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£1,000 to invest? I’d consider these 2 FTSE 250 stocks for an ISA

FTSE 250 energy services business Wood Group (LSE: WG) won’t be at the top of many people’s buy lists as its share price has fallen by a third over the last year. At 449p, it’s worth roughly half its peak share price of 903p, which it hit way back in April 2011.

Margin call

Today’s half-year report to 30 June was headlined “Strong margin improvement and profit growth supports unchanged full year outlook” and its share price climbed around 1.5% in response, although it’s now down slightly.

The firm provides a range of engineering, production and management repair services to the oil sector and it’s been hit hard by the falling oil price. Today, it posted a pre-tax profit of $62.2m, which more than reversed a loss of $25.3m in the first half of last year, even though revenues fell 2% to $4.79bn.

Chief executive Robin Watson said the recovery was led by energy markets in the eastern hemisphere and its environment and infrastructure operations in North America, “together with cost synergies.”

Gone nuclear

The £3bn group has also made substantial progress on its non-core asset disposal programme, agreeing the sale of its nuclear business for more than $300m, subject to clearance. That brings it close to its target leverage, which rose after acquiring Amec Foster Wheeler in 2017. “With 87% of 2019 revenues delivered or secured, we remain confident in our full year outlook and guidance is unchanged,” Watson added.

Wood Group trades at a discounted valuation of just 10 times forward earnings, while offering a generous forecast yield of 6.5%, with cover of 1.4. Operating margins are narrow at 1.7%, although forecast to rise to 2.8%.

Earnings projections look patchy, though, and with the global economy slowing and Brent crude dipping below $60, I’m struggling to get too excited. However, Peter Stephens reckons it could deliver income and growth over the long term.

Rolling along

People like to crack jokes about sausage roll supremo Greggs (LON: GRG). But investors are the ones laughing because this has been one of the best performing stocks on the entire FTSE 250.

The Greggs share price is up a face-filling 93% over the past 12 months and 263% over five years, as chief executive Roger Whiteside transforms perceptions of the business. Its vegan sausage roll has been one of the marketing ploys of the year, and must have tempted many to wander into its stores for the first time, and maybe even return.

Cheap food, high price

The retailer recently delivered an “exceptional trading performance,” with total sales up 14.7% to £546m, and like-for-likes up 10.5%. Shareholders have reaped the rewards, with management showering investors with interim and special dividends.

So here’s the catch. The £2bn group now trades at a premium valuation of 23.4 times forward earnings so although earnings are projected to rise strongly, these have already been priced in.

Last month, my colleague Paul Summers concluded investors should be looking to bank profits as food inflation, Brexit and high investor expectations could all drag. I’m a huge admirer of what Greggs has achieved but there’s a danger of chasing past performance here.

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Harvey Jones 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.