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These top income and growth stocks still look too cheap

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With the FTSE 100 and FTSE 250 rising 8% and 5% respectively since mid-April, it’s fair to say that markets are regaining their bullish poise following a couple of brief wobbles over the last few months.

That’s not to say that there aren’t still some great companies selling at sensible prices out there. Here are two examples that appear to offer the much-sought-after combination of growth and income.

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Paper profits

£10bn cap packaging and paper company Mondi (LSE: MNDI) released a fairly upbeat trading update to the market this morning.

Q1 underlying operating profit came in at €295m. That was 15% above the £256m achieved over the same period in the previous year and 6% up on the last quarter, thanks to increases in average selling prices and “profit improvement initiatives” at the company.

This performance was particularly decent when you consider that operating costs (relating to wood, energy and chemicals) rose over the trading period.  Currency movements — mostly related to the weaker US dollar and Russian rouble compared to the euro — further impacted profits. 

Mondi also had to contend with the cost of maintenance shuts over the quarter. Coming in at €35m, this was 250% higher than over the same quarter in 2017The FTSE 100 constituent estimates that the total impact of such closures across the entire financial year will now be “slightly above” that originally expected, at approximately €115m.

Nevertheless, as a result of growth in demand and the aforementioned positive momentum in the pricing environment, Mondi’s outlook for the rest of the year “remains positive“. With net debt continuing to fall over the last quarter as a result of strong cash generation, the company’s balance sheet is also looking more robust as the months roll by.

Trading on a reasonable 14 times forecast earnings for the current year and offering a well-covered-if-not-exactly-outstanding 3.1% dividend yield, I remain positive on the stock.

Revenue growth

Cinema chain Cineworld (LSE: CINE) also reported to the market this morning. 

Total revenue rose 10.1% (or 6.7% constant currency) from the beginning of 2018 to 13 May. Boosted by films such as Black Panther and Avengers: Infinity War, group admissions rose 1.1% on a pro-forma basis thanks to stellar performance in the US. While trading in the UK & Ireland and Central Eastern Europe appeared more muted, the company was keen to stress that was largely due to “very strong comparatives” from the previous year.

In addition to these numbers, Cineworld confirmed that it had completed the acquisition of Regal Entertainment Group over the reporting period, adding 558 sites (and 7,305 screens) to its estate. When combined with a two new cinemas in the UK and one in Romania, this brings the total number of sites under the company’s control to 793 (9,548 screens). With the integration of Regal “progressing well“, Cineworld also stated that it had altered its presentational currency to US dollars to “remove the largest driver of currency translation” and increase transparency on how it is trading.

Like Mondi, stock in the FTSE 250 constituent still looks good value at 13 times earnings and comes with a secure 4% yield. Taking into account the plethora of blockbusters due for release in the remainder of 2018 — including Deadpool 2, Solo: A Star Wars Story, Jurassic World: Fallen Kingdom, Incredibles 2 and Mary Poppins Returns — I’m tempted to think that the rebound in the share price seen since February is likely to continue.

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Paul Summers 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.

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