Today, I’m profiling two of the best performing stocks in the FTSE 250 index over the last year. Both have made their shareholders wealthy, so are there more gains to come?
Polypipe Group
Polypipe Group (LSE: PLP) is a UK-based manufacturer of plastic piping and energy-efficient ventilation systems for the residential, commercial, civil and infrastructure sectors. Shares in the £748m market-cap group have enjoyed a strong run over the last year, rising from 285p to 399p today, a gain of 40%. Does that rule out further gains in future? I don’t believe so.
Over the last three years, Polypipe has demonstrated impressive momentum. Revenues have increased from £301m to £437m, while adjusted earnings per share have climbed from 10p to 25p. This year, City analysts expect a top-line figure of £466m and earnings of 27p.
A trading update released this morning revealed that the group is on track to achieve management expectations for the full year. Revenue for the 10 months to the end of October was up 8.2% (7.1% on a like-for-like basis) on last year. The group said that it saw “strong organic growth” in its UK residential and mainland Europe segments, which were both assisted by “relatively buoyant” new house building activity. Performance of the mainland Europe commercial and infrastructure systems segment was particularly impressive, with revenue growth of 19.9%. Chief executive Martin Payne commented: “The Group continues to deliver strong organic growth ahead of the overall UK construction market, demonstrating the resilience of its balanced exposure to the different sectors within that market.”
While the threat of a property slowdown in the UK adds an element of risk here, on a forward looking P/E of 14.8, with a prospective dividend yield of 2.7%, the investment case remains attractive, in my view.
FDM Group (Holdings)
Another amazing performer over the last 12 months has been FDM Group (LSE: FDM), which provides IT consultants to its clients, that assist with business analysis, data and operations services and cyber security.
I last covered the stock in late July, when the group had released strong half-year results that sent its share price surging 10%. At the time, I said: “I’m going to keep a close eye on FDM Group shares in the hope that a pull-back creates a more attractive entry point.” Unfortunately, the shares have kept rising. Indeed, they’re now up over 70% in a year. That means £1,000 invested a year ago would have generated a profit of £700.
Like Polypipe, this is a company with strong momentum. City analysts expect a 22% increase in revenue this year, and forecast a 13% rise in earnings per share to 29.2p. However, after a 70% one-year gain, is there any value left in the stock at the current price?
FDM currently trades on a punchy forward looking P/E ratio of 32.9. While I don’t think that valuation is entirely unreasonable given the company’s growth prospects and exposure to the tech sector, I’m going to continue to keep the stock on my watchlist for now in the hope of a meaningful correction.
