Game on

Total revenue rose 7% to just under $230m in the three months to the end of September. As usual, the vast majority of this ($220.3m) came from the company’s business-to-consumer (B2C) division. Here, an 11% rise in gaming revenue was logged. This is impressive when it’s considered just how good the previous year was for the company, thanks to people being forced to stay at home (and surf online).

On the downside, a 15% fall in betting revenue was also reported from this part of the company, due to the “condensed calendar of sporting events” happening in Q3 last year. Even so, B2C betting was still 21% higher compared to Q3 two years ago. For me, this is a far better way of gauging just how quickly the company’s growing. 

All of the above brings 888’s revenue for the year-to-date to $758.3m. That’s a rise of 28% compared to January-September 2020.

But can this last?

The fact that 888 continues to rake in cash following the lifting of restrictions bodes well. For its part, management believes that trading over the remainder of 2021 will be in line with expectations. 

Then again, nothing’s guaranteed. Aside from the (admittedly small) possibility that we’ll want to spend less time at our screens, one issue with any gambling-related stock is the potential for increased regulation. 888’s no stranger to this after the Dutch government’s recent decision to launch a licencing system for online betting in the country.

As a result, 888 removed itself from this market at the beginning of October. It now intends to apply for a licence “in the coming months” and be up and running by H2 next year. Even so, the company’s expecting a $10m hit to earnings. This may help explain why the share price is down today.

Will 888 be snapped up?

In a move that could turbocharge profits in the year ahead, 888 snapped up William Hill International in Q3. It also launched SI Sportsbook in Colorado and 888sport in Germany. Having been the hunter for a while, however, I think it’s quite possible that 888 could become prey. 

At yesterday’s close, shares were trading at 20 times forecast 2021 earnings. That looks very reasonable for a company that boasts a strong brand, is growing well, has net cash and consistently posts excellent returns on the capital it invests. Even if a suitor doesn’t come knocking immediately (and I’m against buying solely on this possibility), I wouldn’t rule out further consolidation in the industry in time.

The one that got away

888 is one of those stocks I highlighted as being a potential bargain in the early days of the coronavirus crisis. Unfortunately, it’s not a stock that I went on to buy myself. Had I done so, I’d be sitting on a gain of around 260% by now. Still, one can’t be invested in everything.

Offering a tempting combination of growth and income, I’d be comfortable buying this stock today — takeover candidate or otherwise. 

The post As Playtech is gobbled up, is this FTSE 250 stock next? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers 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.

If you believe in buying shares when they are down and then waiting for the recovery, these two could make highly tempting buys. So is now the time to invest in the Signature Aviation (LSE: SIG) share price, down 20%, and the Playtech (LSE: PTEC) share price, down almost 40%?

Any company that has anything to do with the airline industry is having a grim time, and Signature Aviation is no exception. Signature, formerly BBA, provides refuelling, cargo handling, and maintenance services to the industry.

Signature stock

Tuesday’s full-year results delivered only temporary respite, even though there were some positive numbers in there. The £2bn group completed its sale of Ontic for $1.37bn, and returned $833.6m of capital to shareholders over the 2019 calendar year. The dividend is up 5% and CEO Mark Johnstone promises further progression.

Total group underlying operating profit hit $441.1m, which fell to $320.8m on a continuing group basis. Free cash flows remain strong, totalling $187.2m.

Signature Aviation looks like a good company caught out in a sector sell-off due to problems beyond its control. The coronavirus is giving it a mighty wallop that could continue, even after the panic recedes. Long-term attitudes toward travel could change, especially if businesses discover they can work just as well remotely. Growing concerns about the effect of air travel on climate change will also likely grow.

The group has drawn praise from my fellow Fool writers for its resilience, shrewd acquisitions, and generous dividends, if not for its share price growth. Signature Aviation offers a forecast yield of 5%, with cover of just 1.1. It is surprisingly pricey at 18.5 times forward earnings, given recent events. There is too much uncertainty around for me to buy at that price.

Dangerous game

Playtech (LSE: PTEC) was in trouble well before the current sell-off. When I wrote about it last summer, its stock had fallen 60% in just two years, as profits disappointed. Now, the gambling software provider has got caught up in the coronavirus sell-off.

Last week’s final results warned that large-scale global events such as pandemics, political unrest, and climate change can hurt its key markets, particularly if they affect live sporting events. Unfortunately, two of Playtech’s key markets, China and Italy, are in the eye of the coronavirus storm.

