Two spectacular FTSE 250 climbers trading at bargain valuations

A low valuation isn’t everything but it certainly helps these FTSE 250 (INDEXFTSE:MCX) firms, says Harvey Jones.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Storage specialist Safestore Holdings (LSE: SAFE) has taken good care of investors’ assets lately, with the company’s share price up 313% in the past five years. Recent performance has also been good, with growth of 40% in the past six months alone. Can it continue?

Safe and sound

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

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

Trouble in storage

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

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

North star

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

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

White van men

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

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

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »