Finding a FTSE 250 stock in the bargain bin can be tough. The UK mid-cap index has climbed 15.9% higher to 21,114 points in the last 12 months with over 170 companies in the index making gains.
That said, there is one part of the economy that I’ve had my eye on. The maritime industry has been in the news lately amid rising geopolitical tensions and higher supply chain costs.
Once I saw a beaten down FTSE 250 stock in that industry, I had to investigate: the good, the bad, and the ugly.
Industry I like
Clarkson (LSE: CKN) is an integrated maritime powerhouse. The company offers integrated services covering ship broking, research, finance, digital tools, port services, and green-driven advisory services.
I have had my eye on maritime services for a while now. There’s potential for growth with increasing global trade and an ongoing reliance on shipping for a large part of that.
The operating environment has stabilised and freight costs have fallen. Additionally, the company is pushing into emerging areas including offshore wind, as well as base and battery metals.
Strong financials
One thing that caught my eye was Clarkson’s interim 2024 results. Revenues and underlying pre-tax profit were under pressure in the six months to June, with the latter sliding 3% to £109.2m. That’s not bad considering a fairly bumper year was had in 2023.
Underlying earnings per share of 129.1p, alongside £178.4m of cash and liquidity, saw the board declare a 32p per share interim dividend. That represents a 7% increase from last year and an incredible 22nd consecutive year of dividend increases for the FTSE 250 stock.
With unchanged full-year guidance and a robust balance sheet, I thought I’d take a look at Clarkson’s valuation.
Valuation
The FTSE stock has a price-to-earnings (P/E) ratio of 13.5 right now. That looks to be a touch on the cheap side for me, particularly given the historically strong dividend growth.
Throw in a 2.9% dividend yield for the income investors out among us and there’s a bit to like.
The catch
There’s no such thing as a free lunch in investing and Clarkson is no exception.
One thing that stood out is a price-to-book (P/B) ratio of 2.4 which is always worth noting. However, as it is a services provider, I can look past this based on the nature of its balance sheet and service offering.
The FTSE 250 stock is up nearly 30% in the past 12 months and sitting at 3,685p despite a recent wobble. That was largely because investors weren’t too impressed by the half-year results.
I think a big part of that may have been the bumper 2023 period that year-on-year figures were being assessed against. A cyclical business like Clarkson isn’t without its risks, but the progressive dividend policy and forward outlook have me kicking the tyres a little more.
The verdict
Investing in a FTSE 250 stock like Clarkson isn’t without its challenges. Looking through the short term, I do see some long-term potential and diversification opportunities.
While I don’t have the cash available at the moment, I’ll be looking to invest before the end of the year if I can. Any further share price declines towards the 3,000p mark would put it even more firmly in the buy zone for me.