The gambling sector also faces regulatory risk, as it comes under pressure to make products “safer, fairer, and crime free”, as Playtech puts it, while licensing requirements in regulated markets are regularly reviewed.

After starting the year strongly, the COVID-19 impact means “results for 2020 are likely to be below existing market expectations”.

In contrast to Signature Aviation, the shares look dirt cheap trading at just 5.9 times forward earnings. The generous 6.9% yield is covered 2.4 times, while shareholder returns rose 4% last year, boosted by a €40m share repurchase programme. This is a risky income play, but if China and Italy get a grip on the coronavirus, now could prove a good time to buy it. Feeling brave?

The post These 2 FTSE 250 stocks are down 20% and 40%! Are they unmissable bargains? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones 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.

Trumped!

China is the world’s biggest importer of natural resources, but that source of demand is threatened by President Donald Trump’s trade war. The Antofagasta share price has tumbled more than 13% in the last month as investors have grown nervous about the slowing world economy and lack of progress towards a trade deal.

It is flat today despite a positive half-yearly report showing EBITDA earnings up 44% to $1.3bn, helped by a 19.1% increase in revenue to $2.5bn, due to higher copper sales volumes and by-product revenues. That helped to make up for a 6.3% drop in the realised copper price.

CEO Iván Arriagada hailed today’s “robust” results with higher production across all operations, and copper up 22%. He expects this to continue with “another year of record copper production”.

Costs and competition

Antofagasta’s Cost and Competitiveness Programme is yielding savings and despite the uncertain outlook and trade talk concerns, Arriagada said Antofagasta “continues to be in a strong position generating solid cash flows and improving returns”. 

The £8bn group paid an interim dividend of 10.7 cents per share, equivalent to 35% of net earnings, and a rise of 57.4% on last year’s interim. However, the forecast yield of 3.2% is a little disappointing against a FTSE 100 average of around 4.3%, even with cover of 1.9.

Antofagasta trades at 15.5 times forecast earnings, so it isn’t hard to find cheaper FTSE 100 stocks paying far more generous levels of income. While City analysts expect a 22% rise in earnings this year, they anticipate a 2% drop in 2020. Copper is a bellwether for a troubled global economy and the stock isn’t trading at enough of a discount to tempt me, given today’s macro and political challenges.

Play it again

FTSE 250-listed gaming software provider Playtech (LSE: PTEC) has given investors a rough ride as profit warnings hit sentiment and its stock fell 60% measured over two years, and today brought little to reverse negative sentiment.

The £1.19bn group saw half-yearly profits before tax dropping 77% year-on-year to €28m, as distribution costs exactly doubled from €246m to €492.8m. Management slashed its dividend by 50%, from 12.1 euro cents per share to 6.1 cents. Yet the market response was reasonably benign, with the Playtech share price holding steady today.

Tech play

On the plus side, revenue rose 69% to €736.1m, boosted by last year’s acquisition of SnaiTech, which posted 26% growth in adjusted EBITDA to €74.7m. Management is sticking to full-year guidance, which suggests that adjusted EBITDA will fall to between €390m and €415m. That is despite a drop in forecast revenues at its Asian business, from €150m at the start of the year to €115m.

However, Playtech does now offer a juicy forecast yield of 6.3%, with cover of 2.1, coupled with a bargain valuation of 7.3 times forecast earnings. Until I saw those figures, I wasn’t tempted to recommend the stock. Now I think it might just be a good recovery play. Or you might prefer these FTSE 250 rivals.

The post Got £1,000 to invest? I’d buy this FTSE 250 high-yielder 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 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 a trading statement today, the builder confirmed plans to return £600m to shareholders via dividends in 2019. My sums indicate that this equates to a payout of 18p per share. At the last-seen share price of 160p, that would give a dividend yield of 11.3%.

What’s going on?

Taylor Wimpey’s share price has fallen by around 20% so far this year, as the market has continued to price in lower profits for housebuilders.

The problem is that so far, there’s no evidence profits are falling. Today’s statement is a good example. Chief executive Pete Redfern says that political uncertainty is dampening sales in the south east, but that overall sales rates for the group have remained unchanged during the second half of the year. The firm’s current order book is for 9,783 homes, 12% higher than at the same point in 2017.

Although build costs are expected to rise by 3%-4% in 2018, this is in line previous estimates. The outlook for profits in 2018 is also unchanged. Based on broker consensus forecasts, this suggests that adjusted earnings should rise by about 5% in 2018.

