Premier Foods (LSE: PFD) hasn’t been a robust earnings generator in recent years as difficult trading conditions have smacked the top line. But City analysts believe the business is about to turn a corner and enjoy a period of sustained earnings growth.
For the year to March 2018 Premier Foods is predicted to report a 10% profits improvement, and to follow this with an extra 6% improvement in fiscal 2019.
And such projections should make the St. Albans-based business an appetising pick for value chasers. Not only does the company carry a prospective P/E rating of 5.2 times – a long way below the widely-regarded bargain benchmark of 10 times – but it also boasts a corresponding sub-1 PEG reading of 0.5.
Turning the corner
Now don’t get me wrong: the Mr Kipling cakes and Ambrosia custard manufacturer is not out of the woods yet. With pressure on UK shoppers’ wallets rising thanks to increasing inflation and stagnating wages, Premier Foods may struggle to see a meaty uptick in sales any time soon.
Indeed, the company saw total sales drop 3.1% during the 13 weeks to July 1st, a result it said was “primarily due to lower sales volumes in the grocery categories, notably desserts.” However, the strength of its much-loved labels helped Premier Foods to continue outperforming the market in the period, and it expects these products to help it return to growth in the current quarter.
With the company’s cost-cutting programme also making huge strides, and overseas demand for its treats also marching higher (international sales rocketed 20% in the last quarter), I reckon Premier Foods could prove a very pleasing growth pick in the years ahead.
Close in on a dividend star
I also reckon Close Brothers Group (LSE: CBG) is worthy of proper attention at current prices.
In the year to July 2017, the Square Mile’s battalion of brokers expect the merchant banking specialist to report a mere 1% earnings improvement, followed by an even more fractional rise forecast for the current year.
These estimates still leave the FTSE 250 star dealing on a hugely-undemanding P/E rating of 11.6 times for fiscal 2018. And Close Brothers should come as a particularly attractive investment destination to income seekers.
For the last year a total dividend of 60.1p is anticipated, up from 57p in fiscal 2016. And this is expected to keep moving upwards with a 62.4p payout predicted for the current period, meaning the firm sports a brilliant 4.1% yield.
Moreover, share pickers can also take confidence in the company meeting these dividend projections, with coverage standing at a robust 2.1 times, above the broadly-considered security yardstick of 2 times.
The London firm’s broad suite of financial services remain in popular demand, and it reported in July that the loan book at its Banking division had grown 6.4% in the 11 months ending June, to £6.8bn.
Close Brothers’s Property Finance and Retail Finance arms also performed strongly in the period, while strong net inflows and favourable market movements helped its Asset Management operations rise 9% to £8.8bn.
Given the terrific momentum the business is enjoying across the board, I reckon Close Brothers is a solid pick for both growth and value investors.
Royston Wild has no position in any of the 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.