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I think it would be safe to say that shareholders of integrated support services group Carillion (LSE: CLLN) have been pretty underwhelmed by the performance of the company’s shares over the past few years. Despite a turnaround in fortunes, shares in the FTSE 250-listed firm are now hovering around eight-year lows, and only worth half what they were a decade ago. So what’s going on?

Stagnation

Since 2013 the Wolverhampton-based facilities management and construction services group has delivered year-on-year increases in revenues, together with rising levels of pre-tax profits. Revenues have grown by almost 32% to £4.4bn, with pre-tax profits rising 33% to £146.7m over the same period, and yet the share price has sunk from 383p in 2014 to today’s levels of around 210p. The problem? Earnings growth has come to a standstill.

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Prior to 2011, the group had delivered more than a decade of strong earnings growth, and it was almost inevitable that this would come to a halt sooner or later. That happened in 2012 when Carillion recorded its first drop in earnings in nine years, with further declines reported in 2013 and 2014. The company stemmed the falls the following year, but is now showing signs of stagnation, with forecasts suggesting broadly flat earnings for the foreseeable future.

Strong pipeline

Nevertheless, the group still has a strong pipeline of contract opportunities, with a high-quality order book plus probable orders worth £16bn, and revenue visibility for 2017 running at 74%. There have also been good contract wins here in the UK as well as overseas, the firm most recently being selected preferred bidder by the University of Manchester for a £75m student residences project.

Growth may be hard to come by from an earnings standpoint, but revenues and pre-tax profits are on the rise, and should continue to do so as new contracts are awarded. The bargain basement P/E rating of just 6.3 may look cheap, but I’d be more inclined to look at Carillion as an attractive income play. The depressed share price means a massive 8.3% yield is on offer at current levels, with payouts covered almost two times by forecast earnings.

Chunky dividend

Meanwhile, fellow mid-cap construction play Berkeley Group (LSE: BKG) has enjoyed a nice rebound since the Brexit vote, with the share price now back up to pre-referendum levels. Investors who took my advice last August will be sitting on healthy gains of around 30%. So what next? Is it time to take profits and move on?

Perhaps. But I think there are still attractions for shareholders who prefer to hold on for long-term gains, not to mention that juicy dividend. The Surrey-based residential housebuilder remains on target to meet its ambition to deliver at least £3bn of pre-tax profit over the five years ending 30 April 2021, with forward sales in excess of £2.6bn.

Despite the post-referendum rebound, the shares till look good value at just seven times forward earnings, supported by a chunky 6% dividend yield covered more than twice by profits.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Berkeley Group Holdings. 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.

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