Buy, sell or hold?

Mr Redfern struck a cautious note on 2019 today, suggesting that sales will be flat next year. However, to my mind, the real question is whether housebuilders can handle the planned tapering of the Help to Buy scheme, which is now due to end in 2023.

My view is that if the economy remains stable after Brexit, housebuilders could continue to trade well for a little longer yet. Many are shifting their focus to more affordable homes and towards the rental market, while developing lower-cost building methods.

Although Taylor Wimpey shares certainly aren’t without risk, I suspect there could be some value available at current levels.

Another possible choice

I’m limiting my exposure to housebuilders to a small part of my portfolio. If you’re taking a similarly cautious approach, you may want to consider another unloved high-yield stock.

Gaming software specialist Playtech (LSE: PTEC) has fallen by about 45% this year after warning on profits. So there was welcome news for shareholders this week, when the firm said that expectations for the full year remain unchanged from August.

Despite this reassurance, investors haven’t been rushing to buy the shares. Playtech’s share price remains at levels not seen since 2013.

One reason for this caution may be that the company’s exposure to the Asian market remains a worry. Revenue forecasts for Asia were cut in the summer. And although management now says that Asian revenue has “stabilised” at about €150m per year, it’s not yet clear to me how this will affect the firm’s profitability.

A speculative buy?

Broker forecasts put Playtech on a 2018 forecast P/E of 9.1 with a dividend yield of 6.8%.

Earnings are expected to rise by 17% in 2019, giving a prospective P/E of 7.7 and a yield of 7.6% for next year.

This business has historically generated strong levels of free cash flow, providing good cover for its dividend. If this record can be maintained then I think the shares could be a recovery buy at current levels.

The post Is the Taylor Wimpey share price & 11% yield a bargain or should I buy this FTSE 250 dividend stock? 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 no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The supplier of online gaming and sports gambling software recovered ground at the back-end of last month but it’s slipped again in the first half of November. Investors may still take some convincing after July’s shock profit warning, but results released today suggest that Playtech has steadied the ship.

In the first release since August’s half-year statement, the firm said that its expectations remain unchanged and that it expects to produce adjusted EBITDA for 2018 in the range of €320m and €360m.

Playtech noted that revenues growth outside of Asia has remained “good” since the end of June, and that sales at its beleaguered Asian division had stabilised at an annualised revenue run-rate of around €150m.

Great growth potential

You cannot blame holders of Playtech stock for selling en masse at the back end of the summer and for this bearishness continuing a little longer. But in my opinion, the selling should probably stop as I see the company’s low, low forward P/E ratio of 8.8 times already reflecting its problems in Asia.

I think the excellent revenues opportunities that Playtech has in the bright emerging markets of Eastern Europe and Latin America suggest that the firm offers plenty of upside at current prices. In the first half, the business further improved its outlook in these key markets when it signed new licensing agreements with Polish national lottery operator Totalizator Sportowy, and Colombian firm Sportium Colombia to provide its technology across both retail and online markets.

What’s more, Playtech’s ability to throw out mind-boggling amounts of cash should enable it to build on its growth-boosting acquisition hunt that saw it snap up a majority stake in Italy’s Snaitech earlier this year. Net cash from operations swelled 51% during the six months to June, to €222.5m, a result which pushed cash and cash equivalents to €936.6m by the end of the period from €584m six months earlier.

Yields launch above 7%

An added benefit of Playtech’s qualities as a cash machine comes in the form of its inflation-smashing dividend yields.

The gambling giant hiked the full-year payout 10% in 2017 to 36 euro cents per share, and while a milder rise is expected this year to 36.8 cents — growth slowing because of those trading problems in Asia — this figure still yields a colossal 6.9%.

Things get even better for next year too. Expectations that Playtech will bounce from an earnings dip this year to a double-digit-percentage rise next year means it’s expected to hike the dividend to 40.6 cents, resulting in a colossal 7.6% yield.

Despite its recent travails in Asia, I believe that Playtech has remained a great bet for long-term investors. And those gigantic dividend yields add a considerable cherry to the cake. It’s a brilliant buy in my opinion.

The post Investors have STILL been selling this 7%-yielding FTSE 250 dividend stock. Are they crazy? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Royston Wild has no position in any 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.

Greenfield growth

Both stocks are listed on the FTSE 250 and trade at bargain valuations of 5.9 and 8.9 times earnings, respectively. They are in favour today, but what does the long term hold?

