings per share of 58p) giving a dividend yield of 3.7% at the time of writing.

Considering the fact that both companies have plenty of headroom to increase dividends by 100% or more without factoring cost synergies from the merger, I think there is a solid chance that the combined OneSavings and Charter could become one of the financial sector’s best income stocks — that’s without factoring in the explosive growth both firms are currently registering (as I have said before, based on its growth, I think OneSavings alone could be worth as much as 694p). That’s why I would buy these two FTSE 250 challenger banks today.

The post 2 FTSE 250 stocks yielding 4% I’d buy today appeared first on The Twelfth Magpie.

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Risk vs Reward 

Brexit concerns have weighed on the share prices of these two banks in recent months, and it’s easy to see why investors are haunted by the spectre of departing the EU. If the UK economy slumps after we leave at the end of March, banks will almost certainly suffer. Although it’s difficult to quantify how severe the downturn will be, it is reasonable to say OneSavings and CYBG could have to deal with higher loan loss ratios and a decline in lending.

If this is the case, then why do I think they could double your money?  It all comes down to the risk-reward ratio. These two stocks seem so undervalued that even in the worst case scenario, I reckon they will yield a positive return. And, in the best case scenario, they could double.

Undervalued 

Take OneSavings for example. Right now, shares in this £918m market-cap are trading at a forward P/E of just 6.5 — a multiple that might be acceptable if the bank was losing money or had a weak balance sheet. 

However, with a return on equity of more than 20%, it’s one of the most profitable banks in the UK, and possibly even Europe. Even if the company doesn’t grow for the next five years, in my mind this kind of profitability deserves a multiple of at least 10-12 times earnings. 

Investors will be paid to wait for a recovery as OneSavings supports a yield of 3.8%. 

City analysts believe the company can produce earnings per share of 57.9p for 2019, a multiple of 12 times earnings on this target gives a possible share price of 694.8p. That’s an upside of 85% from current levels. Add in two years’ worth of dividends (16.6p per share based on current City estimates) and investors could be in line for a total return of 95% over the next few years.

Better than expected

CYBG offers a similar potential return. Shares in this challenger bank bounced earlier in February after it lifted its forecast for margin and lending growth. Meanwhile, management is making good progress integrating Virgin Money.

This is all good news and leads me to believe that the City’s outlook for CYBG is too pessimistic. Analysts have downgraded their growth targets by around a third since October. They now expect the bank to report earnings per share of 23.3p for fiscal 2019 — that’s down from the October target of 31p. Over the next few weeks, as the City digests CYBG’s Q1 results, I reckon this target will be revised substantially higher.

Even without an earnings upgrade, CYBG looks cheap. It’s currently trading at a forward P/E of 7.6 and yields 4.5%. I reckon the company can eventually get to the City’s previous earnings target of 31p and, using this target, with a potential earnings multiple of 12, I arrive at a price of 372p. 

After adding in two years of dividends, currently 11p per share, I reckon investors buying today could see a total return of as much as 102% from CYBG over the next few years.

The post Two FTSE 250 stocks I think could double your money appeared first on The Twelfth Magpie.

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However, since the beginning of October, the price of oil has been trending lower, and Premier’s shares have followed suit. Since peaking at 143p, they’re now changing hands for just 70p, roughly where they started at the beginning of the year.

Today, I’m going to be considering whether or not it is worth buying shares in Premier after the recent declines, or if you should give up on the company in favour of FTSE 250 income play OneSavings (LSE: OSB).

Oil volatility

The way I see it, as the price of oil has fallen, investors have indiscriminately dumped shares in any companies that have exposure to the oil industry. Premier’s sell-off has been so severe because investors are worried about the group’s borrowings — an issue the business has had for some time. However, this year the group has taken serious strides towards reducing its leverage.

