Corrections such as this aren’t uncommon after a long period of growth. The good news is that most major global economies still seem to be in good health, so corporate profits should remain stable.

In fact, the trigger for the falls seems to be strong US wage growth and the likelihood of rising interest rates. This could cause investors to shift cash from stocks to government bonds.

My view is that the current market sell-off isn’t a serious concern. I don’t plan to sell anything and may even buy more shares. After all, lower prices mean higher dividend yields, and cheaper valuations.

Unfairly cheap?

Shares in upmarket interior furnishings group Walker Greenbank (LSE: WGB) rose by 4% today, after the firm issued a solid year-end trading update. Sales are expected to have risen by 17.9% to £108.9m, thanks to “increased overseas sales” and “licensing momentum”.

This good news will be a relief to shareholders. Walker Greenbank stock fell by more than 40% in November, after the group issued a profit warning. And in December, the company’s Loughborough wallpaper factory was hit by a fire.

A return to growth?

Today’s trading update indicates that full-year results should be in line with expectations. However, there still seem to be some concerns over UK brand sales, which fell by 6.1% excluding a recent acquisition.

Fortunately, growth elsewhere seems to be offsetting this slowdown. International sales rose by 23% last year, and UK sales including the Clarke & Clarke acquisition rose by 13.8%.

I think the UK weakness is something to watch, but not necessarily a cause for concern. The shares remain very cheap after today’s news, trading on a forecast P/E of 9 for the year ahead, with a prospective yield of 3.6%. Given the group’s strong balance sheet, I think this is too cheap. I’d be happy to buy today.

A wizard choice

Harry Potter publisher Bloomsbury Publishing (LSE: BMY) has lost 7% in Tuesday’s market sell-off. Shares in the group have now fallen by 15% so far this year. Despite this, I don’t think investors have much to worry about. Indeed, I’m quite tempted to add a few shares to my own portfolio.

Although the print publishing business is expected to face a long-term decline, Bloomsbury has so far avoided problems. A major reason for this is that it’s the main publisher of the Harry Potter series.

Alongside this, the group’s Adult division also publishes celebrity non-fiction books such as Tom Kerridge’s Dopamine Diet, a recent number one bestseller. A third part of the business focuses on academic titles.

A blockbuster set of figures

It’s not only Bloomsbury’s books that make good reading. The group’s accounts are also a pleasure to absorb, featuring strong cash generation, stable profit margins and a welcome lack of debt.

City brokers have become increasingly keen on this business, upgrading their earnings forecasts by almost 10% in 12 months. After today’s falls, the shares trade on a forecast P/E of 12.5 with a prospective yield of 4.4%. In my view, that’s cheap enough for this quality stock to deserve a closer look.

The post Why I’d ignore the falling FTSE and buy these small-cap stocks today 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.

Strong performance

Reporting on Friday was homeware manufacturer and distributor Portmeirion (LSE: PMP). The company’s share price declined by 5% after a trading update, even though it suggested the business was performing well. For example, total group sales increased by 16% in the first half of the year. Even when the positive impact of recently acquired Wax Lyrical was excluded, the company’s sales were 3% up on last year.

As an exporter, the depreciation of the pound has been welcome news for Portmeirion. Although interest rates are forecast to rise in the medium term in the UK, which could prompt a stronger pound, it continues to be on track to meet its guidance for the full year. In fact, it is due to increase its bottom line by 11% this year and follow this with growth of 9% next year. Both of these rates of growth are ahead of those of the wider index. They suggest that investor sentiment could improve.

Portmeirion’s valuation indicates that improved share price performance could be ahead after its 14% decline in the last year. It trades on a price-to-earnings growth (PEG) ratio of just 1.5, which is relatively cheap given its sound financial performance. As such, now could be the perfect time to buy it.

Growth potential

Also offering growth at a reasonable price is luxury interior furnishing company Walker Greenbank (LSE: WGB). It has experienced a consistent level of performance in recent periods, with its bottom line increasing in each of the last five financial years. It has recorded annualised growth of almost 11% during this time, which suggests it has a sound strategy that could perform well in a variety of market conditions.

Looking ahead, Walker Greenbank is expected to report a rise in earnings of 16% in the current year. This puts it on a PEG ratio of just 0.9, which appears to be rather low given its outlook and track record of consistency.

As well as its growth appeal, the company is also gradually becoming an enticing income stock. It currently yields 2% from a dividend which is covered 3.5 times by profit. This indicates there may be significant scope for dividends to rise at a higher rate than profit over the medium term. During a period of time when inflation is forecast to move higher, this enhances the company’s investment appeal.

The post 2 undervalued growth stocks I’d buy right now appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Portmeirion 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.

Managing plenty of growth 

One of them is £60m market cap property fund manager First Property Group (LSE: FPO), which reported a whopping 54% year-on-year rise in earnings per share for the year to March and whose shares trade at 7.9 times earnings.

While investing in property companies at this point in the economic cycle will rightly scare away many investors, FPO may be a less risky option than it first appears. The first reason is that its primary business is investing in property for institutional investors, which means recurring fee revenue and lower risk of a catastrophic hit to the income sheet when the market turns sour.

Funds managed on behalf of clients account for 51% of the group’s assets under management and last year they generated £2.05m in revenue, although a lack of performance fees meant pre-tax profits were only £0.4m.

Another reason FPO may be a more appealing choice than domestic homebuilders or REITs is that in recent years it has concentrated on increasing its exposure to Poland and Romania. These two fast-growing markets now account for around half of all assets under management and the entirety of the company’s directly owned property portfolio.

Buoyant property markets in each of these Eastern European nations made a huge contribution in the year with pre-tax profits from directly owned properties increasing from £9.9m to £10.3m. Although investing in a company this reliant on foreign markets may scare away some investors, FPO’s decision to diversify appears a wise one to me given the state of the UK market.

Furthermore, with an increasingly healthy balance sheet, a decent 2.8% dividend yield and fair valuation I’ll definitely be taking a closer look at First Property Group in the coming quarters.

Few problems to paper over 

A more domestic-centric option is high-end wallpaper designer and manufacturer Walker Greenbank (LSE: WGB). The company has a great record of five straight years of earnings increases and its shares trade at a relatively tame 12.9 times forward earnings.

The company has done well to cope with the temporary closure of its Lancaster manufacturing facility due to flooding in 2015 and with this site now back to full capacity the stage is set for a period of renewed high growth. This growth is coming through increased international exposure and the acquisition of the Clarke & Clarke brand in late 2016, which added new styles, distribution links and international cachet.

The benefits of the acquisition are already being felt as total sales rose 5.2% year-on-year in 2016 and underlying operating profit, which discounts the effect of the flood and acquisition costs, rose 19.5% to £9.8m. As the management team focuses on finding new highly profitable international licensing agreements and domestic sales recover following the flood, the future appears bright for the company.

With good growth prospects, just £5.3m in net debt and quite a low valuation, Walker Greenbank is definitely on my watch list.

The post 2 top growth stocks trading at bargain prices appeared first on The Twelfth Magpie.

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Ian Pierce 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.

Raising its profile

If you’d you been brave (or fortunate) enough to buy a slice of luxury interior furnishing firm, Walker Greenbank (LSE: WGB) immediately following last year’s shock EU referendum result, you would have enjoyed a very healthy 36% capital return so far. I think there could be more to come. 

In its last trading update (for the year ended 31 January), the AIM-listed, Uxbridge-based company stated that results for the year were now expected to be in line with management expectations. These numbers will also include a contribution from industry peer Clarke and Clarke — acquired by the company back in October — and insurance payouts relating to the flooding of the Greenbank’s fabric printing business (Standfast & Barracks) in December 2015. 

Despite the problems connected with the floods, group sales for the year are still expected to be higher at £92.4m compared to £87.8m in the previous year — a positive sign, particularly in light of Brexit and the undeniably cyclical nature of Greenbank’s earnings.