John Laing is an asset manager that invests in greenfield infrastructure and has a market-cap of £1.54bn. Today’s results for the six months to 30 June show profits before tax of £174.3m, up from £36.6m in June 2017. Earnings per share (EPS) also multiplied, from 9.4p to 38.8p.

Piping hot

The group has also reported a 9.3% increase in net asset value per share since 31 December, together with a healthy £2.3bn pipeline of investment opportunities, including 12 shortlisted public-private partnership (PPP) positions worth around £325m. It also made realisations of £241.5m from selling its investments in project companies, up from £151.3m last year. Finally, its £1.26bn portfolio is up 18.2% since December.

The group is reducing its exposure to the UK, a good thing given the construction slowdown and post-Carillion PPP controversies, and expanding in Europe, North America, Asia Pacific, and beyond. It has a forecast dividend yield of 3.2%, with whopping cover of 4.9, which gives scope for progression. The stock trades at a forecast valuation of just 5.9 times earnings.

Earnings are forecast to rise 43% this year, although a dip of 5% is expected in 2019. Despite that, my colleague Roland Head recently rated it a long-term buy and investors are diving in today. Merits a bit more digging.

Tech bust

It has been a tough year for the £1.78bn online gaming firm Playtech. Its stock plunged last year as management warned it was set to miss performance targets, then crashed another 26% in July after a disappointing Asian performance triggered a profit warning.

No such worries today, as the stock surges despite a reported 15% drop in adjusted EBITDA to €145m, and a 34% drop in both adjusted profit before tax and adjusted EPS. The good news was a 4% rise in revenues to €436.5m. Clearly investors were braced for worse.

Playtech also reported net cash from operations up 51% to €222.5m and continued progress on balance sheet efficiency with the sale of its holding in Ladbrokes-Coral & GVC. The interim dividend per share was sustained at 2017 levels.

Child’s play

Chairman Alan Jackson reported “important operational progress and new licensee wins in key strategic markets, the UK, Europe and Latin America,” which led to “higher quality earnings for Playtech with Group revenue now 69% regulated.” Tough market conditions in Asia do not reflect on the core strength of the groups model, he added, while the recent Snaitech acquisition opens up the fast-growing Italian market.

Playtech is now valued at just 8.9 times forward earnings with a stonking forecast yield of 6.1%, and cover of 1.8. While earnings are forecast to drop 14% across 2018, next year looks brighter, with 14% growth pencilled in. By then, the yield could be 6.8%. It’s a gamble, but a tempting one.

The post These 2 FTSE 250 growth and income bargains are absolutely smashing the stock market appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

The company said that it was withdrawing its profit guidance for the year due to the launch of a cheaper generic rival to its Suboxone Film treatment for opioid addiction.

What’s happened

Indivior has been fighting court battles for several years to prevent a generic version of Suboxone Film from coming to market. Despite these efforts, two generic alternatives were approved by the US Federal Drug Administration on 14 June.

One firm, India’s Doctor Reddy Laboratories (DRL), went ahead immediately and launched its product on 15 June, despite being involved in ongoing patent litigation with Indivior.

On 18 June, Indivior managed to obtain a temporary restraining order preventing DRL from continuing with the launch, but by this point the Indian firm had already stocked its distribution channels with product that apparently can still be sold while the restraining order is in place.

Why it matters

As a result of the DRL launch, Indivior says that its market share has fallen by 2.5% to 52% in less than one month. To compete with the generic pricing, it’s now selling Suboxone Film at a discount of 75%-80% below list price. The company estimates that revenue will be at least $50m lower than expected this year as a result.

There’s also a second problem. Sales of Sublocade, a new monthly injection treatment from the firm for opioid addiction, are growing more slowly than expected. The company says that “friction in the new distribution and reimbursement model” is slowing prescription growth. I’m not sure exactly what this means, but management is working to fix these issues.

Are the shares cheap?

Chief executive Shaun Thaxter expects Sublocade to generate $1bn+ of annual sales when its growth peaks. My Foolish colleague Rupert Hargreaves believes that this patent-protected treatment could replace lost profits from Suboxone, and guarantee the company’s long-term future.

The problem for investors is that Indivior’s near-term profitability is dependent on the outcome of several rounds of uncertain legal action. With generic competition starting to bite and no guidance on profits, I’m inclined to stay away for now.

A big faller with a 6% yield

One falling stock I might consider is gambling software group Playtech (LSE: PTEC). This company has issued two profit warnings over the last year due to poor trading in Asia. The second of these came on 2 July and caused the stock to fall by a further 26%.

