Superdry

Superdry (LSE: SDRY) is a clothing company. It designs, produces, and sells clothing items and accessories. This is done primarily under the Superdry brand. With the Superdry share price down by 35% this year, a huge director transaction was executed. The purchase of a large sum of shares could boost investor sentiment.

• Name: Julian Dunkerton
• Position of director: Chief Executive Officer
• Nature of transaction: Acquisition of shares
• Date of transaction: 27 May 2022
• Amount purchased: 1,805,172 @ £1.42
• Total value: £1,144,954.58

Foxtons

Second on the list of director dealings is Foxtons (LSE: FOXT). The firm is a British-based estate agency. Foxtons serves as a go-between to buy, sell, and let properties. The Foxtons share price has had a slight hiccup this year, down 5%. A high-ranking director took the opportunity to purchase a substantial amount of shares.

• Name: Nigel Rich
• Position of director: Chairman
• Nature of transaction: Acquisition of shares
• Date of transaction: 30 May 2022
• Amount purchased: 140,000 @ £0.39
• Total value: £54,180

Big Technologies

Last on the list of director dealings is Big Technologies (LSE: BIG). Big Technologies provides products and services to the remote and personal monitoring industry. It does so under the Buddi brand name in the United Kingdom, Australia, the US, and Colombia. Its share price is firmly in the red at -15% this year. However, this didn’t stop a top director from transferring a number of leftover shares to his self-invested personal pension (SIPP) account after buying and selling.

• Name: Daren Morris
• Position of director: Chief Financial Officer
• Nature of transaction: Acquisition of shares
• Date of transaction: 27 May 2022
• Amount purchased: 10,000 @ £2.91
• Total value: £29,100

• Name: Daren Morris
• Position of director: Chief Financial Officer
• Nature of transaction: Disposal of shares
• Date of transaction: 27 May 2022
• Amount sold: 10,000 @ £2.83
• Total value: £28,300

• Name: Daren Morris
• Position of director: Chief Financial Officer
• Nature of transaction: Acquisition of shares
• Date of transaction: 30 May 2022
• Amount purchased: 15,000 @ £2.82
• Total value: £42,300

• Name: Daren Morris
• Position of director: Chief Financial Officer
• Nature of transaction: Disposal of shares
• Date of transaction: 30 May 2022
• Amount sold: 15,000 @ £2.81
• Total value: £42,150

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, partnership shares were bought and sold from the deals listed. Employees are usually allowed to buy shares on a monthly basis through a SIP. But they can also buy shares at the end of an ‘accumulation period’. If there is one in effect, employees can buy shares at the market value either at the beginning or end of the period.

The post Director dealings: Superdry, Foxtons, Big Technologies appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned at the time of writing. 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.

Foxtons

The first of my two British penny stocks to buy right now is Foxtons (LSE: FOXT). This UK business is an estate agency that deals with both lettings and sales. In the past 12 months, the stock price has soared 52% from 43p to 65p.  These solid returns have come as a result of the UK’s ongoing housing boom.

In its latest financial update in early March, the group said trading in the first two months of 2021 was “well ahead” of the prior-year period. It added that the pipeline of sales commissions was more than 30% higher than the same period in 2020. Foxtons posted total revenues of £93.5m for 2020, down from £106.9m in 2019. Not the worst scenario considering the pandemic massively impacted its first-half sales in 2020. The FTSE 250 company is still a big name in estate agency and could have its best chance to regain some former glory by capitalising on current market trends. 

This penny stock is not without controversy though. It has come under fire for its decision to award Nic Budden, its chief executive, a £1m bonus. This decision was widely criticised as it came with the company benefiting from almost £7m of government Covid support, including £4.4m from the furlough scheme. This black mark for the firm has done nothing to enhance its reputation. 

Despite that, I believe this to be a blip on the radar for Foxtons. The potential for growth outweighs the risk for me, so I’ve added it to my shortlist.

N Brown

Another top UK investment right now, I feel, is N Brown Group (LSE: BWNG). It’s an online clothing retailer that focuses on larger-sized and 50+ customers. Penny stock or not, I think this recovery stock is a great bet for me. Its share price is up more than 300% in the past 12 months, from 16p to 67p. 

N Brown’s switch to an online retail-only model in 2018 has greatly reduced leasing costs. And due to the rapid acceleration of online retail in 2020, N Brown was able to capitalise immediately. By removing its bricks-and-mortar business entirely, it can also increase its margins. It has also been helped by Britain’s average waistline getting larger, and its population ageing. I believe that N Brown’s core market is only going to grow.

However, before the pandemic, N Brown posted a 2019 loss of £58m, showing that it has struggled with profitability. And although it appears to be on the rise, that can change overnight in such a fickle industry as fashion retail. The increased competition might simply be too much. I’m certainly taking a risk if I add it to my portfolio.

That’s a risk I believe is worth taking though as, despite recent gains, I think it has more room to grow. With an ever-increasing target market and recent boons in online retail, the sky’s the limit, in my opinion.

The post Are these two UK penny stocks the best shares to buy right now? appeared first on The Motley Fool UK.

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Jamie Adams holds no position in any stocks mentioned above. 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.

The estate agency was last dealing 6% lower on Wednesday after announcing a significant drop-off in profits during 2017. With signs that the London homes market is set to continue struggling, I believe that this is unlikely to be the last frightful release from Foxtons either.

Turnaround predictions in danger?

Today the FTSE 250 business advised that group revenues slipped 11% in 2017, to £117.6m, with sales revenues having tanked 23% year-on-year to £42.6m. As a result, profits at the property powerhouse collapsed to £6.5m from £18.8m back in 2016.

In a subdued assessment of the company’s performance last year, chief executive Nic Budden advised that “[while] we are pleased to have delivered a performance in line with market expectations… sales activity in the London property market is near historic lows and this had a significant impact on our overall performance in 2017.”

The company suffered badly from a slump in the capital’s property market as deteriorating purchaser confidence, coupled with the impact of the stamp duty changes introduced in 2016, have smacked buyer demand.

And these conditions look set to keep Foxtons under pressure for some time yet, Budden adding: “We expect trading conditions to remain challenging during 2018, and our current sales pipeline is below where it was this time last year.”

So it is not hard to envision broker expectations that Foxtons would report a 9% earnings fightback in 2018, as well as a 17% bottom line increase next year, falling by the wayside. However, a huge forward P/E ratio of 28.2 times does not reflect the probability of savage slashes to profit forecasts now and beyond. I see little reason to invest in the business today.

Huge dividend yields

In fact, I would be much happier to play Britain’s property market by selling out of Foxtons and buying into Telford Homes (LSE: TEF) instead.

The evaporation in consumer confidence is actually playing into the hands of Britain’s housebuilders, causing existing homeowners to think twice about listing their properties, which is in turn exacerbating the supply shortage facing first-time buyers.

In this environment, demand for new-build properties continues to surge, helped by the ultra-supportive lending conditions from Britain’s banks as well as the government’s Help To Buy programme.

Taylor Wimpey today underlined the positive outlook for Britain’s builders when it commented: “We have made a good start to 2018 and are encouraged by solid levels of demand coming into the spring selling season.” It added that the fundamentals for new -build housing in the UK remain good. This is the latest in a raft of positive updates across the industry.

Against this backcloth Telford Homes is set to report earnings expansion of 28% and 18% for the periods ending March 2018 and 2019 respectively, figures that result in a mega-cheap prospective P/E ratio of 7.2 times.

To investors’ delight, these projections feed through to predictions of excellent dividend growth too. So a 17p per share reward is forecast for this year and 18.8p for fiscal 2019, resulting in gigantic yields of 4.2% and 4.7% for this year and next. I reckon Telford Homes is a terrific income share to buy right now.

The post One turnaround stock I’d sell today for this ~5% yielder appeared first on The Motley Fool UK.

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Royston Wild owns shares in Taylor Wimpey. 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.

This is a contrarian position at the moment, and is not without risk. The group is battling against falling customer numbers and faces tough competition in the UK and in North America. There’s also the risk of tougher regulatory price caps if Parliament approves the necessary legislation this summer.

However, I think these risks need to be viewed in context. British Gas remains the largest supplier of household energy in the UK, with a vast installed base of customers and equipment. Management is working on ways to improve the appeal and profitability of its customer-focused businesses, and I see no reason why this can’t be successful.

I’m also encouraged by the recent spin-off of the group’s oil and gas business into a new joint venture company, Spirit Energy. This move should provide a future stream of dividends for Centrica without requiring further funding.

Overall, I think the group’s turnaround plan is credible. I’d also suggest that the low valuation of the stock could provide an opportunity for value investors.

Is the 8% yield safe?

