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I’d sell Stock Spirits Group plc and buy this bargain-basement stock instead

Investors piled back into Stock Spirits Group (LSE: STCK) with gusto in mid-week business following the release of half-year numbers. The share was last 8% higher on the day and dealing around two-month peaks above 170p.

Stock Spirits — which sells alcoholic products primarily in Central and Eastern Europe — announced that total revenues edged 3.3% higher during the six months ending June, to €119.8m. This result helped propel operating profit 32% higher, to €16.5m.

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The drinks giant saw total sales volumes rise 7.3% year-on-year, to 5.7m nine-litre cases. But cost-cutting initiatives introduced last year also played a big part in bulking up the bottom line, with savings of €2.5m chalked up in the first half.

Chief executive Mirek Stachowicz commented that “this performance is a clear sign that the business has stabilised and that the initiatives put in place in 2016 are beginning to deliver tangible results including in Poland.”

He added: “While our core markets remain competitive, we believe that our strategy of further developing our existing brand portfolio whilst continuing to invest in markets and categories with strong potential leaves us well placed to continue delivering long-term and sustainable growth.” 

Not out of the woods

Stock’s latest results pay testament to the hard work it has carried out to jump-start its ailing fortunes. But today’s release still highlighted the problems in some of its territories.

Although price-cutting allowed it to grow revenues and its market share in Poland, drinkers’ appetites for vodka continue to wane. The company explained that while “the overall vodka market in Poland remains in positive growth, [this is] at a lower rate than during 2016.”

Elsewhere, the Buckinghamshire business noted that “the modest growth in the Italian spirits market in 2016 has continued into 2017.”

The City currently expects the firm to endure a 7% earnings fall in 2017, although a 4% rebound is predicted for next year. Still, I would not be tempted to pile in on the hopes of a prolonged recovery given that competition is likely to remain intense, and changing consumer tastes are putting the boot into total vodka sales.

And I reckon a forward P/E ratio of 15.8 times looks a tad lofty given these challenges.

Build a mint

Those seeking stocks with robust growth outlooks would be better off checking out Bovis Homes Group (LSE: BVS), in my opinion.

Just as at Stock Spirits, the number crunchers expect the housebuilder to endure some earnings woe in the immediate term. The 15% bottom-line decline currently predicted reflects its decision to scale back near-term production targets as it prioritises quality over quantity.

But thanks to the strength of the British housing market, this is likely to prove a temporary phenomenon, with supportive lending conditions and a chronic homes shortage keeping property values afloat. As a consequence, the City is expecting earnings to roar 17% higher in 2018.

And current forecasts make Bovis brilliant value for money, a consequent forward P/E rating of 13 times falling below the broadly-considered value benchmark of 15 times. When you also throw a dividend yield of 4.6% into the equation, I reckon the FTSE 250 star deserves serious attention right now.

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Royston Wild has no position in any shares mentioned. 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.