To combat this weakness in Asia, Playtech is focusing its efforts on expanding into newly-regulated markets such as Eastern Europe and Latin America. Its software can be used in both retail and online environments, so it’s a good option for traditional bookmakers wanting to expand online.

Cheap enough to buy?

At the last-seen price of 495p, the share price is now nearly 50% lower than it was one year ago. Profit forecasts have also fallen, but only by around 25%. This has left the stock looking relatively cheap, on a 2018 forecast P/E of 8.4 with a prospective yield of 6.1%.

Although there is still a risk of further problems, I think the shares could be worth considering as a contrarian buy at this level.

The post Why the Indivior share price could be a FTSE 250 buy after today’s 30% fall appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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

Software, hard times

Playtech’s joystick snapped last November when, after years of steady growth, management warned the company was set to miss its performance targets. Investors were already concerned about the impact of merger talks with GVC Holdings on Playtech’s contract to provide gambling software for Ladbrokes, as well as billionaire founder Teddy Sagi’s long-term intentions, after he dumped stock last June to fund a move into real estate.

Shares took another knock in February when the company revealed an 11% year-on-year drop in revenues at its B2B Gaming division for the first 51 days of the current Q1, albeit against strong comparatives in Asia. That overshadowed better news elsewhere, notably in its full-year 2017 results, which featured 29% revenue growth to €84.9m and 73% adjusted EBITDA growth to €27m.

Game theory

Strong cash generation allowed a 10% increase to the full-year dividend. Playtech currently offers a forecast yield of 4.6%, covered exactly twice, which is attractive. The stock is also sitting comfortably in bargain territory, trading at a forecast 10.9 times earnings.

Its prospects look fairly steady, if City analysts are to be believed, with forecast earnings per share (EPS) growth of 5% in 2018 and 8% in 2019. By then, the yield should hit 4.9%. Be warned, revenues and profits are expected to dip slightly this year, before recovering next. More bad news would be a buying opportunity. However, at today’s valuation you already have an opportunity, as my fellow Fool Rupert Hargreaves recently noted, citing healthy profit growth.

Get Meggitt

Rupert has also been talking up prospects for global engineering and defence business Meggitt (LSE: MGGT). This is the second of my FTSE 250 bargain dividend stocks, arguing that its position as a designer and manufacturer of high-performance components and sub-systems for aerospace, defence and other specialist markets gives it strong defensive characteristics.

However, that hasn’t stopped the share price from tanking 18% in the past six months, amid wider energy market weakness, and despite halfway decent full-year 2017 results. Meggitt posted a 42% jump in free cash flows to £186m, a 34% increase in statutory profits to £262.4m, and a 105% surge in EPS to 45.2p. However, in underlying terms, EPS edged up just 1% to 35.3p a share, while organic profits before tax dipped 1% to £357.9m.

Defensive play

Meggitt stands to benefit from Trump’s corporate tax cuts, while chief executive Tony Wood said cost-cutting, non-core disposals and new contract wins leave it nicely positioned to accelerate growth over the medium term. That also allows the board to engineer another 5% on the full-year dividend.

The stock is available at a relative bargain price of 13.6 times earnings, although this may reflect what could be a bumpy 2018, with forecasters predicting an 8% drop in EPS. However, EPS are forecast to rise 8% in 2019, and there’s a generous dividend to tide you over, with a forecast yield of 3.8%. Worth a look.

The post 2 FTSE 250 bargain dividend stocks I’d buy today appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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

Chief executive Chris Hsu will also leave the firm after just six months in the role. So what’s gone wrong?

Problem #1

In January, Micro Focus issued guidance for sales to fall by between 2% and 4% during the year to 31 October. The company now says that sales are likely to fall by between 6% and 9% over this period.

Problems with a new IT system are hampering sales and today’s statement reports “higher attrition of sales personnel,”“disruption” of customer accounts as a result of the HP demerger, and “sales execution issues” in North America.

It sounds to me as if the integration of this $8.8bn acquisition has been botched, with top sales executives leaving and customers receiving poor service. This has resulted in a sharp drop in licensing revenue.

The company says that the impact of these operational issues on profits for the year will be offset by cost savings. However, in my view these issues are likely to have knock-on-effects beyond the current year.

Problem #2

I also think that markets are pricing in a second problem for Micro Focus.

