Looking ahead, the stock could offer long-term return potential. It appears to have a low valuation and an improving financial outlook. It could therefore be worth buying alongside another cheap FTSE 350 share which released results on Friday. Both stocks could offer retirement saving potential, and help investors to overcome a rising State Pension age.

Improving prospects

The company in question is specialist building materials supplier SIG (LSE: SHI). Its full-year results showed it made significant financial and operational progress in 2018, with underlying revenue moving just 1.2% lower in challenging market conditions. It has focused on profit rather than sales growth, which is evidenced by an increase in gross margin of 50 basis points to 26.7%. This helped to drive underlying pre-tax profit 25% higher to £72.7m, in line with expectations.

The company continues to face an uncertain future. However, its transformation strategy seems to be gathering pace, and is forecast to post a rise in earnings of 16% in the current year. Despite its growth potential, the stock has a price-to-earnings growth (PEG) ratio of just 0.7. This suggests SIG could offer growth at a reasonable price, and may be able to deliver impressive capital growth over the long run. As such, now could be the right time to buy it as it appears to be overcoming the challenges which have held it back in recent years.

Changing business

As mentioned, Marks & Spencer has started to execute its revised strategy in recent months. Essentially, it’s seeking to make the company more appealing to an increasingly demanding consumer. Shoppers now expect a slick website and a true omnichannel offering as standard. As such, Marks is investing in a variety of areas, including an improved website, more efficient supply chain, as well as online grocery shopping through a partnership with Ocado.

In the short run, such major changes will require significant investment. However, with a rapidly changing retail environment becoming increasingly focused on mobile devices, it appears to be a major requirement should the business wish to remain relevant among consumers.

With the company’s share price having declined in recent weeks, it now trades on a price-to-earnings (P/E) ratio of around 10. This suggests a margin of safety may be on offer, and there could be scope for a sizeable upward rerating over the long run. Although it may take time for Marks & Spencer to deliver its refreshed strategy, in time it could produce stronger financial results and act as a catalyst on its share price. Therefore, it could offer value investing potential.

The post Worried about the State Pension? I think Marks and Spencer could help you retire early appeared first on The Twelfth Magpie.

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Peter Stephens 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.

To put things in context, SIG’s share price has been sliding since the beginning of 2018 and is down around 38%, which implies investors have been nervous for some time. Today, the price dropped 7% or so in early trading, and that hasn’t made me feel any less nervous about the firm’s trading prospects than I already was.

Attractive if you time an investment right?

SIG operates as a distributor dealing with trade customers “across Europe” supplying insulation, roofing, air handling products, and stuff for the inside and outside of buildings. The thing I like about distribution companies, in general, is that they offer investors the chance to ride the fortunes of a particular industry or sector without getting involved in the operational challenges faced by firms that deal with the customers at the end of a supply chain. In other words, firms such as SIG just ride the economic activity generated by its customer-companies such as builders, developers and maintenance organisations.

SIG skims revenue from the activity of its customer-companies, regardless of whether those firms actually make any profits themselves. As long as those customer-firms are turning over revenue and installing things, that’s all that matters to SIG. In some ways, its business model is a bit like how the government’s tax system works. VAT, payroll taxes and the like skim tax revenue from business activity regardless of whether firms make any profit or not. But that kind of setup works both ways. If SIG’s customers find business declining because of an economic downturn, its business will downturn as well.

Challenging trading

Today’s trading update covers the whole of 2018 and mentions “challenging market conditions and lower trading revenues” in the second half of the year, which I see as a red warning flag. Like-for-like revenue came in 2.3% lower than the previous year. Despite that, the company expects its current turnaround plan to deliver “a further significant increase in profitability in 2019.”

Revenue slipped almost 6% in the UK, an area that accounted for around 44% of all revenues last year. In the rest of the European trading areas, revenues were either flat or up in single-digit percentages. The directors point to macro-economic uncertainty, slowing house-price inflation, and slowing secondary housing market transactions in the UK as reasons for the second-half decline. The weaker trading environment “impacted on demand for SIG’s products,” it said. Indeed, SIG is trading just as I’d expect a cyclical to trade and responding to the cyclical winds of the economy.

