Marks and Spencer

Marks and Spencer (LSE: MKS) is a major British multinational retailer that sells clothing and beauty, home, and food products. This week, three director dealings were carried out. A large number of shares were received in lieu of a cash dividend, but a portion was sold to cover tax and national insurance obligations.

• Name: Stuart Machin
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 203,120 @ nil
• Total value: N/A

• Name: Stuart Machin
• Position of director: Chief Executive Officer
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 99,121 @ £1.37
• Total value: £135,805.68

• Name: Sacha Berendji
• Position of director: Property, Store Development, and IT Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 138,115 @ nil
• Total value: N/A

• Name: Sacha Berendji
• Position of director: Property, Store Development, and IT Director
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 67,399 @ £1.37
• Total value: £92,343.37

• Name: Paul Friston
• Position of director: International Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 131,691 @ nil
• Total value: N/A

• Name: Paul Friston
• Position of director: International Director
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 62,264 @ £1.37
• Total value: £88,048.11

Cranswick

Cranswick (LSE: CWK) is a leading UK food producer and supplier of fresh and premium food products. It’s most famous for its meat products. Four directors opted to exercise their share options this week. However, they then proceeded to sell portions.

• Name: Mark Bottomley
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 31,800 @ nil
• Total value: N/A

• Name: Mark Bottomley
• Position of director: Chief Financial Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 16,379 @ £30.82
• Total value: £504,768.02

• Name: Adam Couch
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 48,100 @ nil
• Total value: N/A

• Name: Adam Couch
• Position of director: Chief Executive Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 24,775 @ £30.82
• Total value: £763,515.95

• Name: Jim Brisby
• Position of director: Chief Commercial Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 31,800 @ nil
• Total value: N/A

• Name: Jim Brisby
• Position of director: Chief Commercial Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 16,379 @ £30.82
• Total value: £504,768.02

• Name: Chris Aldersley
• Position of director: Chief Operating Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 26,300 @ nil
• Total value: N/A

• Name: Chris Aldersley
• Position of director: Chief Operating Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 13,546 @ £30.82
• Total value: £417,460.628

HomeServe

HomeServe (LSE: HSV) offers low-cost home warranty and home repair options. It markets itself as the solution to expensive and inconvenient emergency home repairs. Three massive director dealings happened earlier in the week, as shares were awarded to these directors based on performance conditions.

• Name: David Bower
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 21,119 @ nil
• Total value: N/A

• Name: David Bower
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 10,190 @ £11.69
• Total value: £119,121.10

• Name: Tom Rusin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 30,619 @ nil
• Total value: N/A

• Name: Tom Rusin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 11,815 @ £11.69
• Total value: £138,117.35

• Name: Richard Harpin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 34,911 @ nil
• Total value: N/A

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, all the director dealings above occurred with free shares. These shares were acquired by directors under their companies’ share plans. These were either a restricted share plan (Marks and Spencer), or incentive plans (Cranswick and HomeServe).

Share award schemes give employees actual shares rather than share options. The value of shares given to directors here is treated as employment income. This means that it may be subject to tax and national insurance contributions. That is unless the directors opt for an HMRC-approved share scheme, which has its own rules and requirements. Incentive plans give directors shares when they hit certain performance targets. For HomeServe directors, the awards were subject to the company’s earnings per share.

The post Director dealings: Marks and Spencer, Cranswick, HomeServe appeared first on The Motley Fool UK.

The Homeserve share price journey

Homeserve is an international home repair, maintenance, and home services business. The housing and home services market is a growth market, here in the UK and internationally.

As I write, Homeserve shares are up over 30% in March to date, trading for 898p. At this time last year, the shares were trading for 1,194p, which is a 24% drop over a 12-month period. The decline between this time last year and the early March share price was over 40%.

When talks of a takeover began earlier this month, Homeserve shares rallied. It is worth noting Homeserve released a statement yesterday saying it had not received any formal offer from any interested parties to date.

Should I buy Homeserve shares?

