The Motley Fool

2 FTSE 250 growth and income stocks I’d buy for my 2020 ISA

Image source: Getty Images.

After a three-year slide, Rank Group (LSE: RNK) shares turned upwards again last summer. The company had been suffering from stagnating earnings as gaming revenues shifted online, but Rank is joining the turning tide.

Analysts are now expecting a 35% resurgence in earnings this year, with accelerating dividend growth. The result has been a 90% share price gain over the past 12 months. I think there’s more to come.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

First half results delivered Thursday underscore what I see as an impressive transformation, with a shift towards online delivery. While total underlying net gaming revenue (NGR) rose by 10.3%, digital revenue surged 13.8%. NGR from traditional venues rose 9.5%, though it still makes up the bulk.


The bottom line appears to be soaring, with underlying operating profit up 87% to £59.8m. Underlying pre-tax profit is up 73% to £52.9m. That supports analysts’ pre-tax consensus of £97m for the full year, and I think Rank could do even better than that.

Rank showed modest underlying net debt of £59m, from net cash of £7.7m a year previously, but still raised its dividend by 30%. Statutory net debt reached £300.5m though, so I’d need to examine the difference more closely before I’d buy.

We’re looking at a forward P/E of around 14.5, dropping to 12.8 on 2021 forecasts. I’m not sure that alone provides the safety I’d need, and the gaming business can be volatile. But further growth beyond 2021, plus continued progressive dividends, would assuage that fear.

There’s a bit more investigation needed, but Rank is definitely a ‘buy’ candidate for me.


Brexit might have kicked the stuffing out of the housebuilding business, and a no-deal dumping could have hit even harder. But sooner or later (and hopefully it’s sooner now), we’ll be over the economic effects. And we’ll still be facing a deep and chronic housing shortage.

As a result, I’ve been persistently bullish over the sector, and I think Redrow (LSE: RDW) could be in for a winning decade.

Redrow shares have been climbing since December and are now up 31% over 12 months. They’re also up 158% over five years. But Redrow has looked perpetually undervalued compared to the sector. And even after that strong price performance, the shares are on a P/E of only 8.6.

Taylor Wimpey shares, by contrast, command a P/E of 11, and fellow FTSE 250 builder Crest Nicholson is on a multiple of more than 12. Redrow’s expected dividend yields are lower than those two, and that probably explains the valuation difference.


The City is expecting 3.9% this year, which is perhaps unexciting, but still represents a five-fold dividend rise in five years. A further uplift suggested for 2021 would elevate the yield to 5.5%, which would be more than twice covered by earnings.

2019 brought record pre-tax profit for Redrow, with very strong cash generation of £124m (from £63m in 2018). And though earnings are expected to flatten over the next couple of years, I see a long-term cash cow here.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Redrow. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.