There’s a big lump of debt on the balance sheet, which could prove problematic if a downturn gains traction from here. So, despite the high-looking dividend yield, I’m avoiding shares in SIG. I would rather spread my risk by investing in a diversified index tracker fund, such as one that follows the fortunes of the FTSE 100.

The post Does this company’s trading update mean there’s a recession coming? appeared first on The Twelfth Magpie.

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Kevin Godbold 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 FTSE 250 has lost significant momentum since then and the record highs around £23.50 per share struck on the final trading day of last year now seem a very long time ago. Sentiment has soured after WH Smith declared at the top of 2018 that troubles at its High Street arm had weighed heavily on group performance during the start of the current fiscal year.

What remained apparent, though, in that release as well as in subsequent updates, is that the huge profits potential of its Travel division remain intact. Indeed, the company’s most recent release of August underlined its exceptional potential when it advised that Travel “continues to perform strongly with good sales across all of our channels.”

It had earlier declared that like-for-like sales had risen 3% in the 13 weeks to June 2, and that total sales had risen 8% as it has expanded its store network in the UK and in overseas markets.

WH Smith’s international network now takes in just below 300 news, books and convenience stores and, as the world’s airports and rail stations see more and more travellers flooding across their concourses, it has no intention of curtailing its expansion programme any time soon.

Dividend darling

Supported by a sustained run of earnings growth, WH Smith has been able to lift dividends at a brisk pace over the past half a decade. The newsagent lifted the full-year payout 10% in the 12 months to August 2017 to 48.2p per share, and when it declares results for fiscal 2018 it’s expected to raise it to 51.7p, helped by an anticipated 4% earnings improvement.

Looking to the current period, a 7% profits rise is predicted and this means the dividend is expected to rise to 55.8p, a figure that yields 2.7%.

At current prices WH Smith carries a forward P/E ratio of just 18.8 times. While marginally expensive on paper, I still consider this to be great value given the brilliant profits opportunities created by its Travel expansion and ongoing restructuring measures at the High Street unit.

The only way is up

SIG (LSE: SHI) is another FTSE 250 share tipped to grow dividends at a healthy rate. The building products supplier fell out of favour a couple of years ago when it was forced to rebase the dividend amid no little earnings pressure and a stretched balance sheet. But having rebuilt its capital base City analysts are expecting shareholder rewards to march higher again.

Last year’s 3.75p per share reward is expected to rise to 3.9p in 2018, helped by predictions of a modest 3% profits rise. Things really get exciting next year however. With earnings anticipated to rise 17%, the 2019 dividend is estimated to shoot to 4.5p. These payout projections yield a chunky 3.1% and 3.6% respectively.

While conditions in the UK remain tough for SIG, I am encouraged by the progress of its divisions in Ireland and in Mainland Europe. At current prices it carries a prospective P/E ratio of 12.5 times and this is too cheap given its strong performances abroad.

The post 2 impressive FTSE 250 dividend growth stocks you’re probably overlooking appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended WH Smith. 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.

Of course, it’s not the only stock that could be worth buying for the long term. Reporting on Friday was a fast-growing business which seems to offer an exceptionally low valuation.

Improving business

The stock in question is specialist building products supplier SIG (LSE: SHI). It released first-half results which suggest that its transformation plans are moving along as expected. It was able to strengthen its balance sheet while also refocusing its portfolio. It’s managed to make improvements to its business with regard to leverage, return on capital employed, while also reducing costs at the same time.

Unfortunately, trading conditions in the UK have remained challenging. This was at least partly due to poor weather conditions. But general economic uncertainty has also weighed on the company’s performance. As a result, underlying revenue moved just 1% higher, boosted by its performance across Europe.