In November’s trading update, Centrica’s management said that forecast operating cash flow of £2bn+ means that it expects to be able to maintain the dividend during the group’s turnaround.

It’s clear to me that the dividend remains a priority for the board. I think there’s a good chance the payout will be maintained, but I’m willing to risk a cut. After all, a 30% cut would still provide an above-average yield of 6.1%.

In any case, Centrica’s 2018 forecast P/E of 9.9 looks cheap to me. And it’s also worth noting that the stock currently trades on just 6.1 times its average earning over the last 10 years — a classic value indicator. I remain happy to hold ahead of further news.

It could be too soon for this stock

Shares of London estate agent Foxtons Group (LSE: FOXT) climbed nearly 5% this morning, after a fairly solid year-end trading update.

Since the group’s flotation in 2013, these shares have lost 70% of their value. So investors will be looking for signs that the stock’s decline has bottomed out and that it might return to growth.

Today’s statement shows that revenue from property sales fell by 23% to £42m in 2017, while lettings revenue fell from £68m to £66m due to falling rents. Revenue from mortgage-broking was largely unchanged at around £9m.

My view

This business has historically been heavily dependent on property sales, rather than lettings. And although the lettings business has grown, it’s much less profitable than sales and doesn’t provide support for Foxtons’ mortgage-broking business.

On the other hand, chief executive Nic Budden confirmed that the group still had a “strong balance sheet with no debt” at the end of 2017. Mr Budden also promised to reveal “a number of strategic initiatives” along with the group’s financial results in February.

The shares aren’t obviously cheap on a 2018 forecast P/E of 25, but analysts expect earnings to rise by 10% this year, marking a return to growth. If you’re a fan of Foxtons, then now might be a good time to take a fresh look at this stock.

The post Why 8% yielder Centrica plc isn’t the only dividend stock I’d consider today appeared first on The Motley Fool UK.

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Roland Head owns shares of Centrica. 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.

However, this puts the stock on a forward price-to-earnings (P/E) ratio of 170. Given the challenges which the UK housing market faces, could the company be too highly rated to buy at the present time? Or could it be worth an even higher valuation over the medium term?

Valuation challenges

Valuing a stock such as Purplebricks is relatively difficult. It is currently a lossmaking business and since it is relatively immature, its financial performance is expected to improve dramatically in a relatively short space of time. For example, it is expected to move from a loss of £11m on a pre-tax basis in the current year, to a pre-tax profit of £9m next year. As such, its valuation must take into account potential future growth, as well as its near-term performance.

Growth potential

On the growth front, the company seems to be performing well. Even in tough conditions in the UK it continues to have a strong position within the hybrid estate agency sphere, while expansion abroad could prove to be a shrewd move. It may help the company to diversify ahead of the potential risks from Brexit and will mean it is less reliant on a slowing UK property market for future growth.

Clearly, expanding rapidly into new markets comes with risk. Purplebricks is seeking to diversify internationally before it has delivered a profit, and this may mean its financial standing comes under a degree of pressure. It also means that its capital may be stretched, with there being the potential for it to lose focus on what remains its key market.

Outlook

Falling property prices and lower activity levels have hurt sector peer Foxtons (LSE: FOXT). The London-focused estate agency recorded a fall in its bottom line of 54% last year, with a further 52% decline expected this year. It now trades on a P/E ratio of 27, but as an established company its growth potential may not be particularly impressive. As such, it appears to be worth avoiding at the present time.

Looking ahead, the prospects for the UK housing market seem highly uncertain. The recent interest rate rise showed that inflation is being taken seriously by the Bank of England. Should it rise further then more interest rate rises could be ahead. This may cause the affordability of property to decline – especially among first-time buyers. Housing activity levels may fall even further and leave Purplebricks and Foxtons with a difficult outlook.

However, with growth potential both inside and outside the UK as well as a sound business model, Purplebricks could be worth buying for the long term. While somewhat risky, the potential rewards from investing in it could be exceptionally high.

The post Is Purplebricks Group plc still a strong buy after trading update? appeared first on The Motley Fool UK.

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Peter Stephens has no position in any 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.

Sainsbury’s declared on Tuesday that it was ramping up its streamlining initiatives in a move than underlines the frantic need for the established chains to boost margins in an environment of rising costs and intensifying competition.

I plan to look at Morrisons a little later, but right now I want to discuss estate agency Foxtons Group (LSE: FOXT), another frightful stock I would sell today.