Oil production is on track to end the year at 80,000 barrels of oil per day (kboepd), up from 76.2 kboepd in the first half of 2018, at an average operating cost of $17–$18/bbl. Debt is already falling (from $2.7bn at the end of 2017 to $2.5bn at the end of October) and management has taken the prudent step of hedging a portion of the company’s production in 2019. Around 30% of production is hedged at a price of between $69/bbl and $72/bbl, which guarantees a certain level of income for the business over the next 12 months, even though the oil price is about $20 below this level.

With production rising, output hedged and debt falling, Premier is benefitting from a triple tailwind of higher oil prices, increased production and lower debt costs. And with this being the case, I think the stock is worth more than it was at the beginning of the year. Although considering the uncertain outlook for oil prices, it’s difficult to try and place an exact value on the shares. 

On the other hand, trying to place a value on the shares of OneSavings is easier. In comparison to Premier, the bank’s income is relatively predictable, because products like mortgages and loans have a fixed interest rate for many years. City analysts are expecting the company to report earnings growth of 4% in 2018, and 7% for 2019. 

Granted, this rate of growth is not going to win any awards, but it is predictable. 

Undervalued? 

Despite the aforementioned steady growth, shares in the company look cheap. They are currently changing hands for just 6.4 times forward earnings. Despite all of the uncertainty facing the UK as it prepares to leave the EU, I think the multiple severely undervalues the business and its prospects. 

Indeed, the rest of the banking sector is trading at an average P/E of around 8, implying the shares are undervalued by approximately 25%. On top of this discount valuation, investors are also entitled to a dividend yield of 4.1%. 

Unfortunately, at this point, Premier doesn’t offer a dividend. So overall, while shares in Premier might look cheap after recent falls, because we don’t know what the future holds for the price of oil, I think OneSavings is the better buy today.

The post Is Premier Oil undervalued or should I buy this FTSE 250 income stock? appeared first on The Twelfth Magpie.

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But as investors, we need to put that behind us and decide whether Royal Bank of Scotland (LSE: RBS) shares are a good buy today. With some caution, I think they are.

I’ve been sceptical of RBS lagging behind the Lloyds Banking Group recovery by some way, as it still hasn’t managed to pay a penny in dividends since they were cut off by the crisis. Lloyds paid its first post-panic dividend back in 2014, albeit a token amount, but we saw a yield of 3% a year later. Forecasts currently suggest 5.5% for this year and 6% next.

Turnaround?

But though I’ve been bearish on RBS in the recent past, I can’t help reflecting on fellow Fool Roland Head’s question: How low can the RBS share price go?

Q3 results beat expectations, and forecasts value the shares at just nine times full-year earnings per share. The dividend resumption, while taking longer to deliver than many of us had hoped, is set to yield an unexciting 2.6% this year, but that would more than double to 5.4%, based on 2019 forecasts.

Covered by earnings that would be more than two times too, and I see that as an increasing sign RBS is regaining respect in the investment world. I finally see it as a decent long-term buy.

Challenger

Meanwhile, the so-called challenger banks, which have none of the financial crisis baggage shouldered by their more establish peers, also languish at what look like weak valuations.

Look at OneSavings Bank (LSE: OSB), for example. On Thursday, it told us that its “strong financial and operational performance has continued in the third quarter.” It saw growth in its loan book over the past nine months of 16%, and “net loans and advances growing by £1,175m to £8.5bn.”

One thing that does disturb me a little is CEO Andy Golding’s stress on the bank’s buy-to-let business (which I think is a troubled market that’s set for more short-term pressure). But overall, I don’t actually see that as a sector that’s heading anywhere too disastrous in the foreseeable future.

Cheap shares?

As a long-standing buy-to-let investor myself, I wouldn’t get into that business today. I see long-term share investing as potentially more profitable these days, and a lot less risky.

But that doesn’t change the fact that OneSavings Bank shares are valued at what I see as an attractive forward multiple of only seven times projected earnings. It also comes with a progressive dividend policy that has seen expectations rise to yields exceeding 4% by 2019 and covered more than 3.5 times by earnings.

The market still seems to be firmly set against banking stocks. I say the market is wrong.