Looking ahead, SIG appears to offer growth potential at a reasonable price. The company is expected to post a rise in earnings of 16% in the next financial year. Despite this, it trades on a price-to-earnings growth (PEG) ratio of just 0.7, which suggests that it could offer a wide margin of safety. As such, and while it’s still in a process of major change, its stock price performance could be ahead of the FTSE 100 in the long run.

Growth potential

The Tullow Oil share price could also outperform the FTSE 100. While it has the potential to be volatile in the near term, its strategy looks set to pay off. Increasing production could boost cash flow, as well as profitability. This may help the business to command a higher valuation at a time when the oil and gas industry is experiencing a recovery following an increase in the price of oil.

With Tullow Oil’s shares having a price-to-earnings (P/E) ratio of around 12, they seem to offer good value for money. The company is expected to post a rise in earnings of 11% in the next financial year, and this could allow it to generate improving share price performance following its recent decline.

Of course, the oil price is highly unpredictable and could move sharply upwards or downwards in the medium term. Therefore, with the company having what appears to be a low valuation, it seems as though investors have priced in potential uncertainty. This could allow long-term investors to take advantage of a wide margin of safety on offer. And with debt levels falling, and activity levels across the sector set to increase, now could be the right time to buy it for the long run.

The post Here’s why the Tullow Oil share price could be set to beat the FTSE 100 appeared first on The Twelfth Magpie.

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Peter Stephens 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.

While prospects for the FTSE 100 may be relatively positive at the present time, a number of shares could outperform it in the long run. Here are two prime examples which could be worth a closer look due in part to their dividend growth potential.

Uncertain future

The outlook for the UK housing market is currently uncertain. Brexit has contributed to a decline in consumer confidence, while concerns surrounding affordability have naturally come to the fore after nearly two decades of house price rises. As such, the share price performance of FTSE 100 housebuilders such as Persimmon (LSE: PSN) has been volatile and generally disappointing.

However, the outlook for the company remains attractive. It’s forecast to post improving earnings figures in each of the next two financial years, while population growth is expected to be considerably higher than the volume of new homes being built in the UK. Alongside policies such as the help to buy scheme, this could mean demand remains well ahead of supply and that house prices continue their upward trajectory after a brief pause.

With Persimmon having a capital return plan in place, it currently yields around 7.8% based on its payment schedule for the next three years. Since dividends are due to be covered around 1.4 times by profit in each of the next two years, it would be unsurprising to see a further increase in shareholder returns over the medium term.

Mixed performance

Also facing an uncertain outlook in the UK at the present time is specialist building products supplier SIG (LSE: SHI). The company reported a relatively positive half-year trading update on Wednesday which showed that revenue growth was flat versus the comparable period, with a 3.1% decline in UK sales offset by growth in mainland Europe.

Looking ahead, the company expects this situation to continue. It’s experiencing particular challenges in the commercial new build sector, as well as in the repair, maintenance and improvement segment. However, the business appears to be on track to deliver a significant improvement in its operational performance, with meaningful cost benefits due to be realised in the second half of the year.

With SIG yielding around 3% at the present time from a dividend which is covered 2.6 times by profit, its dividend growth potential appears to be sound. That’s especially the case since its bottom line is forecast to grow by 17% next year, with a price-to-earnings growth (PEG) ratio of 0.8 suggesting its shares are undervalued.

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Peter Stephens owns shares of Persimmon. 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.

Today, alongside the firm’s full-year figures for 2017, the company announced a dividend per share of 3.8p, up 6% year-on-year, thanks to a 4.3% rise in underlying pre-tax profit from £79.2m to £75.9m. Revenue expanded 3.8% with a recovery in demand in mainland Europe offsetting uncertainty and the “challenging market conditions” in the UK & Ireland business. 

And it seems as if management is cautiously optimistic about what the future holds for the company and construction markets in general. Commenting on today’s figures, CEO Meinie Oldersma said: “As the group moves into 2018, we are seeing increasingly confident markets across Mainland Europe and Ireland.” And even though the UK market will remain challenging, management believes there’s “considerable potential for a significant improvement in operational and underlying financial performance” across the group thanks to market tailwinds. 