Fox on the run

In yet another chilling trading update Foxtons advised on Wednesday that revenues clocked in at £35.1m between July and September, down 6.4% year-on-year. For the nine months ending September, turnover dropped to £93.7m from £106.3m in the same 2016 period.

In what it described as “challenging conditions in the London property market,” sales revenues dropped 16.3% in the third quarter to £10.3m, while lettings revenues dipped 1.8% to £22.5m.

And a string of releases on the state of the housing market suggest things aren’t about to get any easier for Foxtons. Rightmove announced this week that home values in London fell 2.5% year-on-year in October, while a report compiled by Acadata and LSL Property Services revealed a 2.7% slide in the capital’s property values in September, the biggest annual fall since 2009.

Reflecting current trading troubles, City analysts expect Foxtons to endure a 51% earnings slump in 2017.

Yet I do not believe the possibility of further heavy annual reversals, in the face of worsening economic and political strife in Britain, is reflected in the estate agency’s valuations.

The company sports a forward P/E ratio of 27.7 times, leaving plenty of room for extra share price weakness should news flow continue to disappoint (Foxtons has seen its market value erode by 25% since the start of 2017 alone).

I reckon investors should steer well clear of the property play right now.

Chain of fools

As I mentioned earlier, the sales outlook for the likes of Morrisons is also less-than-compelling right now given that the fragmentation of the British grocery sector is still intensifying.

With cut-price chains Aldi and Lidl still embarking on their massive store expansion programmes, latest figures from industry expert Kantar Worldpanel showed sales at these chains up 13.4% and 16% respectively in the 12 weeks to October 8.

While Morrisons was the best performer of the UK’s so-called Big Four supermarkets in the period, with sales rising by 2.8%, this could not prevent the company’s market share slipping 0.1% to 10.3%. By comparison Aldi’s take swelled to 6.8% while Lidl’s rose to 5.2%, both up 0.6% year-on-year.

And Morrisons is likely to face increasing stress as falling real incomes force more and more Britons into the arms of the discounters, a situation that is likely to feed into further bouts of margin-sapping price slashing.

City brokers expect the Bradford chain to report a 14% earnings improvement in the year ending January 2018. But I do not believe a subsequent forward P/E ratio of 19.2 times is indicative of the risk of Morrisons’ problems worsening in the years ahead.

The post One FTSE 100 stock I wouldn’t touch with a bargepole appeared first on The Motley Fool UK.

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• Here’s what fresh legal news could mean for Lloyds shares
• A new risk has emerged for Rolls-Royce and it could send the share price back to 1,010p
• Here’s how Britons can invest in SpaceX on the FTSE 100
• The BT share price is on fire in 2026. Is there still time to buy?

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.

But I reckon the focus is too heavily biased towards the newcomer now,  and even though the shares have fallen back a bit, I still wouldn’t buy.

Recovering rival?

Sentiment could already be swinging back, as we saw a 10% share price hike for rival Foxtons (LSE: FOXT) on Tuesday, with the shares now trading at 73p.

There was no news on the day, but the spike comes a day before the firm is expected to release a third-quarter update, so optimism appears to be high. What should we expect?

Analysts are currently forecasting a 50% drop in EPS for the full year after a similar crash last year, but even after the firm’s interim results, it might not be as bad as expected. In the first half, pre-tax profit was slashed by 64% to £3.8m and basic earnings per share (EPS) crashed by 74% to 0.43p.

There could be some optimism rebuilding for the second half, despite the firm’s warning that it expects “conditions to remain challenging for the remainder of 2017.“

One thing I do like is the company’s liquidity. At the halfway stage, chief executive Nic Budden told us that Foxtons has “a robust balance sheet, good cash generation and … no debt,” adding that, despite political and economic uncertainty, he expects London “to remain a highly attractive property market for sales and lettings.“

The forward P/E remains high with a forward multiple of around 22 on the cards for 2018 (after a predicted 13% rebound in EPS), but further recovery could drop that to attractive levels. 

Better value?

For a candidate in the same sector with a lower valuation, I’ve been looking at Countrywide (LSE: CWD), whose shares have crashed by more than 80% from their peak in March 2014 to 119p as I write.

Plummeting earnings have been behind the fall, with EPS set to drop for three years in a row if current 2017 forecasts prove accurate, and the previously attractive dividend yield of around 3.5% has been wiped out.

