When I last wrote about the FTSE 250 stock Diploma (LSE: DPLM) in May, its share price had touched an all-time high following its half-year results. Cut to July, and it is even higher, albeit marginally.
That, to me, was a good reason to take another look at it. Diploma supplies a range of technical products ranging from surgical devices to specialised industrial equipment and wiring products. It divides its operations into three segments – life sciences, seals, and controls.
Healthy trading update
In its trading update released earlier today, the company reported “very good trading trends” in all three segments for the nine months ending 30 June. Revenues have been supported in a big way by its acquisitions. It also expects an operating margin of around 19% for the full year. This is a promising buildup on its already healthy financials.
Since it supplies products with relatively resilient demand, it is easy to see why this FTSE 250 stock is in favour at this uncertain time. On the flip side though, that has also made it a pricey stock with a price-to-earnings (P/E) ratio of almost 70 times.
Since we are in recovery now, I am not sure that its share price can continue to rise sustainably in the foreseeable future. This is because stocks that were out of favour during the pandemic, like travel and retail shares, are also in the running now. For this reason, I think it is a buy-on-dip stock for me.
Fortune smiles on this FTSE 250 stock
Another FTSE 250 stock that recently reached a new all-time high is the Big Yellow Group (LSE: BYG), the self-storage services provider. The company benefited from robust business demand as the shift towards online sales accelerated during the pandemic. But even now, it continues to be in a fortunate place, because of increased demand from customers who sold homes before the tapering in the stamp duty holiday.
This has contributed to a more than doubling in occupancy for the quarter ending 30 June compared to the same time last year, as per its trading statement released today. Its revenue, too, has risen at a healthy 15% in the quarter. It has also acquired a number of properties in London, which could expand its business even more.
The downside
There could be some softening ahead in numbers, though. Demand from households can taper as people shift into their new homes. Because of this, the company reports that there has been a higher than usual number of move-outs in July. Besides this, business demand may conceivably slow down as well because the reopening of brick-and-mortar stores can give renewed competition to online purchases.
Still, I think that it can be a rewarding stock to hold for the medium to long term. It has an earnings ratio of sub-10 times, which after all the price increase looks pretty decent to me. I continue to maintain that it is a buy for me.