Last Tuesday, the £151m market cap company revealed that retailer John Lewis had launched two pop-up shops showcasing its products in the latter’s flagship store on Oxford Street. With each featuring wallpaper and textile collections from Greenbank’s brands (Scion, Harlequin, and Morris & Co) along with a diverse range of licensed products including bedding, towelling and tableware, this can only help to raise the company’s profile.

Based on predicted growth of 19% for the next financial year, Greenbank’s shares currently change hands for a not-unreasonable 15 times forecast earnings. While a forecast yield of just 1.8% is hardly enticing, it should be pointed out that the company is rapidly and consistently hiking its bi-annual payouts. Boasting a net cash position and decent returns on capital, I think there are worse options out there. 

Full year results are due on 26th April.

Dynamic performance

Another small cap that may warrant further research before next month is testing systems provider AB Dynamics (LSE: ABDP). Serving the global automotive industry, shares in the £117m company have soared by 50% since this time last year. Based on this week’s trading update, I think they have even further to go before half year results are announced on April 25th.

On Wednesday, AB predicted that revenues and operating profits for the six months to the end of February would be ahead of the same period last year and in line with management expectations. Demand for the small cap’s track testing products appears to be growing and a robust order book running into the next financial year is certainly encouraging. A new HQ — intended to help reorganise production and support further growth — will be ready by the end of the summer. 

Recent performance aside, it’s also worth pointing out that AB Dynamics’s balance sheet boasts a net cash position. Factor in a history of generating high returns on capital and a price-to-earnings growth (PEG) ratio of below one and the high valuation attached to the company’s shares  (25 times 2017 earnings) loses some of its sting. Considering that net profits in 2018 are expected to be over double those achieved in 2015, I’d be surprised if AB’s shares deviated from their upward trajectory.

The post 2 small-cap stocks I’d buy before it’s too late appeared first on The Twelfth Magpie.

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Paul Summers 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.

Improving performance

It’s not long since Headlam reported that it was performing better than expected. In fact, on December 1 it said its financial performance would be ahead of market expectations. Since then, it has recorded even better performance due in part to more favourable trading conditions. As such, it now expects to report results before non-recurring items that are ahead of revised guidance.

Revenue for 2016 was 6% higher than in 2015, with a quarter of that growth being due to the weaker pound. The UK continues to account for the vast majority of total revenue at 88% and UK like-for-like (LFL) growth of 4.7% indicates that demand for the company’s products remains robust. Similarly, constant currency growth of 3.6% in Continental Europe (which accounts for the remaining 12% of the firm’s total sales) shows that the performance of the business has been impressive across the board. And with Headlam benefitting from price increases that could continue in future, it’s in a strong position to deliver further growth.

A bright future

While Headlam’s bottom line is forecast to rise by just 3% in 2017 and by 4% in 2018, a positive catalyst on its share price looks set to be its dividend growth. It currently yields 4.4% from a dividend that’s covered 1.6 times by profit. However, in 2018 Headlam is expected to record a rise in dividends per share of over 27%, which puts it on a forward yield of 5.7% and leaves its dividend coverage ratio at a still acceptable 1.3 times.

Given the outlook for higher inflation and low rates for savings accounts, the company’s increasing dividend could hold considerable appeal during the course of the next couple of years.

But other stocks within the same sector such as Walker Greenbank (LSE: WGB) may have superior growth potential when it comes to the bottom line. For example, the company is expected to record a rise in its earnings of 26% in 2018 and 7% the year after. However, much of this growth is already priced-in since it trades on a price-to-earnings growth (PEG) ratio of 1.8. And as it has a yield of 2.1%, it lacks income appeal compared to its sector peer.

Clearly, the outlook for both companies is somewhat uncertain. They both face a risky period where Brexit concerns could weigh on consumer spending as well as the wider UK economy. However, with sound income prospects and a business model and strategy that do seem to be working well, as evidenced by today’s update, now could be the right time to buy Headlam for the long term.

The post Headlam Group plc soars over 7% after beating profit expectations appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
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Peter Stephens owns shares of Headlam Group. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Improving performance

The third quarter saw a continuation of IG Design’s upbeat performance from the first half of the year. While today’s update doesn’t provide any figures on sales growth, it does state that results are in line with the upgraded expectations released in November. Furthermore, all of the company’s regions are trading profitably, which shows that its current strategy is working well.

