2 FTSE 250 stocks at 52-week highs that may still be worth buying

These FTSE 250 (INDEXFTSE:MCX) stocks still offer excellent value, says G A Chester.

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It’s one of the eternal conundrums for investors. A stock trading at a new high. If we own it, has the time come to sell? If we don’t, is it too late to buy?

If you’re an investor in a business — as opposed to a trader betting on short-term movements of a share price — the answer is generally to be found by applying Warren Buffett’s adage: “Price is what you pay, value is what you get.”

A share price may be at a new high but the performance and prospects of the business may have improved to the extent that the stock still offers excellent value for investors. With this in mind, I’m looking today at two high-flying FTSE 250 firms.

Global, diversified business

Shares of Hays (LSE: HAS) extended their one-year gain to 33% after the company released its annual results this morning. In what it described as a “milestone year,” the international recruitment group said: “The transformation of Hays into a truly global, diversified business is evident in these results.”

The company reported “strong, broad-based” net fee growth in its Continental Europe & Rest of World segment, with record performance in Germany, which is now its largest business in the world. Asia Pacific delivered “good overall net fee growth,” with Australia the standout performer.

Net fees were lower in the UK & Ireland. The UK private sector “saw a marked step-down after the EU Referendum” but “activity levels quickly stabilised and we exited the year with modest private sector growth.” For its smaller public sector business, conditions “remained challenging.”

Oozing cash and confidence

Hays’s geographical diversification meant that, despite the subdued UK performance, group net fees and operating profit increased 18% and 17%, respectively, driven by international growth and favourable exchange rates. There was a strong 103% conversion of operating profit into operating cash flow and the company’s balance sheet boasted net cash of £112m at the year-end.

A 14% increase in earnings per share (EPS) to 9.66p, supported an 11% increase in the ordinary dividend to 3.22p and a first special dividend of 4.25p. At a current share price of 175p, the trailing price-to-earnings (P/E) ratio is 18.1 and the overall dividend yield is 4.3%.

With the company saying that “conditions remain good in the vast majority of our markets and we see many clear opportunities to grow,” I rate the shares a ‘buy’ at today’s new high.

Still very buyable

Also trading at a new high today is fellow mid-cap Ascential (LSE: ASCL). The international business-to-business media group, which specialises in exhibitions, festivals and information services, posted strong first-half results last month.

Revenue and operating profit from continuing operations increased 26% and 28%, respectively. As with Hays, this was driven by international growth and favourable exchange rates. Free cash flow and cash conversion increased, net debt was lower and the board hiked the interim dividend by 20%.

At a new all-time high share price of 374p, Ascential’s P/E is 21.4, based on current-year earnings forecasts, and the prospective dividend yield is 1.5%. The valuation is higher than that of Hays but the strength of its half-year performance and the positive momentum in the business, lead me to conclude that the stock remains very buyable today.

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.

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.

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