A return to growth 

City analysts believe that the company has what it takes to build on its existing footprint and grow further in the years ahead. Earnings per share are expected to increase 17% for 2018, which should underpin a dividend hike of 11%, taking the payout to 4.1p, close to the level before the cut in 2015. 

This payout looks much more sustainable than it was before. Indeed, dividend cover had fallen to just 1.3 times in 2015, leaving management with no room for manoeuvre if growth stalled. However, based on current projections, next year the payout will be covered 2.7 times by earnings per share., which in my view looks much more secure and gives plenty of scope for future growth. 

Based on the City’s figures, shares in Sig yield 2.7% and trade at a forward P/E of 13.5. 

International exposure 

Page Group (LSE: PAGE) is another FTSE 250 dividend growth stock I’ve got my eye on today. 

Earlier this week, Page reported that thanks to a buoyant global jobs market, the group’s gross profits leapt 14.6% higher to £711.6m. The firm’s core Europe, Middle East and Africa (EMEA) division — responsible for around half of the overall profits — was the most significant contributor to earnings with gross profits leaping 22.2%. 

Unfortunately, due to Brexit uncertainty, the company expects its UK division to remain under pressure in 2018, but management (and City analysts) are extremely confident on the outlook for the rest of the group as the global economic recovery continues apace. 

Following 2017’s strong performance, analysts have pencilled in earnings growth of 15% for 2018 and 12% for 2019. Over the same period, the company’s dividend distribution is expected to explode from 12.5p for 2017 to 21p for full-year 2019 giving a dividend yield of 4% at current prices. With a net cash balance of £100m as well, this payout looks exceptionally secure. 

Overall, Page is undoubtedly one company dividend investors should keep an eye on, especially if you’re worried about the impact Brexit might have on your portfolio.

The post 2 FTSE 250 dividend growth stocks to watch for 2019 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.

Analysts are forecasting earnings per share (EPS) of 9.4p when the FTSE 250 firm posts its final results in March, giving a price-to-earnings (P/E) ratio of 17.6. This comes down to 15 for 2018, with forecasts of 17% EPS growth to 11p. The resulting price-to-earnings growth (PEG) ratio of 0.88 is on the value side of the PEG fair value marker of one, so there’s a prima facie case that SIG’s share price represents good value for the growth on offer.

Over-ambitious?

The company today reported it had identified “a historical overstatement of cash and trade payables” and as a result, has “initiated a rigorous review of controls around cheque issuance.” The overstatement had no impact on the income statement at 31 December 2016 or 30 June 2017 but did flatter the cash and leverage position. However, I don’t think this is a huge issue for investors to be worried about.

Going forward, I’m more concerned about the economic environment for the group meeting its chief executive’s ambitious margin targets. The company’s two operating divisions are the UK & Ireland and Mainland Europe. Margin performance in the UK has been weaker of late, although it’s been mitigated by an improvement in confidence in Mainland European markets.

SIG operates in a low-margin industry and historically has struggled to get its net margin even as high as 1.4%. I see the stock as priced for margin-target success but I believe this may be over-ambitious. Brexit uncertainty looks likely to impact UK performance and in a worst-case scenario, the company acknowledges that the final Brexit terms could impact its “ability to conduct its business, or make the conduct of such business more expensive.” For these reasons, I rate the stock a ‘sell’.

Pedigree for the 21st century?

Another FTSE 250 stock on my ‘sell list’ is challenger bank Metro (LSE: MTRO). Founded in 2010, on a model its chairman had employed successfully in the US between 1973 and 2007, Metro is busy opening branches, while its rivals close theirs. It aims for high levels of service and convenience, with its stores (as it calls them) open seven days a week, and from 08:00 to 20:00 on weekdays. And it has other quirks: “We love dogs at Metro Bank. We welcome them in all of our stores with fresh water bowls and biscuits.”