But forecasts put the shares on a low P/E of only eight, which would drop to around 7.5 based on 2018 forecasts — while the dividend would come back nicely to offer a yield of 2.7%. Is that the steal that it appears?

Well, caution is needed, because Countrywide is not debt-free like Foxtons. In fact, at the end of the first half in June, the company reported net debt of £217m. That was down from £248m at the same stage the previous year, but only after a new placing in March 2017.

And to put the debt level into perspective, it’s the equivalent of 77% of the entire market capitalisation of the company — and that scares me. In fact, on that score, I can’t help thinking that a P/E ratio of under eight is perhaps still overvaluing the firm.

Having said that, with a highly-leveraged company like this, the leverage can work to investors’ advantage too — if an earnings recovery does set in and continue over the next few years, we could see an upwards re-rating of the share price.

Too risky for me, though.

The post A turnaround stock to buy after 10% share price hike? appeared first on The Motley Fool UK.

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• Here’s what fresh legal news could mean for Lloyds shares
• A new risk has emerged for Rolls-Royce and it could send the share price back to 1,010p
• Here’s how Britons can invest in SpaceX on the FTSE 100
• The BT share price is on fire in 2026. Is there still time to buy?

Alan Oscroft has no position in any 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.

Country classic

There is a classic today, in the interim results of property company Countrywide (LSE: CWD) for the six months ended 30 June. CEO Alison Platt assured investors that: “We are building a stronger business for our future and remain on track with our goals to broaden our digital capability, reduce our operating cost base and strengthen our balance sheet… we expect our results and our leverage for the full year to be within the range of market expectations.”

The response to these soothing words? A 10.65% drop in the share price, triggered by a perilous 10% year-on-year plunge in total income, from £370.3m to £333m in first-half 2017. Operating profits fell from £28.3m to £6.5m. Earnings per share dropped from 9.8p to -0.1p. Countrywide blamed the 7% drop in housing transactions, while noting that its sales market share held broadly flat at 4.9%.

No dividend

Countrywide said it continues to invest in cost and growth initiatives to build a sustainable and profitable business and remains committed to reducing its leverage, which is the long way of saying: we are not paying you an interim dividend this year. There was positive news too, with growth in mortgage distribution market share, cash generation of £11.8m against £1.6m last year, and a reduction in debt from £248m on 31 December to £217m.

UK house prices remain robust but shortage of supply and lack of affordability are hammering transaction levels and Countrywide is paying the price. Trading at 8.49 times earnings and yielding 3.49%, it may be worth a punt for those who are bullish on bricks and mortar. City analysts reckon that three years of double-digit EPS losses could reverse in 2018, with a rise of 14%. Today could be your chance to get in early.

What does the FOXT say?

London-focused estate agency chain Foxtons Group (LSE: FOXT) is also hurting today, down 5.25% after posting a 64% drop in profits in its interim results for the half year to 30 June. Pre-tax profits plunged from £10.5m to £3.8m, as revenues fell 15% to £58.5m. 

Lettings revenue dipped 2% to £32.1m, although volumes rose 1% and Foxtons CEO Nic Budden hailed this resilient, recurring revenue stream. Sales revenue fell a hefty 29% to £22.2m, although that looks worse than it is due to last year’s Q1 surge as investors rushed to beat the April 2016 stamp duty surcharge. Q2 sales revenue fell just 3% overall, partly hit by electoral uncertainty.

Property crash

At least Foxtons is paying its 0.43p interim dividend. Budden said the company is working hard to beat challenging conditions, and its balance sheet and brand should support long-term shareholder growth. Trading at 16.84 times earnings and yielding 2.19%, it is less of a bargain than Countrywide.  

That said, Foxtons has struggled for some time, with pre-tax tax profits more than halving to £18.77m in 2016, and EPS falling 54%. It has levelled off after a dismal three years that have wiped two thirds of its share price, but the turnaround could take more time.

The post Should you dump Countrywide plc and Foxtons Group plc after today’s disappointing updates? appeared first on The Motley Fool UK.

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• Down 9%! Here are 3 dangers that are emerging for Rolls-Royce shares
• Here’s what fresh legal news could mean for Lloyds shares
• A new risk has emerged for Rolls-Royce and it could send the share price back to 1,010p
• Here’s how Britons can invest in SpaceX on the FTSE 100
• The BT share price is on fire in 2026. Is there still time to buy?

Harvey Jones has no position in any 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.