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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. 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, I want to profile two under-the-radar banking stocks that both pay shareholders dividends as well. Could these boost your personal balance sheet?

Close Brothers

Reporting full-year results today is Close Brothers Group (LSE: CBG), a FTSE 250 bank I have long been bullish on. What appeals to me most is its dividend growth track record. Whereas banks such as Lloyds and Barclays slashed their dividends during the global financial crisis, CBG maintained its payout. And since then, it has recorded eight consecutive dividend increases, which is an excellent achievement.

FY2018 results today look solid. For the year ended 31 July, adjusted operating profit rose 4% to £278.6m, and adjusted basic earnings per share increased 5% to 140.2p. The loan book grew 6.6% on an underlying basis to £7.3bn, and the bank generated a return on equity of 17%. Once again, it hiked its dividend by an inflation-beating 5%, taking the total payout per share to 63p (a yield of 3.8%). CEO Preben Prebensen commented: “All of our businesses have continued to successfully navigate and make the most of current trading conditions, while continuing to focus on maximising opportunities in future years.”

So, it appears that the business has momentum at present. But are the shares a ‘buy’ right now?

They don’t look expensive at present, trading on a P/E ratio of 11.8, although that’s a higher valuation than Lloyds (forward P/E 8.0) and Barclays (forward P/E 8.3). Knowing that the stock does tend to move up and down a fair bit, it could be worth waiting for a more attractive entry point, I think. With a bit of patience, it’s probably possible to pick up CBG at a slightly lower price with a yield above 4%. For now, I’m keeping the bank on my watchlist.

Another dividend-paying bank

Another FTSE 250 bank that looks really interesting from a dividend-investing perspective is challenger bank OneSavings Bank (LSE: OSB). Since paying a maiden dividend of 3.9p in 2014, it has increased its payout by 230% and is forecast to reward shareholders with a dividend of 14p per share this year. That equates to a healthy yield of 3.4%, with projected dividend cover of almost four times.

Like Close Brothers, it has a fair bit of momentum at present. In August, the group posted a 17% rise in profit before tax and lifted its interim dividend by a huge 23%.

As a buy-to-let specialist, there are risks to the investment case here in the form of regulatory meddling and property market weakness. Yet, in my view, these risks are already incorporated in the stock’s valuation, as its forward P/E ratio is a low 7.8. When you consider that other challenger banks, such as Shawbrook, Aldermore and Virgin Money, have all been targeted for takeovers recently, that valuation looks worth the risk.

The post Are these banks better buys than their FTSE 100 peers? appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. 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.

Here’s a look at two FTSE 250 stocks that I believe could double their dividends in the coming years.

OneSavings Bank

Investors love it when a company lifts its dividend significantly and one that’s doing exactly that is challenger bank OneSavings Bank (LSE: OSB). Since its 2014 IPO, the company has paid divis of 3.9p, 8.7p, 10.5p and 12.8p per share, meaning that the group has lifted its payout by 228% in the space of just three years. Can the dividend growth continue?

The bank released half-year numbers yesterday and, for income investors, there was more good news. Thanks to net loan book growth of 11% and a 17% increase in profit before tax for the half year, the group decided to lift its interim dividend by another 23% to 4.3p per share. Looking ahead, analysts expect a payout of 14.6p per share for the full year, which translates to a prospective yield of 3.4% at the current share price.

One thing I really like about OSB’s dividend prospects is the amount of dividend coverage the bank has. Earnings per share this year are forecast to come in at 53.3p per share, which would provide dividend coverage of a very healthy 3.7 times on the estimated payout of 14.6p. In other words, profits could halve here and the dividend would still look sustainable.

Of course, as a UK bank that focuses on the buy-to-let market, there are risks to the investment case. For example, yesterday’s results showed an increase in the bank’s loan loss ratio as growth in property values slowed. Yet overall, OSB appears to have momentum at present, and I envisage further dividend growth from the bank in the coming years.