Like other banks, Metro is set to benefit from rising Bank of England base rates. However, while its business model has been successful in the past across the pond and its current expansion in the UK has been rapid from a standing start, I’m really not convinced that Metro is the future of 21st-century banking. Even if I were, I wouldn’t be willing to pay 150 times expected 2017 earnings and over 50 times forecast earnings for 2018. The shares have climbed to more than 3,500p from their flotation price of 2,000p less than two years ago and I believe that now could be a good time to cash in.

The post 2 growth stocks I’d avoid in 2018 appeared first on The Twelfth Magpie.

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G A Chester 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.

Strong demand

The Newcastle-based business said this morning that it expects housing revenue for the year to increase by over 13% to £2.5bn, amid continued strong customer demand which has been underpinned by the Help to Buy initiative and the ongoing availability of cost effective mortgage finance. The average selling price of homes sold rose by 2.9% to a record £260,000, while the number of housing completions grew by 10.6% to 9,644.

These figures place Bellway in the top quartile of the housebuilding sector in terms of growth. And looking ahead, it is well placed to continue its recent outperformance as it has significant capacity for further volume growth, which is supported by its strong balance sheet and its operational ability to open new divisions in areas of strong demand.

Admittedly, the cyclical nature of the housebuilding sector means investors will always worry about the next property downturn. And although recent surveys have suggested slowing house price growth in the UK market, I remain confident about the sector’s prospects given high employment levels and the chronic shortage of affordable new homes.

At current levels, I reckon shares in Bellway are trading far too cheaply right now. The housebuilder trades at just eight times its expected earnings next year, against the sector average of 14.9. What’s more, there’s also plenty for income hunters to get excited about too, with shares forecast to yield 3.8% this year.

Cost inflation

Meanwhile, things aren’t exactly smooth sailing for construction materials supplier SIG (LSE: SHI). Underlying operating profits in the six months to 30 June fell by 16.1% to £45.7m amid continuing competitive market conditions and cost inflation pressures in the UK.

Although SIG has raised prices in response to higher raw material costs, demand for insulation and interior products in the UK remained relatively soft, putting pressure on its top-line growth. In addition, the impact on its bottom-line was only partially offset by a modest improvement in gross margins, which rose from 22.9% in second half of last year, to 24.5%.

Looking ahead, SIG remains concerned about continued macroeconomic uncertainty in the UK, although this may partly be mitigated by continuing improvement in confidence in its mainland European markets. In the first-half, underlying profits there rose by 2.1%, which compared favourably to the 21.7% decline from the UK and Ireland.

In this tricky environment, the City expects SIG’s underlying earnings per share to slip 1% for the full-year, although clearly this estimate is in danger of being downgraded should market conditions indeed remain challenging. Fortunately, the situation is expected to improve for the coming year, as analysts are currently pencilling in an 11% earnings improvement, to 10.64p, for 2018.

Trading at a forecast valuation of 14.8 times its expected 2018 earnings, SIG looks reasonably priced. What’s more, its forecast yield of 2.4%, which is backed by 2.8 times earnings, adds to the investment appeal of the stock.

The post 2 stocks for savvy growth hunters appeared first on The Twelfth Magpie.

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Jack Tang has no position in any 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.

Clearly, this is positive news for investors in Cape. However, could it be followed by a bid approach for another company which also appears to be a strong buy for the long term?

Rationale

The deal for Altrad to purchase Cape is a relatively obvious one, with the two companies likely to have a number of synergies if the acquisition goes through. There is a clear strategic fit between the two businesses, and this could lead to reduced costs as well as helping to create a multi-disciplinary industrial services company. At a time when a number of the companies’ end markets are experiencing a difficult period, a merger may provide additional financial strength and resilience should trading conditions remain tough.

A good deal?

Since its operating conditions are challenging at the present time, Cape is forecast to report somewhat volatile earnings over the next two years. In the current year, its bottom line is expected to rise by 17%, before falling by 23% next year. This puts it on a price-to-earnings (P/E) ratio of 9.8 at the offer price of 265p, which suggests Altrad is obtaining the company for a bargain price.