Improving outlook

Reporting on Monday was residential property services specialist LSL Property Services (LSE: LSL). The company’s share price jumped 11% after it announced a strong trading performance for the first half of the year. It expects to report half-year results which are ahead of the board’s expectations, and which are a major improvement on the same period of last year.

In particular, the Estate Agency division has performed well and delivered strong growth in Lettings and Financial Services income. There has also been a sound performance from LSL’s Surveying division, while a smaller number of non-recurring items versus the same period of last year has also boosted the company’s performance.

Overall, operating profit for the first half of the year is due to be ahead of prior expectations. This could push the company’s share price even higher in the short run, although LSL continues to be a relatively unpopular share. Evidence of this can be seen in its valuation, with it trading on a price-to-earnings (P/E) ratio of just 10.8 and having a dividend yield of 3.6% from a payout which is covered 2.6 times by profit. This suggests there is upside potential – especially with the company forecast to record a rise in earnings of 8% next year.

Growth potential

Also relatively unpopular among investors at the present time is Foxtons (LSE: FOXT). The London-focused estate agency has endured a difficult period of late, with its profitability coming under pressure at least partly because of weakness in the London property market. In the short run, those pressures could continue and the company may experience difficult trading conditions. However, in the long run there could be a buying opportunity for dividend investors.

Although Foxtons currently yields just 2.1%, there is scope for significant growth in shareholder payouts. One catalyst for this could be a rising bottom line, with earnings expected to rise by 15% in the next financial year. This could put the company on a dividend coverage ratio of 1.9, which suggests a much higher dividend is affordable.

In addition to dividend growth potential, it remains unpopular among investors. It trades on a price-to-earnings growth (PEG) ratio of just 1.5, which suggests there is capital growth potential. Certainly, the outlook for London property and estate agents is uncertain as a result of Brexit, but with a low valuation and dividend growth potential, the company could prove to be a sound buy.

The post Two unpopular dividend stocks I’d buy today appeared first on The Motley Fool UK.

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• Down 9%! Here are 3 dangers that are emerging for Rolls-Royce shares
• Here’s what fresh legal news could mean for Lloyds shares
• A new risk has emerged for Rolls-Royce and it could send the share price back to 1,010p
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Peter Stephens has no position in any 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.

Alongside this robust set of results for the first half, Countryside’s management also provided an upbeat outlook for the rest of the company’s financial year. Management now expects results to be ahead of market expectations for the year thanks to a “sharp increase in completions which looks set to continue in the second half.” The company is entering H2 with a “record private forward order book.”

Undervalued?

Current City forecasts are projecting earnings per share of 25.6p for the financial year ending 30 September, but after today’s update, it looks as if these figures are set to be revised substantially higher. And with this being the case, even though shares in the group have risen by 18.7% year-to-date, there could be further gains on the cards. Indeed, if the company outperforms City forecasts the shares will be trading at a low teens forward earnings multiple, which looks cheap compared to Countryside’s earnings growth. The shares also support a dividend yield of 2.8% covered three-and-a-half times by earnings per share, leaving plenty of room for further growth.

This is certainly one hot property stock I’d keep my eye on.

Overvalued

On the other hand, I would avoid estate agent Foxtons (LSE: FOXT) as the company struggles to maintain its composure in London’s creaking property market.

After a tough 2016 in which profits fell by more than 50%, this morning the company has reported a 25% decline in revenue year-on-year. A slowing property market seems to be entirely to blame for this decline with property sales commissions falling from £20m to £11.1m for the period. What used to be described as relatively stable lettings revenues also fell by £300,000 to £15.5m.

City analysts are expecting it to report full-year pre-tax profits of just under £14m on revenue of £124m, which can only be described as a relatively dismal performance for the group. For some perspective, during 2014 it generated a pre-tax profit of £42m. So, over the past three years, pre-tax profit has fallen by more than two-thirds.

With this being the case, it is surprising that shares in Foxtons currently trade at a forward P/E of 26, an extremely demanding valuation more suited to a high-growth tech company than struggling London estate agent.

Put simply, considering the premium valuation and falling earnings, coupled with the group’s cloudy outlook it’s difficult to get excited about the shares. Compared to Countryside, Foxtons looks to be a poor investment.

The post One ‘hot property’ growth stock I’d buy and one falling knife I’d sell appeared first on The Motley Fool UK.

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Rupert Hargreaves has no position in any 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.