4 Neil Woodford Yield/Growth Plays: Homeserve plc, Rightster Group plc, Paypoint plc & Cranswick plc

Four names to keep on the radar: Homeserve plc (LON:HSV), Rightster Group plc (LON:RSTR), Paypoint plc (LON:PAY) and Cranswick plc (LON:CWK).

| 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 shares of Homeserve (LSE: HSV), Rightster (LSE: RSTR), Paypoint (LSE: PAY) and Cranswick (LSE: CWK) amount to just about 1.5% of Neil Woodford’s portfolio. Here’s why you should keep an eye on them. 

Homeserve: A Yield Play 

Homeserve offers home emergency repair services. Most of its revenues are generated in the UK, but the group is also exposed to Western Europe and the US. Its shares, however, are not especially cheap.

But Homeserve is a decent business, with solid growth prospects. As it grows abroad, hefty operating and net income margins are likely in the next couple of years. It has a market cap of £1.1bn, which is roughly in line with its enterprise value. So, net debt is negligible.

The group’s price to earnings ratio stands at 19x for 2015 and 18x for 2016. A projected dividend yield of 3.5% is appealing. The shares were badly hit by a profit warning in early 2013, which followed an investigation by the FSA, but have registered a gain of 74% since a two-year trough in April last year. 

Rightster Promises Growth 

Fancy some exposure to the IT services and consulting sector? 

Rightster offers cloud-based services focusing on the distribution of live and on-demand video. This is a young business with less than £10m of revenues.

Rightster has a market cap of £67.8m, which implies a forward sales multiple of about 7x. As you would expect, the group doesn’t generate positive operating cash flow and doesn’t pay any dividends. The shares are not incredibly expensive, according to the sector’s standards, but Rightster remains a risky investment. 

You would want to add it to a diversified portfolio, in my view. Along with Mr Woodford, other key shareholders are Invesco and Vesuvius. Proceeds from a rights issue in July were used to fund acquisitions.

Is it an opportunistic buy? Well, the stock hit a 52-week low of 32p last week…

PayPoint Offers Growth & Yield

PayPoint provides payments systems and services across a wide range of sectors. It generates £200m of gross revenues, some 80% of which are generated in the UK. Its financials are decent: earnings and dividends have nicely grown in recent years and should continue to do so into 2016. 

Why does Mr Woodford like PayPoint? 

First, it’s a decent income play.

Second, its five-year performance reads +124%, but the stock currently trades more than 20% below the record high it achieved earlier this year.

Cranswick: Just A Boring Food Producer?

You reckon this is the least exciting business of the four, don’t you? 

Of course, Cranswick is just a boring British producer of foods and pet products, you may think. 

You don’t like the sector, do you? 

Profitability is so low for food producers!

Think again. 

Cranswick boats a strong balance sheet. It has a market cap of about £700m, which is in line with its enterprise value.

Its P&L shows a truly impressive track record, while forecasts for growth are promising, although its dividend yield is about one percentage point below the market’s. Its operating profit could easily grow at an annual clip of 10% into 2017, which would likely boost earnings per share.  

Cranswick stock trades around its record highs, but doesn’t look too expensive based on forward trading multiples. Its stock performance in the last two years reads +81%. 

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.

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has recommended Homeserve. The Motley Fool UK owns shares of PayPoint. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

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 »