Artisan food-to-fork meat producer Cranswick (LSE: CWK) was started by a group of pig farmers in the 1980s and has ridden the foodie wave nicely, its website stuffed with buzz words such as ‘authenticity’, ‘artisan’ and ‘craftsmanship’. It has served shareholders a few tasty treats as well.
Plenty of beef
The £1.66bn FTSE 250 listed stock is up a juicy 183% over five years but it has been volatile in recent months, despite continuing to deliver strong results. I suspect the underlying concern is its valuation, with the stock now trading at a forecast P/E of 21.5 times earnings, while City analysts now forecast that four consecutive years of double-digit earnings per share (EPS) growth will slip into single-digits.
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Yet the group is still making progress, reporting a 22% jump in full-year pre-tax profits in May to £92.4m, with revenues up 17.6% to £1.5bn, and robust growth across all product categories. Exports are also rising strongly. At the end of July, a trading statement reported 3.2% growth in revenues despite a slight dip in the UK pig price.
Cranswick has also commissioned a state-of-the-art, purpose-built continental products factory in Bury, Greater Manchester, to be completed next year, adding substantial capacity. The financials look good, with the group turning an £18m net debt position into £8m net cash over the last year. It has also committed, unsecured facilities of £160m, which give it comfortable headroom.
The yield is low at 1.8% but there is scope for progression with cover of 2.6%, while EPS are forecast to grow 4% in the year to 31 March 2019, and 6% the year after. Solid businesses like these attract a premium these days, making them hard to get too excited about.
Digital car buying and selling platform Auto Trader Group (LSE: AUTO) has picked up speed over the last year, growing 20%, and some reckon this stellar dividend growth stock could continue to stomp the FTSE 100.
It managed to increase revenues by 7% to £330.1m while profit before tax rose 10% to £210.8m, which is impressive given the drop in new and used car sales across the year to March, fuelled by Brexit and diesel demonisation.
Management has worked hard to control costs and encourage car retailers and manufacturer to adopt its new digital products, while profiting from new dealer finance products. Happily, the fall in car sales appears to have reversed, with August seeing the highest new car registration figure for a decade-and-a-half.
Auto Trader is now valued at 23.2 times earnings, but its positive earnings outlook partly justifies this, with anticipated growth of 9% in the year to 31 March 2019, followed by 12% the year after. The yield is 1.5%, but covered three times, while the full-year dividend of 5.9p is forecast to carry on climbing to 6.44p then 7.17p.
The FTSE 250 group also generates plenty of cash, up £13.2m to £226.1m last year, allowing it to reward shareholders with £96m of buybacks. Operating margins of 65% look healthy but again, you have to pay a premium price.