Homeserve’s growth has been excellent over the past few years. It has managed to consistently increase revenue year on year since 2014. The pandemic was a good period for the business as a lack of overseas travel and social events led to consumers spending surplus cash on home improvements and home services. I wasn’t surprised to see the Homeserve share price hit all-time highs at the height of the pandemic, in summer 2020 close to 1,400p.

Looking at Homeserve’s performance, it did suffer a profit drop in FY21 results, but this was due an ill-fated customer relationship management tool, eServe, that did not work out and cost the business over £80m. Analysts expect Homeserve to return to growth this year with a net profit of £161m forecast. Forecasts aren’t guaranteed, however.

One aspect of Homeserve’s growth journey I like, and that has contributed well to its success in my opinion, has been its propensity to acquire other home services businesses to supplement its current offering and grow the business.

Homeserve shares could also be a good passive income option for my holdings. The Homeserve share price currently sports a dividend yield of close to 4%. It is worth mentioning that the dividend per share has doubled since 2016!

Risks and my verdict

Homeserve is operating in a lucrative growth market, and this brings the challenge of competition. There are plenty of home services businesses in the UK and abroad jostling for market share. These competitors could impact Homeserve’s performance and any growth, as well as investor returns.

I believe the Homeserve share price has come under pressure, before the takeover talk, due to rising costs and inflation. This can often lead to profit margins being squeezed, resulting in investor payout being negatively affected.

Overall I’d happily add Homeserve shares to my holdings at current levels. I will keep a keen eye on development involving the risks mentioned and any potential takeover. Homeserve’s dominant position in this lucrative growth market, journey to date with organic and acquisition-led growth, and dividend record boost my bullish stance.

The post The Homeserve share price is up over 30% this month — should I buy now? appeared first on The Motley Fool UK.

I am not interested in buying a firm just for a couple of months. I want to buy businesses with robust competitive advantages and an international footprint, qualities that should help them expand and grow over the next decade.

With that in mind, here are two FTSE 250 shares that I would buy for my portfolio today with a view to holding them for the next decade or so.

FTSE 250 global leader

Part of the global economy that is currently experiencing substantial growth is the resources sector.  Demand here has exploded over the past couple of years, and companies are struggling to keep up.

The result has been a substantial increase in commodity prices, and corporations in the sector are now throwing off cash.

With profits surging, businesses are looking to invest in increasing their capacity, and that bodes well for equipment manufacturers such as Weir (LSE: WEIR).

This corporation develops innovative engineering solutions for the minerals and mining markets. That includes equipment such as pipes and valves mission-critical infrastructure, which helps enterprises improve efficiency and increase output.

With a significant global footprint and 15,000 employees around the world, the company is one of the most trusted and experienced operators in the space. This in itself is a competitive advantage.

Mining businesses do not want to install equipment that breaks a couple of months after it has been delivered. They want to buy equipment from someone they can trust. The FTSE 250 company offers just that.

Sales growth

According to its latest results release, the business is already benefiting from the increase in capital spending. During 2021, orders increased 22% to £2.2bn. Growth accelerated towards the end of the year. In the fourth quarter, the value of orders placed with the group increased 26% year-on-year.

With profits growing, the company’s redeploying cash flow back into its business. It acquired Motion Metrics in 2021, increasing its exposure to technological solutions.

Management has also hiked spending on research and development to find new products. Outlay here increased to 6% of revenue during 2021, up around 0.4% on the previous year. Management believes that the corporation can achieve a similar rate of growth in 2022, based on current trends.

And it looks as if city analysts agree. Analysts have pencilled in earnings growth of nearly 40% in the current year. They have also projected growth of around 12% for 2023.

FTSE 250 projections

However, I should caution that these are just projections at this stage. There is no guarantee the corporation will hit these targets. Indeed, pressures are building across the engineering industry, which could hit the company’s growth in the years ahead.

Costs are rising significantly across the sector, with energy and materials costs putting tremendous pressure on manufacturing firms like the FTSE 250 business. Economic uncertainty resulting from the situation in Eastern Europe could also cause corporations to delay capital spending plans.

This would have a significant impact on the company’s order book and growth potential over the next few years.

Still, even after considering these charming challenges, I would acquire the FTSE 250 stock for my portfolio today, considering its competitive advantages and growth potential over the next couple of years.

Growth services market

The housing and home services market is one of the largest markets in the UK and indeed the world. And one of the best ways to invest in this market is with Homeserve (LSE: HSV).

This corporation is an international home repairs and improvements enterprise. It claims to make home repairs and improvements easier by matching customers to trades to generate repeat and recurring income.

Over the past couple of years, growth across the group has been nothing short of outstanding. Revenues have increased at a compound annual rate of 16% since 2016. Unfortunately, the company did suffer a setback during the pandemic, and profit growth hit a wall.

However, analysts expect the group to return to growth this year with a net profit of £161m pencilled in, up from £109m reported for 2019.

Bolt-on growth

Over the past couple of years, the company has developed and refined a unique growth strategy. As well as capitalising on the organic demand for its services in the UK and USA, it has been acquiring other home services businesses to complement growth.

The property services markets in the UK and US are highly fragmented. They are made up of a network of smaller traders. This presents a tremendous opportunity for the company to consolidate the market and use its economies of scale to push down costs and increase profitability.

That is precisely what the corporation has been able to do over the past six years.

FTSE 250 income stock

And as profits have grown, the company has been able to reinvest more back into the business and return cash to investors. The dividend per share has more than doubled since 2016 and, at the time of writing, the stock supports a dividend yield of 4.1%.

That said, I cannot take the company’s growth for granted. The cost of living crisis could force consumers to delay repairs to their properties, which would have an impact on growth.

Rising interest rates could also increase the cost of the corporation’s borrowing. It has relied heavily on borrowing in the past to fund its acquisition programme.

Higher interest rates could hit profitability and profit margins and lead to slower growth if the group is forced to delay further deals.

Despite these risks, I would be happy to add the firm to my portfolio of FTSE 250 shares, considering its growth potential over the rest of 2022 and beyond.

The post 2 FTSE 250 shares I’d buy for April and beyond appeared first on The Motley Fool UK.

With this in mind, here are the stocks I’m buying before next month.

A Stocks and Shares ISA investment

I’d first top up my investment in Nvidia (NASDAQ: NVDA), the leading designer of computer graphics cards. Like most share prices, the stock has come under pressure recently and is down by 10% so far this year. I think this may represent a buying opportunity. Analysts seem to think so, too, as the consensus share price target is $338, or 27.5% above today’s share price.

Nvidia benefits from being the leader in computer graphics card design. In fact, the company invented the graphics processing unit (GPU) that is now a crucial component in various high-end computers.

GPUs are also required in advanced technology such as artificial intelligence and autonomous driving. I see these technological trends as being huge catalysts for Nvidia’s growth in the years ahead. As a long-term investor, this does get me excited about buying Nvidia’s shares.

It hasn’t been all good for the company recently though. It failed in its attempt to buy Arm from SoftBank. This was a big disappointment, in my view, as Arm is a leading chip designer focusing on central processing units, or CPUs. It would have diversified Nvidia’s business, and potentially led to quicker growth for the company.

Nevertheless, I’d add Nvidia shares to my portfolio today.

One more stock I’d buy

I’d also buy the home repair services group Homeserve (LSE: HSV). It owns the platform Checkatrade, which I think strengthens the business as it’s a trusted place to find tradespeople in the UK.

The share price has been almost in freefall recently though. This year alone the price has dropped 21%. And over one year, the stock is down a huge 41%. It means the shares are valued on a lowly price-to-earnings ratio of 12 based on next year’s earnings forecast. I think there could be some good value here.

Financial performance looks to be improving, too. Revenue is expected to rise by 8% in fiscal year 2023 (the 12 months to 31 March 2023). Net profit is expected to rise by an even bigger 13%, which suggests that margins are improving.

The investment isn’t without risk. Homeserve is undergoing a transformation plan of its UK business as it tries to return it to growth. It’s a key risk to consider because the UK is Homeserve’s most established market.

But for me, I think the risks are full priced into the shares. So I’d buy the company in my Stocks and Shares ISA before the deadline next month.

The post Here’s what I’m buying as the Stocks and Shares ISA deadline approaches appeared first on The Motley Fool UK.

Here’s one that I’d buy today as a long-term investor.

A FTSE 250 stock that looks oversold

The company I’ve been looking at is Homeserve (LSE: HSV), a provider of home repair services across the US and Europe. It offers a subscription service to customers for emergency repairs. In addition, the company also owns platforms such as Checkatrade that connects tradespeoples to homeowners.

Overall performance at the company looks to be improving. For example, Homeserve is expected to achieve an adjusted net income margin of 11.5% in fiscal year 2022 (FY22, the 12 months to 31 March 2022). This would be an improvement on the 8.7% net income margin it achieved in FY21.

Revenue for FY22 is also forecast to increase by over 9%. This is great to see as a potential shareholder: growing revenue and improving profit margins. There’s a good chance that the share price will rise if this continues!

However, the share price has done exactly the opposite recently. Over one year, the stock has plunged 29%. The FTSE 250 has dipped by almost 0.4% across this time, so the Homeserve share price has significantly underperformed.

The reason is the valuation. Based on a forward price-to-earnings (P/E) ratio, Homeserve is valued on a multiple of 14 today. This time last year the stock was trading on a P/E of 19. And before the pandemic, the P/E multiple was an even higher 30.

So, although the overall financial performance of the business looks to be improving, investors have been willing to pay less for Homeserve shares recently. This could be a sign that the stock has been oversold as markets have fallen this year.

Why I’m buying as a long-term investor

Another reason why a company’s valuation can decline is due to uncertainty about its future. I think this has been another factor that has led to the underperformance of Homeserve shares. Indeed, the company is undergoing a “transformation plan to stabilise its UK business and return it to growth”. This is a key risk for the business as the UK is its most established market. In fact, operating profit across Homeserve’s UK business fell over 10% in FY21 compared to the prior year.

Things are starting to improve though. In the most recent half-year results to 30 September, operating profit across the UK grew by 3% over the same period in 2020. Homeserve also said: “There has been good early progress on initiatives to transform and broaden the UK business”.

The investment here isn’t without risk. However, I like the early signs of improvement with Homeserve’s UK business. The overall performance, particularly in the key North American market, has been excellent, too.

Taking everything into account, I do think Homeserve has been oversold recently. I also view the risks for its UK business as having been fully priced into the share price. Therefore, I’d buy the stock today as a long-term investor.

The post Here’s a beaten-up FTSE 250 stock I’m buying as a long-term investor appeared first on The Motley Fool UK.

• I’m looking for stocks with inflation-beating dividend growth
• Gaming, consumer goods and banking stocks are among my choices
• One of these companies has a 30-year track record of dividend growth

When I’m buying dividend stocks, I always take a look at the yield they offer. But with inflation expected to hit 5% in the coming months, I reckon dividend growth is more important than ever. A flat dividend income means my spending power will fall in the future. 

What I really want to do is to build a portfolio of shares that will deliver reliable dividend growth, year after year. Here are five income shares I’d consider buying for raising dividends in 2022 and beyond.

US growth story tempts me

Home emergency repair service provider Homeserve (LSE: HSV) is best known in the UK for the insurance policies it sells through utility partnerships. However, the real growth story here is the US market, where membership services are more popular than in the UK or Europe.

During the six months to 30 September, profits from Homeserve’s US business rose 11% to £32.5m, while customer numbers rose 8% to 4.8m.  This business generated 65% of the group’s operating profit during the period.

My main concern as a potential buyer is Homeserve’s rising level of debt. This has lifted sharply in recent years as the group has funded acquisitions and new projects.

However, I’m still comfortable with the risk, given the group’s strong cash generation. Homeserve’s recent share price slide prices the stock on 14 times earnings, which looks reasonable to me. The shares also offer a 3.8% dividend yield that’s expected to rise by 11% this year. This dividend stock is on my shortlist to buy for my portfolio.

A top choice for gamers

Shares in wargaming specialist Games Workshop (LSE: GAW) have risen by 880% over the last five years. This impressive share price performance means that this old-school company has significantly outperformed popular video gaming stocks such as Keyword Studios (+310%) and Team17 (+210%) since 2017.

Games Workshop relies on an unusual combination of shops and online presence to draw customers.

An additional profit stream comes from royalties. Games Workshop is starting to exploit the potential of its intellectual property through video game and television deals. Royalty payments doubled from £9m to £20m during the six months to 28 November.

The main risk I can see for shareholders is that sales growth recorded in recent years won’t be sustainable. I don’t know how likely this is — I’m not a customer.

However, the company’s high profit margins, excellent cash generation and long track record suggest to me that Games Workshop could remain an attractive dividend stock. The dividend is expected to rise by 11% this year, giving a 3% yield. I’m definitely interested.

A defensive dividend stock

FTSE 250 firm Cranswick (LSE: CWK) doesn’t get many headlines. But this meat producer has delivered unbroken dividend growth every year since 1988. Over the last six years, dividends have risen by an average of 13% per year, providing excellent protection against inflation.

Of course, there’s no guarantee Cranswick’s performance will be sustainable. Growing concerns about the environmental impact of large-scale meat production are a potential worry. And I’m not totally sure that the company’s recent decision to expand into pet food is a good idea.

However, Cranswick’s long track record of growth is attractive to me. I’m also tempted by the defensive nature of the group’s products. The group is a big supplier to supermarkets and sales are generally stable, even during a recession.

Cranswick shares don’t look especially cheap to me, trading on 17 times forecast earnings with a 2% dividend yield. But the group’s 30-year track record of dividend growth is unusual in the UK. This is a stock I’d like to own.

The best bank?

The big FTSE 100 banks tend to grab most of the headlines. But they haven’t delivered very good results for shareholders since 2008. For my portfolio, I’ve chosen to own FTSE 250 merchant bank Close Brothers (LSE: CBG).

Close Brothers’ share price has risen by 145% since February 2009, compared to a gain of just 50% for Lloyds Banking Group.

This group has been in business since 1878 and specialises in commercial lending and automotive finance. Profit margins are much higher than at high street rivals and the bank’s management has avoided the costly mistakes made by larger peers.

Shareholders have benefited from this careful management. Close Brothers didn’t cut its dividend during the financial crisis. Indeed, until the pandemic, the bank hadn’t cut its payout for more than 30 years.

Future dividends are never guaranteed and Close’s exposure to property and business lending could lead to big losses during a recession. But the bank’s long track record gives me confidence. I’m also tempted by this stock’s 5% dividend yield and expected growth. I’m happy to have this banking share in my portfolio.

An overlooked dividend stock?

My final pick is consumer goods group PZ Cussons (LSE: PZC). This business is known for brands such as Carex and Imperial Leather and operates globally.

Profits have dipped this year as sales of Carex sanitiser and handwash return to normal levels after record sales during the pandemic. But the performance of the group’s remaining business is improving under newish chief executive Jonathan Myers.

The CEO took over at a difficult time for the group. PZ Cussons’ product portfolio had become confused, there were problems in Africa, and growth had stalled. It’s too soon to be certain that Myers simplification strategy will return the business to growth. But my impressions so far are positive.

After surging higher during the pandemic, PZ Cussons’ share price has pulled back. The stock now trades on 14 times forecast earnings, with an expected dividend yield of 3.3%.

Although dividend growth is expected to be limited this year, I see this business as a good long-term pick for inflation protection, due to the essential nature of many of its products.

The post 5 top dividend stocks I’d invest £1,000 in for 2022 and beyond appeared first on The Motley Fool UK.

As such, here are five FTSE 250 stocks that I would acquire for my portfolio today. 

Shares to buy today for growth

The first company on my list is home services group Homeserve (LSE: HSV). Over the past decade or so, this organisation has grown steadily through a combination of acquisitions and organic growth across the UK and North America.

Homeserve has built a group of home improvement and maintenance businesses, providing consumers with a one-stop-shop for services. Revenues have increased at a compound annual rate of 16% since 2016, and as consumers continue to splash out on their properties, I think this trend will continue. 

Unfortunately, the group suffered a setback last year as profits plunged more than 70%. However, analysts are forecasting a rebound in the current financial year, and they believe growth should return in 2023. 

Some challenges the company may face, which could hamper growth, include competition and rising prices for acquisitions. Despite these risks and challenges, I would buy the stock for my portfolio of FTSE 250 shares today. 

Home improvement

On the home improvement front, I would also acquire engineered door and window components supplier Tyman (LSE: TYMN). 

The current building boom is landing this business with windfall profits. Earnings per share are projected to increase by 57% this year and a further 6% in 2022. 

According to the company’s half-year report, it is benefiting from both high levels of demand and higher prices. This is giving management the resources required to increase market share across North America, including the funding needed to develop new products.

I do not think Tyman’s current growth rate is sustainable, but if the company is able to reinvest its windfall back into expansion initiatives successfully, the enterprise’s growth should continue. Albeit at a lower rate. 

And after a bumper 2021, Tyman’s potential over the next few years has improved dramatically. 

But there are still risks. Challenges that could hold back growth include competition and a housing market slowdown. Rising costs may also weigh on profit margins. 

FTSE 250 hospitality

Like every other hospitality business in the UK, JD Wetherspoon (LSE: JDW) struggled during the pandemic. But the company is now on the road to recovery. For the first 15 weeks of its financial year, sales were 8.9% lower than the same period in 2019. 

The speed of the recovery differs significantly across the group. City centre locations such as Oxford and Newcastle have recorded double-digit growth compared to 2019 levels.

However, trade in central London, airports, stations, and regions of the UK where restrictions apply, means activity there is still down by a double-digit percentage compared to 2019 levels. 

Therefore, it looks as if Wetherspoon still has some way to go before it can claim to be back on track. Still, I think this FTSE 250 hospitality giant is an attractive way to invest in the UK economic recovery.

Risks to my investment case include rising staff costs and a squeeze on consumers’ income due to inflation. There is also the potential for further coronavirus restrictions, which may derail the recovery. 

Property shares to buy

Another recovery play I would buy is real estate investment trust (REIT) Shaftesbury (LSE: SHB). 

Due to the pandemic, the central London landlord was forced to write down the value of its property portfolio last year. It also struggled to collect rent from tenants that lost virtually all of their business overnight when forced to close. 

The good news is, business activity in general and central London are now recovering. This is having a knock-on effect on commercial property values. According to a trading update published at the end of October, Shaftesbury’s portfolio increased in value by 5% during the second half of its 2021 financial year.

What’s more, by the end of September, just 2.9% of the portfolio was available to let, down from 8.4% at the end of March. 

These figures appear to show that tenants are returning to central London, and the value of the company’s property portfolio is appreciated as a result. 

I would buy the REIT today based on these numbers even though further coronavirus restrictions could significantly impact commercial property values, and many tenants may not survive another lockdown. This is probably the most considerable risk to the company’s growth right now. 

Retail behemoth

Frasers Group (LSE: FRAS), formerly known as Sports Direct, suffered a loss of £83m last year. However, analysts are expecting profits to rebound this year and grow further in 2023. 

Heavy investments in the group’s online division helped it weather the Covid storm, and this online business is now helping drive the recovery. Management is so confident about the group’s prospects it is returning cash to investors with a share repurchase programme. This should help improve earnings per share, and the company’s overall valuation. 

At the time of writing, the stock is dealing at a forward price-to-earnings (P/E)  multiple of 19.3. According to current analysts projections, this could fall to 17.3 next year.

Evidence shows that consumers tend to trade down to lower-priced commodity products in periods of high inflation. With inflation set to hit 5%, Frasers’ Sports Direct business could possibly benefit from this trend. I would buy the stock for this potential as well as the reasons outlined above. 

Some challenges the group may face as we advance include rising costs due to inflation and further coronavirus restrictions. 

The post 5 FTSE 250 growth shares to buy today appeared first on The Motley Fool UK.

Share price fall presents an opportunity

Homeserve is an international home repair and maintenance business. I consider Homeserve to be a great growth stock opportunity at an enticing price just now. At the time of writing, I can pick up shares for 951p a piece. This is a 31% drop compared to levels this time last year when shares were trading for 1,381p per share. In the year to date, its share price has dropped over 10% to current levels.

Looking back over a longer period of time, I could have doubled my money if I had bought Homeserve shares fives years ago. It was trading for 581p per share in July 2016. It has made significant progress despite recent bumps in the road.

Performance

The Homeserve share price fell when it released its annual report in May for the year ended 31 March 2020. The results were a mixed bag, in my opinion. Firstly, revenue increased by 15% and customer numbers were up too. It increased its dividend as well which is always a good sign. In addition, growth in international markets was substantial, especially the US.

Homeserve saw its operating profit drop substantially. This was primarily due to a one-off charge related to its customer relationship management solution eServe, which did not work out. This cost it £84.8m. Despite this turn of events, it does not put me off as Homeserve said it would look to rectify this digital IT-related problem for the future.

In a Q1 trading update released last week, Homeserve confirmed that, although a traditionally quieter period in the year, it was still growing in international markets. More importantly for me, it said it had started work on overhauling its IT issues to ensure past mistakes aren’t repeated. 

Growth stocks have risks too

I am aware of risks associated with Homeserve. Firstly, it does have a fair bit of debt on its books but I believe this is manageable, based on its past performance. Another risk which I have noted is that implementing new IT systems and policies does not happen overnight. There may be issues. If these persist long term, we could have a repeat of the eServe debacle. Finally, further restrictions may mean consumers could be forced to cut back on home repair policies, there affecting Homeserve too.

I do believe Homeserve’s profits levels will return to normality after its issues last year. It has a track record of performance which helps me make this assertion. I am aware that past performance is no guarantee of future performance. I use it as a gauge when I am assessing investment viability. As well as profits, it offers a dividend which is always a bonus.

I also believe Homeserve possesses defensive qualities based on the current climate in the world. Due to Covid-19, more people are spending time at home whether that is leisure time or working remotely. In turn, they will require maintenance and upkeep to their homes. This should keep customer numbers rising.

Overall, I think it is an excellent FTSE 250 growth stock option which I am considering adding to my portfolio for August.

The post 1 FTSE growth stock I would buy for August appeared first on The Motley Fool UK.

All three of these firms are using technology to accelerate their growth, and I reckon they still have plenty of room to expand. 

Explosive global growth 

The first two companies on my list are Flutter Entertainment (LSE: FLTR) and Future (LSE: FUTR). 

Flutter operates one of the world’s largest gaming and gambling platforms. Meanwhile, Future publishes magazines and has leveraged its experience in technology to turn these into valuable online properties by selling products and gathering consumer data. 

We only need to look at Flutter’s first-quarter trading update to see how the company is currently faring. During the three months to the end of March, average monthly players increased 36% globally. Total revenues jumped 33% year-on-year while online revenues jumped 42%. 

The company’s US business is achieving by far the fastest growth. US revenues jumped 135% during the first quarter, and the group maintained its leading position in the market. 

These numbers suggest to me that the firm’s growth last year wasn’t a one-off. It seems that consumers are still drawn to Flutter’s gaming platforms. That’s why I would buy the company for my portfolio of growth stocks. 

Digital growth stocks 

Future also reported robust growth in its latest trading update, published ahead of the group’s fiscal 2021 numbers. The firm said it expects “full-year profitability to be materially ahead of current market expectations.“

Management noted it’s also benefited from “robust digital advertising revenue and ongoing e-commerce product affiliate revenue growth.” These are the digital channels I mentioned earlier that have helped turn the group’s magazines into valuable assets. 

Despite their recent growth, both companies face challenges. Flutter’s biggest one is the fact that the gambling industry is highly regulated. If regulators decide to move against the business, its profits could crumble overnight. 

Meanwhile, Future relies heavily on digital advertising. Google and Amazon effectively control this market, and they have been criticised for a lack of transparency when it comes to tracing digital advertising spending. This could put some entities off from advertising with the business. 

IT issues 

As well as Flutter and Future, I’d also buy Homeserve (LSE: HSV) in my portfolio of explosive growth stocks. 

The international home repairs and improvements business is benefitting as consumers shell out more to upgrade and maintain their homes. For the 12 months to the end of March, group revenues jumped 15%. North American revenues increased 22%. 

Unfortunately, due to a bungled IT system switchover, the company’s profits slumped in the year. Management is now trying to rectify this issue while investing more in the group’s digital capabilities. The aim is to create a more diversified, efficient digital business and return to stable growth.

The biggest challenge facing the firm right now is getting this switchover right. If it can’t, additional losses could be on the horizon. Its growth may also take a hit. 

Nevertheless, I’d buy the company for my portfolio of growth stocks right now, based on its potential. If management can get the IT issues sorted, I reckon Homeserve’s growth could take off. 

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Newsflow surrounding a specific company can unexpectedly disappoint the market, causing it to plummet in value. Unforeseen external problems, like industry changes or broader economic upheaval, can also cause a stock to sink.

Last year’s stock market crash following the Covid-19 outbreak is a perfect example of this. Great UK shares were sold off heavily along with the bad.

That said, there’s no harm in buying stocks which could rise in value in the following days, weeks or months on one condition. That these UK shares will provide me with decent long-term returns irrespective of whether or not they rise in price in the near future.

Here are three of what I consider to be the best UK shares to buy for solid share prices in July. I’d buy them today and be happy to hold them for years.

#1: A tasty business

I think the Devro share price could rise strongly when it releases half-year results on Tuesday, 27 July. The sausage skins-maker has the wind in its sails right now, thanks to strong demand in Asia and Latin America.

Sales to these regions were up 15% in the four months to January 29, latest financials showed. And I think these emerging regions could deliver terrific profits at the UK share in the years ahead as wealth levels increase.

Devro is targeting average annual growth of 6-10% in developing territories through ongoing investment in headcount and production capacity. I think this firm’s a great buy despite the threat the growing popularity of meat-free diets pose.

#2: A top UK dividend share

I also think DCC’s share price could balloon when it releases its own trading update tomorrow (16 July). But this isn’t why I’d buy the FTSE 100 share for my own stocks portfolio right now. Instead, I’d buy it for the fact it’s raised dividends every year for more than a quarter of a century.

DCC provides sales, marketing and support services across four divisions (LPG, Retail & Oil, Technology and Healthcare). And its long and exceptional record when it comes to acquisitions has enabled it to keep growing profits despite the pressures created by the Covid-19 crisis.

I’d buy this UK share despite the threat to the oil and gas industries as green energy becomes increasingly popular.

#3: Home run

Emergency callout specialist Homeserve is also set to update the market on Friday, 16 July. And I’m expecting another encouraging update here too as its North American operations click through the gears.

Revenues on the other side of the Atlantic jumped 22% in the financial year to March as customer numbers increased by 300,000 to 4.7m. It’s true that this UK share has a lot of debt on its books that causes some concern. But I’d still buy as its trading performance overseas gets steadily stronger.

The post 3 of the best UK shares to buy for late July appeared first on The Motley Fool UK.