October is almost here and that means a slew of updates from UK companies are on the way. Today, I’m looking at three stocks from the FTSE 250 whose share prices I suspect could push higher in the weeks ahead.
The latest trading update from food-on-the-go baker/retailer Greggs (LSE: GRG) will be essential reading for me on 5 October. It’s one of the biggest single company positions in my Stocks and Shares ISA.
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Having likely benefited from UK staycations and high streets getting back to some semblance of normality, I’m confident whatever numbers are released will be encouraging. Recent signs that the company is keen to crack on with store openings over the rest of the year are surely bullish?
Of course, the risk with Greggs is that all of this is already priced in. A valuation of 29 times forecast earnings arguably doesn’t give new investors a massive margin of safety. Perhaps trading has moderated. Perhaps everyone has had their post-lockdown fill of sausage rolls for now.
No matter — I’m focused on the long term. If I do end up getting my call wrong, I’ll still use any dip as an opportunity to increase my holding further.
Quality FTSE 250 retailer
Shares in homewares retailer Dunelm (LSE: DNLM) are up 74% over the last five years. That may not be as great a performance as that seen elsewhere in the index but it’s still a very decent return. For perspective, it’s well over double that achieved by the FTSE 250 as a whole (32%).
Next month’s trading update, due on 14 October, could see further positive momentum. Despite its apparent lack of economic moat, a valuation of a little under 21 times earnings seems reasonable for a company that generates consistently great returns on the money it invests in itself. Any move upwards may also be exacerbated by the fact that Dunelm has a low free float. Only 55% or so of the company’s shares are actually traded.
Of course, a significant lurch downwards is also possible. Investors might also argue that Dunelm has already benefitted from the home improvement bug that set in over 2020 and could be about to slow.
Still, the 2.8% dividend yield is higher than the FTSE 250’s 1.8%. It also looks very secure, based on projected profits.
Recruitment company Hays (LSE: HAS) is a third stock whose share price could rise in October. Like Dunelm, it’s down to release a trading update on 14 October.
Only last month, the FTSE 250 member said it now saw “a clear route back to, and then exceeding, pre-pandemic levels of profit” at a faster clip than previously expected. No wonder the share price has been on a roll.
I can’t imagine the outlook has changed for the worse over the last few weeks. Moreover, a PEG (price/earnings-to-growth) ratio of just one suggests investors could still get a lot of bang for their buck from the shares. A net cash position and the recent resumption of dividends further enhance the investment case.
Obviously, a jump in Covid infections could put a stop to this progress. With the colder weather approaching and more people being a little less vigilant than usual, this certainly can’t be dismissed. As always then, I need to ensure I was diversified in other sectors before pulling the trigger here.