Bellway

Housebuilder Bellway (LSE: BWY) is another company that appears to have strong dividend prospects and the potential to double its payout in coming years. The group has registered some of the highest dividend growth across the entire FTSE 350 index in the recent past, and has paid out 52p, 77p, 108p and 122p per share between FY2014 and FY2017. That represents a compound annual growth rate (CAGR) of an incredible 33%.

Bellway looks well placed to keep rewarding investors with big dividends, in my view. In a recent trading update, the group announced that it had just built 10,000 homes in a year for the first time in its 70-year history and that revenue for the period was up around 16%. As such, City analysts are expecting the group to lift its dividend by another 13.2% to 138.1p per share (a prospective yield of 4.7%) when it reports full-year results on 16 October.

Like OneSavings Bank, Bellway has a high level of dividend coverage, with analysts expecting earnings to cover this year’s payout approximately three times. While it’s worth keeping in mind that housebuilding is cyclical and that dividends could dry up if the UK’s housing market crashed, I think Bellway’s dividend has plenty of room for future growth given current market dynamics.

The post Two great FTSE 250 income stocks that could double their dividends appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Royal Dutch Shell. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended HSBC Holdings. 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.

Power of One

The £1bn FTSE 250 lending and retail savings group posted a 17% rise in profit before tax to £91.8m in its half-yearly results to 30 June. It also reported net loan book growth of 11%, driven by a 17% gain in gross organic origination to £1.44bn. Basic earnings per share (EPS) rose 13% to 27.3p.

There were also some negative numbers in there. Net interest margins dipped 23 basis points to 301bps, a drop of 7%. Its loan loss ratio jumped from 4bps to 11bps year-on-year as growth in property values slows. Return on equity dipped from 28% to 26%, and even though the common equity tier 1 capital ratio is strong at 13.3%, that’s down slightly from 13.7% in full-year 2017.

Good as Golding

CEO Andy Golding nevertheless hailed “excellent shareholder returns,” with volume growth driven by high demand for its professional buy-to-let and commercial and semi-commercial products. The Treasury tax crackdown has hit demand but this has been partially upset by rising remortgage business.

Golding also highlighted a “market-leading cost to income ratio” of 27% (28% in H1 2017). The interim dividend was hiked 23% to 4.3p per share, and the forward yield is now 3.3%, with meaty cover of 3.6. Yet the stock trades at a forward valuation of just 8.3 times earnings.

Perhaps I can understand investor caution. EPS growth has clocked in at 82%, 43%, 20% and 23% for the past four years, but forecasts suggest just 5% in 2018 and 6% in 2019. Also, the full force of those buy-to-let tax relief cuts has yet to be felt. Rising UK interest rates will both help and hinder, but OneSavings still looks good value to me.

Royal relief

While the OneSavings share price has jumped 15% over the last year, and 97% over two, Royal Bank of Scotland Group (LSE: RBS) is foundering, down 3% in the last 12 months. That’s despite finally announcing a 2p-per-share interim dividend earlier this month, the first since its taxpayer bailout.

RBS is finally shaking off its bad boy reputation, having agreed a final cash settlement of $4.9bn with the US Department of Justice for the misselling of residential mortgage-backed securities. Yet this has failed to whet investor appetite for the stock.

Bull or bear

Nor has a price-to-book value of just 0.88 and valuation of 9.8 times earnings. Not to mention the forecast yield of 2.7%, handsomely covered four times. City analysts reckon that could hit a juicy 5.5% by the end of 2019. Why aren’t investors thirsting after that?

Forecast EPS growth 5% this year, and 6% in 2019 isn’t spectacular, but hardly disastrous either, although anticipated revenue growth of just 1.6% looks poor. Macro factors are scaring many. Higher interest rates may boost net margins, but at the expense of a slowing global economy, while the end of QE won’t help. RBS still looks like a strong long-term buy, if you still feel bullish on the global economy.

The post This bargain FTSE 250 growth stock is thumping the RBS share price 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 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.