My favourite FTSE 250 stock is up another 17% today and still dirt-cheap with a P/E of 4.2!

Harvey Jones is thrilled by the performance of this FTSE 250 stock that has justified his faith in it. But can it keep climbing at this speed?

| 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.

Image source: Getty Images

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.

I only hold a couple of FTSE 250 stocks. The vast majority of my portfolio is plucked from the FTSE 100 but specialist retirement advisor Just Group (LSE: JUST) is a rare and heroic exception to that rule. Especially after today’s bumper results.

I knew about the company from my work as a financial journalist but never thought of buying its shares as they were having a torrid time.

The Just Group share price crashed in July 2018 after management warned it had to set aside extra capital to cover its lifetime mortgage products, ahead of a Prudential Regulation Authority consultation into the equity release market.

Should you invest £1,000 in Lloyds Banking Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Lloyds Banking Group made the list?

See the 6 stocks

Super growth stock

While the consultation concerned every equity release product provider, Just was more vulnerable than big guns like Aviva and Legal & General Group. The consultation never came to much, though, and events moved on.

Investors woke up to the fact that Just had been heavily oversold and was ripe for a comeback. This morning it made yet another great leap forwards, after posting a whopping 44% increase in first-half underlying operating profit to £249m.

The Just Group share price rocketed as a result and is up 16.87% today. Personally, I’m up 65% since buying the stock on 30 November. The 12-month return is 41.96%. For once, I was a little lucky with my timing.

Created with Highcharts 11.4.3Just Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Even after today’s mighty leap, the shares still trade at a laughably low 4.2 times earnings. As a medium-sized business with a market cap of £1.43bn, I think it’s got plenty of room for growth.

Just focuses on later life and retirement income, selling products such as annuities and equity release lifetime mortgages. As the population ages and the state struggles, there’s growing demand for this type of stuff.

Today’s growth was largely driven by higher new business sales. Retirement income sales grew 30% to £2.5bn while pricing discipline and risk selection widened margins to 9%.

Low but rising income

New business volumes are expected to continue climbing in the second half, although margins may narrow due to a shift in business mix. Markets took that news pretty well. I hope that doesn’t come back to bite investors.

Just looks solid with a capital coverage ratio of 196%. Cash generation before new business was steady at £49m.

Just Group also reported an improved return on equity of 15.6% and an increase in tangible net assets per share to 240p. That offers a huge safety net given that the share price is roughly half that at around 137p.

CEO David Richardson delivered the killer line by saying Just expects to “substantially exceed previous 2024 guidance of doubling 2021’s £211m operating profit in three years”.

The yield is pretty meagre at just 1.52%. However, the board did hike today’s interim dividend by 20% to 0.7p per share. So shareholder payouts are climbing nicely.

My main worry is that annuity sales could slide once interest rates start falling, hitting a key source of revenue.

Should I buy more? Typically, I’m a contrarian who targets out-of-favour stocks. Just is now likely to prove the exception to that rule, too.

Of course, there are plenty of other passive income opportunities to explore. And these may be even more lucrative:

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

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.

Harvey Jones has positions in Just Group Plc. 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »