The stock is Dowlais (LSE:DWL), and American Axle & Manufacturing Holdings is the company that has put together a deal worth 85.2p per share for it. The current Dowlais share price is 69.45p, but there’s a lot more to it than this.

The deal

Ordinarily, I’d be pleased to receive this type of offer. Even if I didn’t think it reflected the full value of the company, I’d find something else to do with the cash. 

The trouble is, the way the deal is being financed makes things complicated. The 85.2p per share offer consists of the following:

• 42p in cash
• a final dividend of 2.8p
• 0.0863 shares in the new combined company

This amounts to 82p per share based on a couple of key assumptions. The first is American Axle being worth $5.82 per share. The second is an exchange rate from GBP to USD of 1.2434.

Neither of these is outrageous – both were true when the deal was agreed. But things have changed since then and the deal now looks a lot worse for Dowlais shareholders. 

What’s happened?

The biggest problem is that shares in American Axle have been falling since the deal was announced. The share price is currently $4.93 – 15% below the level assumed in the takeover.

Since around 40% of the proposed valuation comes from shares in the new company, this significantly reduces the value for Dowlais shareholders. And there’s also an issue of exchange rates to consider.

The value of the pound against the dollar is slightly higher than it was a week ago. And that’s weighing on the potential return for investors in the FTSE 250 company. 

As a result, the overall deal looks much less attractive for shareholders like me than it did when it was initially announced. And that gives me a bit of a dilemma. 

What next?

When I bought Dowlais shares, the firm was planning to divest its powder metallurgy unit. I expected the proceeds to strengthen the balance sheet and leave behind an attractive car parts business.

That now looks unlikely. However, while while the stock could climb sharply from its current levels if the deal goes through, I wouldn’t be surprised if it doesn’t — at least, not in its current format.

Management has recommended shareholders vote in favour of accepting the offer. But with over 90% of shares in the FTSE 250 company owned by institutions, it isn’t in a position to force the issue. 

Rejecting the offer is risky – Dowlais might not find a buyer interested in taking its powder metallurgy business by itself and the business has a lot of debt. So there’s a real dilemma here for investors.

What I’m doing

I nearly never view a stock as a Hold – I usually think stocks are either too cheap (and want to buy them) or too expensive (and want to sell them). But Dowlais might just be the exception. 

The stock could climb 23% if shares in American Axle pick up or exchange rates turn favourable, but that’s highly speculative. With so much uncertainty around the outlook, I’m going to sit and wait.

The post This FTSE 250 stock could jump 23% in 2025 appeared first on The Motley Fool UK.

One guide to what a stock is actually worth is the company’s book value – the difference between its assets and its liabilities. And a lot of UK shares look cheap on this basis.

Young & Co’s Brewery

Young & Co’s Brewery (LSE:YNGA) doesn’t actually operate any breweries – it runs a chain of pubs and hotels. And the stock trades at a price-to-book (P/B) multiple of 0.6. 

That means investing is a bit like buying £1 coins for 60p. But for investors to get that £1 in cash, the firm would need to liquidate its assets, which it’s currently showing no signs of doing. 

It’s therefore probably more accurate to say investing in Young’s shares is like buying £1 coins in a locked money box for 60p. But I think there are other reasons to like the business and the stock.

The firm owns its pubs outright instead of leasing them, which protects it from rising rents. And its focus on the premium end of the market means it has much higher margins than JD Wetherspoon.

While high margins are a good thing, premium pricing is risky. Young’s plans to pass on the effects of higher staffing costs from the Budget by increasing prices, but these are already relatively high.

I think there’s a real danger this could put customers off. So while I like the business and I’m considering buying the stock, I’m certainly not dismissing this risk.

Dowlais

Right now, shares in Dowlais (LSE:DWL) are trading at a P/B multiple of 0.4. And unlike Young’s, the company is trying to realise this discount by selling off its assets. 

Specifically, the firm is trying to divest its Powder Metallurgy business. This is valued on its balance sheet at £884m, which is a lot in the context of an organisation with a £911m market cap. 

That makes it seem like investors could get all of their money back by selling part of the company, but it’s not quite as straightforward as this. Dowlais has a lot of debt that also needs factoring in.

Even accounting for this, though, I think the stock is clearly undervalued. And the remaining business – which manufactures parts for cars – looks like it’s in a strong position. 

It has agreements with 90% of the leading car companies and is especially well-positioned to benefit from the shift to electric vehicles. I think this is inevitably, which is very positive for Dowlais.

Investors shouldn’t ignore the debt on the firm’s balance sheet as an ongoing source of risk. But I think the potential sale of the Powder Metallurgy business makes this a stock to consider buying.

Bargain prices?

A lot of UK shares trade below the book value of the underlying businesses, but not all of them are bargains. Stocks that look cheap can turn out to be value traps.

I think Young’s is a quality business and Dowlais has a clear plan to generate value for shareholders. That’s why the discount to book value is something investors should take seriously in both cases.

The post 2 UK shares trading below book value appeared first on The Motley Fool UK.

The next destination

Even for an investor who isn’t young, I believe there’s still a place for some allocation to growth stocks. A good example is Trainline (LSE:TRN). I think most of us have used the Trainline app at some point over the year, with it being Europe’s most downloaded rail app.

Over the past year, the stock has jumped by 49%. This has been fuelled by strong financial results. Last month, the half year earnings showed a 44% increase in the adjusted EBITDA versus the same period last year. Operating profit jumped by 117%.

What’s interesting is that even though rail isn’t a new form of travel, Trainline is growing market share and has been increasing revenue for a while now. The use of technology has helped to open up the market to new users. I don’t think we’ve reached peak user engagement yet, so I believe Trainline can keep this growth up for several years to come.

As a risk, the business is reliant on third-party train operators. Strikes, delays and other negative impacts are outside of the control of Trainline. Yet it would still experience some reputational damage (as well as lower revenue) as customers will be disgruntled in these situations.

Income potential

The other angle to help build wealth is via including a dividend stock. Over time, the income payments can be reinvested, compounding gains over many years.

An income stock for investors to think about is Dowlais Group (LSE:DWL). The UK engineering company was listed as an independent firm in 2023 following its demerger from Melrose Industries. So even though it doesn’t have a long track record specifically, Melrose Industries does. The stock is appealing as engineering is a defensive sector that has a proven profitable business model.

The share price for Dowlais has fallen by 36% over the past year, with the dividend yield at 6.64%. This is well above the FTSE 250 average. Although the demerger has allows Dowlais to focus on what it does best (primarily within the automotive sector), the slowdown in demand in this sector hasn’t been great.

However, investors might see this as a good dip to buy, both from a valuation perspective but also for the current yield. A price-to-earnings ratio of 4.5 is less than half of the ratio of 10 that I use for a fair value comparison. As for the dividends, I don’t see any concerns about them being cut. Aside from a brief period during the pandemic, Melrose Industries has been paying out income for years.

The post 2 UK stocks to consider buying to build wealth after 40 appeared first on The Motley Fool UK.

In both cases, companies are looking to sell off some of their less attractive divisions. And I think this has the potential to unlock significant value for shareholders in 2025. 

Anglo American

Earlier this year, BHP thought they saw value in FTSE 100 mining company Anglo American (LSE:AAL). And I think they were right to take this view. 

The firm has some interesting assets in copper and iron ore, as well as some less promising ones in platinum, coal, and diamonds. But the company is looking to divest these.

Earlier this week, Anglo American announced the finalised sale of its coal assets for a total of $4.9bn. That’s around 15% of the company’s current market cap. 

The risk going forward for the business is demand for copper falters in the future. And the biggest chance of this is if the energy transition takes longer than expected.

Despite this, I think Anglo American has the right strategy and the cash released by the divestitures should offer good value for investors. That’s why I’ve been buying the stock. 

I do expect the opportunity to become less attractive as the company restructures, though. So while I like the look of the business for the long term, I’m also after the short-term benefit.

Dowlais

Since it was divested from Melrose Industries in April 2023, Dowlais (LSE:DWL) shares have fallen 60%. And at first sight, the underlying business doesn’t look great, either.

Revenues have been falling, the company has been reporting losses, and the balance sheet looks heavy on debt. But all of this is hiding what could be a very attractive opportunity.

Things aren’t as bad as they look, though. A combination of a cyclical downturn and one-off costs have been weighing on sales and profits and the firm has a plan to fix its debt.

Dowlais has two operating divisions – Automotive and Powder Metallurgy. And it’s looking to sell off the latter, which generated £96m in operating profits in 2023. 

The big risk is that it won’t be able to achieve a decent price for the unit, which would make the investment equation much less attractive. If it can, though, I think things look very promising.

Dowlais achieving eight times 2023’s operating income would generate cash equivalent to the firm’s entire market cap. And in that situation, I wouldn’t be worrying about the firm’s debt.

Warren Buffett

Both Anglo American and Dowlais look to me like decent companies trading at excellent prices. And as Warren Buffett points out, the reverse is usually preferable.

I agree with this. But Buffett has also said that if he were starting again, he would look for undervalued opportunities – and that’s what I think I have here.

From a valuation perspective, there’s enough short-term return enough for me to buy both shares at today’s prices. Over the longer term, I’ll look to see how things develop before deciding how long I want to keep them for.

The post What are the best value shares for me to buy in December? appeared first on The Motley Fool UK.

Here are three passive income stocks that have grabbed my attention:

Dividends are never, ever guaranteed. But if broker forecasts are accurate, a £9,000 investment spread equally across these shares would produce a £657 passive income just in 2025.

I’m confident that each of these stocks could provide increasing dividends over time, too. Here’s why.

Bumpy road

First off, it’s important to say that Dowlais Group — which builds parts for auto makers — isn’t for the faint of heart. Its share price has plummeted 55% since it listed last spring. It could continue falling too if pressures in the car industry persist.

But looking longer term, I believe the engineer has significant rebound potential. This is because of its focus on the high-growth electric vehicle (EV) segment. Comprising parts of former FTSE 100 stock GKN, it is a leading light in areas like electric powertrain technology.

In the near future, too, Dowlais’ share price could receive a bump if it manages to sell its Powder Metallurgy unit which it put up for sale in August.

With that near-8% dividend yield and low price-to-book (P/B) ratio of 0.2, I think the company merits serious attention at today’s prices.

Boxing clever

I already own Tritax Big Box REIT shares in my Stocks and Shares ISA. As a real estate investment trust, or REIT, it’s designed to provide a steady stream of income to investors.

This is because, in exchange for tax advantages, it must pay out at least 90% of annual rental profits in the form of dividends.

There are almost 50 REITs listed on the London Stock Exchange. Tritax is one of my favourites because of its focus on the chronically undersupplied warehouse and distribution centre market. Like-for-like annualised rents at Tritax rose 5.1% on leases subject to rent review in the first half.

Like other property stocks, its share price could fall if interest rates fail to fall significantly from current levels. But a healthy long-term outlook makes this dividend stock worth serious consideration.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Green machine

Renewable energy stocks have fallen sharply following the US Presidential election. This includes Greencoat UK Wind, which could have further to fall if Donald Trump makes things tougher for green energy providers, souring the broader sector.

I’m confident, however, that renewable energy stocks could bounce back sharply over a longer time horizon. As the climate crisis worsens, I think demand for wind energy and other clean sources might still explode, whoever is in the White House.

Greencoat UK Wind owns wind assets worth £3.6bn across the country, both onshore and offshore. This wide footprint reduces the risk that unfavourable weather conditions in one or two regions pose to group profits.

From a dividend standpoint, I also like the firm’s pledge to raise shareholder payouts in line with retail price inflation (RPI). It’s a policy that ensures my passive income keeps pace with appreciating living costs.

The post £9,000 to invest? These 3 high-yield shares could deliver a £657 annual passive income appeared first on The Motley Fool UK.

Aston Martin Lagonda

What it does: Warwick-based Aston Martin Lagonda Global Holdings is a luxury car company.

By Paul Summers. Having fallen 96% since listing, surely the only way is up for Aston Martin Lagonda (LSE: AML) shares? As things stand, I’m not convinced. It could easily get worse for a company now on its fourth CEO in four years. 

My issue is not the beautiful cars; it’s the mountain of debt on its balance sheet. This is currently around the same as the value of the firm itself (£1.3bn). That’s hardly a solid foundation for a rip-roaring recovery. Then again, I’m not surprised. Aston Martin has gone bankrupt seven times before. 

To be fair, the entire luxury sector is struggling. And at least the board has predicted that volumes and profits will rise in the second half of 2024. If this can continue into 2025 and beyond, I might change my opinion.

But right now, this is a punt stock and nothing more.

Paul Summers has no position in Aston Martin Lagonda Global Holdings.

Burberry

What it does: Burberry is one of the world’s biggest fashion houses with more than 450 retail outlets across the globe.

By Royston Wild. The Burberry (LSE:BRBY) share price has crumbled by around 50% in the past six months. The fashion giant’s now lost three-quarters of its value over the past year, and it’s tough to see how it breaks out of the downtrend that began in May 2023.

Investors were spooked by the firm’s failure to raise profits guidance back then. But things have gone from mildly concerning to outright alarming over time, its realignment to focus on the ultra-expensive end of the luxury goods market backfiring spectacularly.

Latest financials showed sales down 22% in the three months to June. So Burberry’s hoping the appointment of Joshua Schulman as new chief executive in July will spark a recovery. Schulman’s an industry veteran with successful stints at the likes of Jimmy Choo and Michael Kors, so that experience could prove extremely fruitful for the business.

It may prove a masterstroke. However, turning Burberry round is a tough job, as the merry-go-round of CEOs in recent times has proved. And Schulman’s task is especially difficult against the backdrop a struggling luxury sector.

I can see the FTSE 100 firm continuing to struggle.

Royston Wild does not own shares in Burberry.

Dowlais Group

What it does: Dowlais is a group of automotive engineering businesses focused on the transition to sustainable vehicles.

By Mark David Hartley. To say Dowlais Group (LSE: DWL) has had a bad year would be an understatement. It only went public just over a year ago and already the shares are down 50%. The company was formed in 2023 as a demerger of two companies from aerospace manufacturer Melrose Industries. It operates as a collection of engineering businesses focused on sustainable vehicles. With the market for sustainable vehicles expected to grow significantly, the company is well-positioned to benefit.

Despite bringing in £1.14bn in revenue last year, it posted a £50.5m loss, with earnings per shares (EPS) at -4p. However, such losses aren’t that uncommon for newly-listed companies. Sales-wise, it seems to be doing well, with a price-to-sales (P/S) ratio of 0.16. I think the shares could still fall further but with a 9.78% dividend yield, the low price seems a great opportunity to grab them while cheap.

Mark David Hartley does not own shares in any companies mentioned.

Ocado Group

What it does: Ocado Group is a grocery retailer, e-commerce and logistics business with a presence in 12 countries.

By James Beard. With its share price plummeting 70% since September 2019, I think Ocado Group (LSE:OCDO) qualifies as a FTSE flop.

Its favourite measure of profitability is EBITDA (earnings before interest, tax, depreciation and amortisation) which was £51.6m during the year ended 3 December 2023 (FY23). But it’s borrowed heavily to invest in its clever technology which will need replacing at some stage. This means its ‘I’ and ‘D’ are significant — its FY23 pre-tax loss was £393.6m.

Presently, its joint venture with Marks & Spencer accounts for approximately 70% of revenue.

But Ocado describes itself as a technology business and sees a path to profitability through licensing its platform to third parties and providing automated warehousing solutions and delivery services to others.

However, despite being around for 24 years, there’s no immediate prospect of the company moving into the black. For this reason, I wouldn’t touch the stock with a bargepole.

James Beard does not own shares in Ocado Group.

Vodafone 

What it does: Vodafone is a multinational telecommunications giant. During the dotcom boom, it was the largest company in Europe by market capitalisation. 

By Charlie Keough. Despite posting a gain this year, Vodafone (LSE: VOD) has been a terrible performer in recent times. In the last 12 months, its share price is down by 1.8%. In the last five years, the stock has lost a whopping 52.2% of its value. 

While it may look cheap on paper, I think the stock could be a classic value trap. It’s one I’ll be avoiding adding to my portfolio anytime soon. 

Its shares look on the expensive side. At the time of writing, they trade on 20.9 times earnings, comfortably above the FTSE 100 average of 11. 

Granted, the business has been in transition, which I must take into consideration. And it has turnaround potential. As part of its streamlining mission, it has offloaded underperforming businesses to raise cash. 

But I’m put off the large debt it has on its balance sheet. I think that could halt growth moving forward. 

Charlie Keough does not own shares in Vodafone. 

The post 5 FTSE flops Fools think have further to fall appeared first on The Motley Fool UK.

Sometimes, a business can use its cash in a way that significantly improves its long-term outlook. And in that situation, it’s best for investors if it doesn’t pay it out as a dividend.

Forterra

One example is Forterra (LSE:FORT), which I used to hold. The stock has a dividend yield of 1.66%, but I don’t think it should be sending cash out to shareholders at the moment.

The company’s a brick manufacturer and – understandably – has been finding a weak housing market’s bad for business. And this has been showing up on the firm’s balance sheet.

At the end of 2022, net debt was £24m, but this jumped to £117m at the start of 2023 and reached £123m by the end of June. And that’s a lot for a business like Forterra.

For context, the company’s operating income in 2022 – its best year in the last decade – was £72m. So I think it will be a while until the firm’s able to get its balance sheet to 2022 levels.

Given this, I’d rather see Forterra reducing its debt than sending out cash to shareholders. The dividend has been cut substantially, but I’d prefer to have seen it suspended entirely.

The company’s in a cyclical downturn and things are likely to improve by themselves. But paying dividends with debt levels growing substantially isn’t something I like the look of.

Dowlais

Unlike Forterra, I still own shares in Dowlais (LSE:DWL). And despite a pretty attractive dividend yield of almost 8%, I think the company has better uses for its cash. 

The FTSE 250 manufacturer also has a lot of debt on its balance sheet. But it’s planning to sell off one of its divisions, so the cash from that could be used to strengthen the financial position.

Right now though, I think Dowlais shares are incredibly cheap. And that means I’d rather the firm used its excess cash for share buybacks, rather than dividends. 

If the share price stays where it is (or anywhere near it) I’m expecting to reinvest the next dividend I receive. At today’s prices, I’d like to own more of the company. 

But it’s more efficient for this to happen by Dowlais buying out other shareholders. And in fairness, the company has been doing this over the last few weeks and months. 

From my perspective, buybacks make a lot more sense for investors with the stock at its current levels. So I’d rather see the cash go there. 

Long-term investing

Sometimes, the best thing for a company to do with its cash is return it to shareholders as dividends. But this isn’t always the case.

When a business has a better opportunity, I want to see management taking it. Ultimately, that’s what is going to determine the success of my investment.

In the right circumstances, I’m very happy to do without dividends in the short term if it means I’ll get more in the future. That is – after all – what investing is all about.

The post 2 UK shares I wish DIDN’T pay dividends appeared first on The Motley Fool UK.

FTSE 250 manufacturer Dowlais (LSE:DWL) has just released its trading update for the 10 months to the end of October. And the news has sent the firm’s shares soaring 17%.

The stock was down 55% before Wednesday’s (13 November) announcement. But I think the company is doing the right things and the share price looks like a potential bargain. 

The headline news

Dowlais has two operating units. The automotive business makes drive systems and the powdered metal division makes sintered metal components. 

Things haven’t been going well during the first six months of 2024. Sales fell 5% and earnings per share declined by 30%. 

That continued in the third quarter, with the decline in overall revenues for the year increasing to 6%. Automotive revenues fell 7% as electric vehicle production slowed and powdered metal sales dropped 1.9%.

That isn’t especially encouraging and the risk of this continuing is real. But beyond the performance of the underlying business, there are a couple of positive signs.

Buybacks

The income statement has been ugly in 2024. But I think Dowlais has been very intelligent with the cash it has been generating. 

Over the last few weeks and months, the company has been aggressively using its cash for share buybacks. As a result, the number of shares outstanding has been falling. 

The firm has £915m in net debt – which is more than its current market cap. And that might make investors question the wisdom of repurchasing shares at this point. 

I understand the concern. But with the stock trading at such a low level, I think management is doing the right thing to add long-term value for shareholders. 

Valuation

With the stock moving higher, Dowlais has a market cap of £770m. In the context of £4.2bn in (adjusted) revenues during the first 10 months of the year, that doesn’t look like a lot to me. 

The company’s profits are still depressed as a result of ongoing restructuring costs. But the powder metallurgy business has made £527m during the first half of the year. 

In August, Dowlais announced that it was looking into selling this part of the company off. If this happens, it could be a big catalyst to push the share price higher. 

If the firm can use the proceeds to clear its debt, shareholders could be left with a strong automotive business still trading at a very cheap price. I think the potential rewards are well worth considering even with the risks.

Outlook

I expected the Q3 update to cause a big move in the Dowlais share price – in either direction. Sales falling further would make 2024 a very bad year, but any improvement could make the stock look very cheap.

When it comes to my investment thesis though, short-term earnings are beside the point. I think the stock is significantly undervalued and I’m looking for the company to unlock this.

I believe the firm repurchasing shares while they’re cheap and trying to realise the value in its powdered metals business are good moves. I’ve been buying the stock and I expect to continue.

The post The Dowlais share price is SURGING after Q3 earnings. I think the FTSE 250 stock still looks like a bargain appeared first on The Motley Fool UK.

At the end of last week, I decided to sell part of my investment in Citigroup and Norfolk Southern. At the time, they were the two largest investments in my Stocks and Shares ISA.

This has nothing to do with the Budget, my view hasn’t changed on either business, and I still own a good amount of both. But I decided there was something else I wanted to buy.