Certainly, Cape’s bottom line could experience more volatility and may even fall over the medium term. However, it remains a relatively sound business in terms of its fundamentals, and it could therefore be worth a higher valuation than 265p per share. As such, while today’s news has pushed the company’s share price significantly higher, in the long run it may have been worthy of a valuation which is above and beyond that reached after the bid approach.

Bid potential

Also offering bid potential right now is building products distributor, SIG (LSE: SHI). It is expected to record a rise in its bottom line of 10% in the next financial year, which indicates it is moving into a more profitable period following a challenging couple of years. Despite this, it trades on a price-to-earnings growth (PEG) ratio of just 1.4, which suggests it may benefit from an upward re-rating over the medium term.

Even though the prospects for the UK and European economies remain uncertain, loose monetary policies look set to remain in place over the next few years. They could help support activity levels across the building industry and lead to improved trading conditions. As such, SIG could become a realistic bid target, while also offering upside potential for investors due to its growth prospects and valuation.

The post Cape plc surges 45% on offer: will this stock be next? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any 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 shares climbed as much as 6.5% to a new 52-week high of 155.4p half an hour into trading but fell back a bit after management issued a correction at 08:37, saying it was currency that contributed the 5.3%, while acquisitions contributed 0.5%.

Encouraging progress

Aside from the gaffe, the update was encouraging. SIG — which suffered a £120m loss last year due to heavy writedowns of assets — reported an improved performance in the UK, as it successfully passed on increased supplier price inflation to customers. Over in Europe, it said it’s benefitting from a recovery in construction markets.

SIG had relatively high net debt of £260m at the last year-end but said it expects this to be lower at 30 June, although it didn’t put a number on it.

Fully valued

At a current share price of 152p, the company trades on a forecast price-to-earnings (P/E) ratio of 15.8. This looks a full valuation to me and seems to price-in a successful turnaround of the business. I suspect market optimism is down to a boardroom overhaul, which saw the arrival of Meinie Oldersma — a highly regarded sector veteran — as chief executive in April.

However, I see little margin of safety for investors if the turnaround doesn’t go entirely to plan and/or if there’s a less-than-favourable outcome to Brexit, which the company says could impact on its “ability to conduct its business, or make the conduct of such business more expensive.”

Furthermore, I don’t see distributors like SIG as particularly attractive for investors at the best of times. Even before last year’s annus horribilis, the company’s fundamentals left a lot to be desired. For example, there was another lossmaking year in the previous four. And in the three that were profitable, the statutory net margin ranged between 1% and 1.4%. On the company’s “adjusted” numbers — which increased cumulative net profit of £83m to £256m — the highest margin posted in any one year was a still-uninspiring 2.9%.

On a forward P/E of 15.8 and a running yield of 2.4% (after a dividend cut last year), I’d be looking to cash-out if I held this stock.

Pricey property

Shares of Shaftesbury (LSE: SHB) are not far off their recent all-time high. This owner of an exceptional portfolio of real estate in the heart of London’s West End released upbeat results in May. While acknowledging the risks of Brexit, it said: “We expect the West End, underpinned by its wide appeal and dynamic economy, will maintain its long record of resilience.”

West End resilience shouldn’t be confused with share price resilience, because Shaftesbury’s shares more than halved in value during the financial crisis. How much should we be willing to pay for them today?

A lot less than the current 970p, in my view. The forward P/E is 53.2, the running dividend yield is 1.6% and the shares trade at a 6.4% premium to EPRA net asset value (NAV). This compares with peers Land Securities (P/E 19.7, running yield 3.8%, discount to NAV 28.7%) and British Land (P/E 16.6, running yield 4.8%, discount to NAV 34.1%).

Purely on valuation grounds, Shaftesbury is another stock I would be cashing-out of if I held it.

The post Why I’d dump these high-flying FTSE 250 stocks appeared first on The Twelfth Magpie.

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G A Chester has no position in any 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.