The group’s growth into a FTSE 100 member has been driven by regular acquisitions of smaller rivals, followed by cost savings to boost profits. This has worked well, but with the HP Enterprise acquisition performing poorly, I think investors are starting to question the firm’s growth potential.

The company’s focus on supporting legacy technology such as COBOL mainframe systems means that it lacks exposure to modern growth technologies such as AI.

I suspect profits will miss expectations this year. Net debt is also quite high, at around $4bn. Taken together, these factors suggest to me that this business should have a low valuation.

Although the forecast dividend yield of 8.8% is tempting, I think this payout could be cut. I plan to wait for the company’s next set of accounts before considering whether to invest.

One stock I would buy today

FTSE 250 gambling software provider Playtech (LSE: PTEC) is also out of favour with markets. The group’s share price has fallen by 24% since a profit warning in November. But in this case I believe the shares could offer a buying opportunity.

Although the group faced headwinds last year, mainly due to a disappointing performance in Asia, the group’s recent 2017 results didn’t seem to highlight any fresh problems. Cash generation remained strong, leaving the stock trading on a price-to-free cash flow ratio of 12.5.

One concern is that Playtech’s operating margin fell from 26% to 21% last year. But this is still a creditable figure that’s much higher than most high street bookmakers. And the group ended last year with net cash of €107m.

Adjusted earnings per share are expected to rise by 14% in 2018 and by 10% in 2019, putting the firm on track for steady growth. With the shares trading on a 2018 forecast P/E of 11 and offering a forecast yield of 4.4%, I believe Playtech looks good value at current levels.

The post Should you buy after Micro Focus share price falls 55%? appeared first on The Twelfth Magpie.

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CORRECTION: this article originally stated incorrectly that EPS at Playtech was expected to fall by 10% in 2018. It has since been updated to reflect the expected rise of 14% in 2018 EPS.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Micro Focus. 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 ahead, I wouldn’t be surprised if the recent spate of consolidation seen in the industry continues with one stock in particular likely to feature.

Prime target

Gaming provider 888 Holdings (LSE: 888) could be attractive to many other companies in the industry thanks to its digital technology. It’s certainly been open to discussing deals in the past, having almost merged with casino and bingo hall operator Rank back in 2016 with the intention of buying bookmaker William Hill — a hugely complex deal that ultimately collapsed. 

Clearly, any potential suitors of 888 would be getting a good business with decent growth prospects. December’s trading update revealed that adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) for the full year would be in line with market expectations. The mid-cap saw “further progress in Casino, strong momentum with 888Sport, increased activity on mobile devices and continued expansion in regulated Continental European markets“. 

These results were particularly impressive given the decision to back out of five markets over the first half of the year and the increased attention from regulators, particularly in the UK. As far as the latter is concerned, CEO Itai Frieberger remarked on his confidence that 888 was “well positioned” as this focus continues to tighten.

Shares in 888 have climbed a very respectable 29% over the last year. Based on analyst expectations for 2018, the stock currently changes hands for a little under 20 times earnings. That’s not exactly cheap — and certainly a lot higher than the valuations afforded to traditional high street bookmakers — but the company’s technological know-how and sizeable net cash position perhaps justify this premium. A forecast dividend yield of 4.1% should also appeal to income hunters. 

Buying shares in a company based purely on the possibility of a takeover or merger is a risky move. Given that the underlying business appears sound, however, I wouldn’t blame investors for becoming increasingly interested in 888.

Ready to recover?

While perhaps an unlikely takeover target, I also think online gaming software provider Playtech (LSE: PTEC) warrants closer inspection given the rather attractive valuation attached to its shares.

Right now, you can pick up stock in the FTSE 250 constituent for just under 12 times expected earnings for the new financial year. Why this cheap? Let’s turn back the clock.

Back in November, the stock lost over 20% of its value after issuing a profit warning. Despite an acceleration of daily average revenues in its Gaming division since August, the company stated that a slowdown in some Asian markets coupled with difficulties relating to its Sun Bingo contract would mean that full-year profits would now be “around 5% below the bottom end of market expectations“.

While it was inevitable that this news would disappoint some investors, I think the reaction was overdone. Other parts of the business appear to be doing well, with Playtech’s Financials division showing signs of continued growth. Moreover, the company’s declaration that it would continue to “increase its exposure to key regulated markets” — thus reducing the relative contribution from Asia — looks entirely appropriate.

Playtech next reports to the market on 22 February. Should the numbers be reassuring, I can see the stock recovering to former highs fairly quickly.

The post Is it time to bet big on these top growth stocks? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers 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.