In fact, the company is forecast to grow its bottom line by 28% in the current year. If this is achieved, it would mean that it has posted five successive years of profit growth, with earnings rising at an annualised rate of over 17% during the period. This shows that IG Design has the potential to perform well in a variety of market conditions, which should bode well given the uncertain outlook for the UK economy and retail sector.

A difficult year ahead?

A key reason why the UK economy and retail sector face a challenging future is Brexit. Already, it has caused a depreciation in the value of sterling which is likely to equate to a much higher rate of inflation over the course of 2017. This could mean a return to the negative real wage growth last seen in the aftermath of the credit crunch, with consumer spending likely to decline as shoppers tighten their belts. That’s particularly the case since unemployment could rise over the medium term.

As mentioned, IG Design appears to be well placed to overcome such challenges. This is evidenced by its past performance, but also by its wide margin of safety. For example, it trades on a price-to-earnings growth (PEG) ratio of only 1.4. This shows that even if its profit guidance is downgraded, it could still be a strong performer versus its sector peers. And its earnings growth indicates that a share price rise of over 20% is relatively likely.

An even better option?

Of course, sector peer Walker Greenbank (LSE: WGB) offers an even lower valuation. The interior furnishings company is forecast to grow its earnings by 26% in the next financial year, which puts it on a PEG ratio of only 0.5. And with it having recorded a rise in earnings in each of the last five years, it offers a relatively stable business model as well as a sound strategy. As such, while IG Design is a strong long-term buy, Walker Greenbank could outperform it while offering a lower risk profile from its wider margin of safety.

The post Why IG Design Group plc is set to soar by 20%+ after today’s update appeared first on The Twelfth Magpie.

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It seems to me that those with lots of disposable income have a tendency to spend a fair bit on luxurious items for their homes. The rich could also benefit from a degree of insulation from the fiercest effects of economic downturns, perhaps so much that they will splash out on keeping their homes well decorated and furnished whatever the economic weather.

With that theory in mind, I am glad to have stumbled across Walker Greenback (LSE: WGB), a firm that specialises in luxurious interiors for the mid to upper end of the premium market.

Must-have brands       

The firm designs, manufacturers and markets wallpapers, fabrics and a range of ancillary interior products, all under the brand names Sanderson, Morris & Co, Harlequin, Zoffany, Scion and Anthology. These brands, the firm says, offer solutions for customers, designers and contract interiors by covering a wide range of tastes from traditional to ultra contemporary.

Walker Greenback trumpets its ‘made in Britain’ heritage, which in itself strikes me as a good selling point. On top of that, the company’s show rooms are in all the ‘right’ places for hooking the rich, including London, New York, Paris and Dubai, and the firm also runs partnership arrangements in Moscow and Shenzhen. On the face of it, Walker Greenback ticks all the right boxes, but how well has the firm been trading?

Strong growth

Despite targeting the well healed, there is bound to be a good deal of cyclicality in Walker Greenback’s business. However, growth since 2010 has been strong and the shares responded well by multi-bagging over the period. Here is the company’s financial record:

That looks like well-balanced progress with cash flow broadly supporting the expansion in revenue and profits.

At today’s 214p share price, Walker Greenback trades on a forward price-to-earnings (P/E) ratio of just under 18 for year to January 2017. City analysts following the firm expect earnings to grow 6% that year and to cover the dividend payout almost four times. That’s encouraging — a high level of dividend cover suggests the directors see more opportunity for growth ahead, otherwise they might hand more back to investors in the dividend. Right now, the forward dividend yield runs at around 1.5%.

One to watch

So Walker Greenback isn’t cheap, but the firm has potential. In an interesting recent development, one of the firm’s factories suffered extensive flooding, which will have an adverse impact on machinery, stock and profits.

The company has a comprehensive insurance policy, it says, which covers flood damage and business interruption, and has already logged a claim. However, maybe this or some other temporary setback could end up knocking the share price. If it does, we could see an opportunity to dig into further research with a view to buying some of the firm’s shares.