Selling shares

In general, I’m not a big fan of selling investments. Even when a stock becomes a large part of my portfolio – as those two had – I prefer to add to other things, rather than sell. 

I also try to avoid setting up my portfolio to be ready for near-term events. For example, I don’t look to sell cyclical companies when I think there might be a recession on the way. 

There are two reasons why I might sell stocks though. One is if my outlook for the business changes – either because something happens or I find out something I didn’t already know. 

In that situation, I’d probably look to sell all of my shares in the company. If something causes me to stop seeing it as an opportunity, it’s unlikely that I’d want to own it at all.

That isn’t the case with either Citigroup or Norfolk Southern. So I’ve retained the majority of my shares in both (and Citi is still the largest investment in my ISA).

The other reason is if I see a different opportunity I want to take advantage of. In that case, I might raise cash by selling part of another investment – and that’s what has happened here.

What I’ve bought

This raises the question of what I’ve been buying. The answer is Dowlais (LSE:DWL) – a FTSE 250 engineering firm that’s fallen so far I decided action was required. 

Revenues are falling, the business is paying dividends despite not turning a profit, and the stock is down 56% in 18 months. There’s a danger of this continuing. But I see a lot of hidden value here. 

First, Dowlais hasn’t actually been performing as badly as it seems. Its reported losses are due to one-off restructuring costs and some non-cash charges in the form of goodwill impairments.

Neither of these looks to me like a serious long-term issue. Leaving them aside, the company generated around £355m in operating profit in 2023 – over half its current market cap.

Second, Dowlais is considering selling its powdered metals division, which reported operating income of £96m in 2023. This could put investors in a very nice position if a deal goes through.

If the firm clears its debt with the cash, shareholders will be left with the automotive arm. That made £300m in operating profit last year – and the market cap today is around £650m.

Risks and rewards

Whether or not Dowlais goes ahead with the sale of its powdered metal business, I think things look good from an investment perspective. I can see above-average returns either way. 

It’s unusual that I sell shares in companies that I’m still positive about, but it does happen when something very unusual comes along. This is one of those times.

The post Why I’ve just sold two of the largest investments in my Stocks and Shares ISA appeared first on The Motley Fool UK.

The stock looks cheap, at around 8 times free cash flow and with a 7.5% dividend yield. But the interesting stuff’s just getting started.

What Dowlais does

Dowlais consists of two operating divisions. This used to be three in 2023, but the firm’s since disposed of its hydrogen storage solution. 

By far the biggest division is the automotive operation. This makes up around 80% of revenues and manufactures drive systems used in around half of all light vehicles globally.

The rest of the company’s a powdered metals business. It’s the market leader in this industry and has over 3,000 customers.

In its interim report in August, Dowlais announced it was considering selling its Powder Metallurgy division. And that’s where I think the potential opportunity could be for investors.

Powdered metal

In 2023, Powder Metallurgy generated just over £1bn in revenues and £96m in operating profits. Since then, sales have declined slightly, but operating income’s been steady.

The obvious question is what Dowlais might make by selling the operation. It’s hard to forecast exactly, but at today’s prices, I think there’s a big margin of safety.

I think a conservative forecast might have the Powder Metallurgy business selling at 3 times operating income. That would generate around £288m.

The thing is, Dowlais has a market-cap of £730m. That means investors could be left with the core automotive business that made £306m in operating income last year at a price of £442m.

An unbelievable bargain?

As I see it, this could potentially be the kind of opportunity for investors that doesn’t come around very often. I’m very interested, but there’s more to think about.

The first is that the automotive business – the part that investors are set to be left with – has been struggling in 2024. Sales in this part of the firm were down 10% in the first half of the year.

Investors should take note of this, but it’s also worth keeping in mind that management’s attributing this to car sales slowing. And I expect this to remedy itself with time.

That’s why the share price has been falling. But I think the stock has reached the point where the value on offer for investors more than justifies the risks. 

Looking past the surface

Dowlais recorded negative earnings in the first half of 2024, making the stock look expensive and suggesting the dividend’s in danger of being cut. I don’t think either of these is the case.

The reason profits came in negative was due to a goodwill impairment in the Powder Metallurgy business. Without this, the firm made just over 4p per share.

If Dowlais decides to sell off this part of the company – and does so successfully – I think the stock could look incredibly cheap. I’m looking to start buying it in November.

The post 1 FTSE 250 stock that might be a screaming buy for me in November appeared first on The Motley Fool UK.