3 high-potential FTSE 250 stocks 

The FTSE 250 is loaded with promising stocks backed by strong businesses and I’d buy these three right now in my quest for a million.

| 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.

The stock market recovery is happening. And I’m finding loads of FTSE 250 mid-cap stocks that look poised to advance, powered by strong and growing underlying businesses.

As a recap, the FTSE 250 is a capitalisation-weighted index consisting of the 101st to the 350th largest companies listed on the London Stock Exchange. And it’s a rich hunting ground for long-term-focused stock-pickers like me.

Ahead of expectations

For example, public services provider Serco (LSE: SRP) released an operations update in May. The company said trading had been better than the directors expected. And a “positive outlook” led to an increase in full-year guidance.

Since then, the share price has been responding well. But at around 185p, the valuation looks reasonable. City analysts expect earnings to notch up by a mid-single-digit percentage in 2023. And set against that expectation, the forward-looking earnings multiple is around 14.

Serco has a record of lumpy earnings. But revenue and cash flow have been climbing over the past few years. However, things haven’t always been that way. Several years ago, the outsourcing specialist was making losses. And there’s some risk that trouble could hit the firm’s operations again.

But things look bright right now. And Serco looks like its operations are recovering well. I’m tempted by the stock.

A return to growth

I’m also keen on soft drinks maker Britvic (LSE: BVIC). July’s third-quarter trading update delivered the headline: “On track to deliver a full-year performance in line with expectations”. And City analysts expect earnings to increase by around 36% in the current trading year to September, and by almost 7% the year after that.

However, it’s possible for any company to miss its estimates. Nevertheless, with the share price near 857p, the forward-looking earnings multiple for 2023 is just below 14. And I reckon that’s a fair valuation.

Britvic suffered declining earnings over the past three years. But a recovery looks like it’s underway now. And because of that, I find the stock attractive. Meanwhile, as I wait for growth to gather momentum, there’s a handy dividend to keep me company. Britvic is yielding a shareholder income worth about 3.5%.

Fallen consumer stocks

Bombed-out consumer-facing stocks have been tempting me lately as well, such as Pets at Home (LSE: PETS). In May, the company said the pet care market “remains robust and in growth”. And a rise in customer spending had been “maintained across all categories and channels”.

City analysts predict single-digit increases in earnings for the current trading year to March 2023 and the year following. Meanwhile, with the share price near 320p, the forward-looking earnings multiple is just over 13 for the trading year to March 2024. I think the valuation looks fair. And there’s a handy dividend to collect, estimated to yield about 4%.

A year ago, the share price stood near 488p. And I reckon the company’s operational progress could send it there again. Although nothing’s certain and setbacks can affect any business. Nevertheless, I think Pets at Home operates in a robust sector. And I’m tempted to invest in the shares now for the long term.

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.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Britvic. 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

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

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 »