Or should I go for Aviva?

FTSE 100 constituent Aviva’s (LSE: AV) valuation certainly looks lower than Walker Greenback’s. At today’s 498p share price, Aviva’s P/E ratio comes in at just over 10 for 2016. However, I’m not keen on insurance firms because they fall into the wider category of ‘financials’.

The ‘trouble’ with financials is that they tend to be very responsive to macro-economic cycles. A good lurch down in the economy can really pull the rug from full-on cyclicals such as Aviva. On the other hand, maybe Walker Greenback’s brand strength and its affluent market could provide some watering down of the most onerous effects of cyclicality.

The post Can Walker Greenback plc Beat Aviva plc In 2016? appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Tesco

I have long warned investors of the perils of investing in mid-level grocery operators like Tesco (LSE: TSCO). Along with its established rivals Sainsbury’s and Morrisons, the Cheshunt business continues to be whacked by the disintegration of the supermarket space — budget chains like Aldi are attracting shoppers away in their droves with their cheaper prices, while more affluent customers are driving into the likes of Waitrose instead.

These problems prompted yet another broker downgrade on Wednesday, this time by Credit Suisse. The boffins noted that “like-for-like sales continue to be negative at all three companies, but margins are declining even faster. We see no obvious path back to recent margin levels.” Still, Tesco and its rivals remain committed to a strategy of profit-denting discounting, even though years of such initiatives have failed to steady their market shares.

And with their high- and low-end rivals embarking on massive store roll-out programmes, I cannot see how these businesses will turn sales around. The City has pencilled in a 3% earnings decline for Tesco for the year concluding February 2016, a result that would mark a fourth consecutive drop. And given the murky revenues outlook, I believe that the stock is overdue a strong share price correction — an elevated P/E multiple of 24.1 times is hardly reflective of a company with such embedded structural problems.

Walker Greenback

Luxury furnisher Walker Greenback (LSE: WGB) electrified the market in midweek business and was recently trading 4.5% higher on the day. The Uxbridge firm noted strong trading performance so far in 2015, with a “continued strong trading performance in the UK along with an acceleration in international sales growth.”

Walker Greenback has seen total branded product sales surge 8.9% since February, with demand in its core British market rising 8.1% during the period. And incredibly the furnisher saw sales gallop 27.1% higher in the States. Its Anthology label is clearly making waves with foreign shoppers, and I expect demand for the company’s premium goods to continue climbing as consumer spending power advances.

Walker Greenback has a terrific record of generating earnings growth year after year, and the number crunchers do not expect this trend to cease any time soon. Indeed, a fractional uptick in the year concluding January 2016 is anticipated to improve by 6% in 2017, driving a reasonable P/E multiple of 17.2 times for this year to 16.1 times for the following period. With the firm investing heavily in product innovation and marketing, I expect the bottom line to keep swelling in the coming years.

Severfield

Like Walker Greenback, engineering specialists Severfield (LON: SFR) cheered the market today and were recently changing hands 1.9% higher. The firm saw underlying pre-tax profit double to £8.3m in the year ending March 2015 from £4m the previous year, while improving trading conditions helped the order book tick to £194m from £185m previously.

Following the results broker Edison noted that “the UK commercial construction cycle is still in relatively early stages of recovery and medium term prospects are somewhat better than the near term would suggest.” It added that despite the problem of falling bolts from Severfield’s ‘Cheesegrater’ building, “all other indicators are favourable and for those not fixated by the short term, Severfield represents an excellent geared play on medium term UK growth.”

This view is shared across the Square Mile, and Severfield is anticipated to record breakneck earnings growth of 52% and 49% in 2016 and 2017 respectively, shoving an earnings multiple of 20 times for this year to just 13.5 times for the following period. And with the engineer having agreed to reinstate the final dividend, a payout out 0.5p per share for last year is expected to advance to a total of 1.5p in 2016 and 2p for 2017, producing handy yields of 2.1% and 2.9%.

The post Should You Consider Buying Tesco PLC, Walker Greenback plc And Severfield PLC? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.