Let me explain why I’m a fan of the stock, and why I’m considering snapping up some shares when I next can.

Building for the future

Lords is a distributor of building, plumbing, heating, and DIY products across the UK. The business serves a multitude of customers. These include private consumers enthusiastic about DIY, as well as smaller merchants and larger construction firms.

It wasn’t surprising to me see that the Lords share price has been struggling in recent months. Over a 12-month period, the shares are down 26% from 61p at this time last year, to current levels of 45p.

Pros and cons

It makes sense for me to cover the bear case first, after mentioning the struggling share price. I reckon a big part of this is due to economic volatility impacting construction projects and hurting consumer spending. As consumers are battling with rising costs of living, construction and home improvement projects have been put on the back burner.

Away from private projects, other initiatives such as house building, have seen completion numbers drop due to higher costs and tougher sales pipelines. This is something I’ll keep an eye on. It could begin to dent earnings and returns for Lords if it continues for the long term.

Moving to the other side of the coin, as a Foolish investor looking to the future, I reckon there are some great bullish traits about the business that could help bolster my portfolio.

Firstly, the mammoth housing imbalance in the UK could present Lords with great opportunities to grow earnings and returns. At present, demand is outstripping supply. This gap needs to be addressed, and Lords’ presence and know-how could serve it well when this is the case. Plus, when I factor in that the UK population is increasing, there could be some lucrative times ahead.

Next, Lords looks to be on a good financial footing, with a decent balance sheet. This is a good sign for the business to navigate the current tricky climate. This will also help returns, and a dividend yield of just over 4% is attractive. However, I do understand that dividends are never guaranteed.

Finally, although I take forecasts with a pinch of salt, analysts reckon profitability will soar in the coming years.

My verdict

When looking for growth stocks, it’s hard to look past current volatility and issues. However, as a long-term investor, I see plenty of meat on the bones when it comes to Lords Trading Group.

I see short-term issues and negativity, including a falling share price, as a dip-buying opportunity. The housing imbalance could play a crucial role in Lords’ future earnings. The new Labour government is pledging to plug this gap, so there’s further positivity for me to get behind.

The post Down 26% in a year, I’d buy this growth stock today, with one eye on the future! appeared first on The Motley Fool UK.

Good Lord!

Lords Group Trading‘s (LSE:LORD) a specialist supplier of building, plumbing, heating and DIY products in the UK. This gives it good scope to grow profits as housebuilding activity accelerates (Labour has set a goal of 300,000 new homes by 2029).

But this isn’t all. The AIM-listed company’s focused on repairs, maintenance and improvement (RMI), a market from where it sources around 80% of revenues. Given that the UK has the oldest housing stock in the world, Lords can expect strong and sustained revenues from now and into the future.

Finally, I believe its robust balance sheet gives Lords a chance to bolster earnings growth through further acquisitions. Its expansion strategy saw it hoover up another two companies in 2023 — Chiltern Timber Supplies and Alloway Timber — taking the total number of acquisitions to seven in 15 years.

City analysts are predicting Lords’ profits column to swell in the next few years. Bottom-line growth of 156% and 33% is forecast for 2024 and 2025. This also builds expectations of more healthy dividends, leading to a 4.7% dividend yield through to the end of next year.

Lords’ share price has fallen steadily in recent years as a result of high interest rates. Like-for-like revenues here dipped 1.2% in 2024 due to difficulties in the construction sector.

Further trouble could be in store if the Bank of England fails to meaningfully cut interest rates. But with inflation falling and the central bank already loosening monetary policy, the omens are looking increasingly good for this penny stock.

All-round value

Brickmaker Michelmersh Brick Holdings (LSE:MBH) is another AIM stock that should benefit from a potential homebuilding boom. It also stands to gain from strong revenues to update Britain’s ageing homesteads. The company makes more than 125m clay bricks and pavers each year.

I especially like this business because of the excellent all-round value it offers. The firm trades on a forward price-to-earnings (P/E) ratio of 9.4 times, which is much lower than those of industry rivals Forterra and Ibstock.

Michelmersh also offers up a tasty 4.7% dividend yield today. It’s tipped to continue growing dividends over the forecasted period too.

Those targeting immediate earnings growth might be disappointed however. Earnings are tipped by City analysts to drop 13% in 2024, before rising 4% and 5% in 2025 and 2026 respectively.

Earnings projections here could, as with Lords Group, be in peril if building activity remains under pressure. On top of this, Michelmersh’s vulnerable to a sharp uptick in costs across its six factories if energy prices soar. Brickmaking is a notoriously power-intensive task.

Still, on balance, I believe the potential long-term benefits of owning this penny stock outweigh these risks, and especially at current prices.

The post 2 penny stocks to consider for growth and income! appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Eurocell

What it does: Eurocell manufactures, distributes and recycles window, door, and roofline unplasticized polyvinyl chloride (uPVC) products. 

By Kevin Godbold. The Eurocell (LSE: ECEL) business looks set to bounce back after a period of weaker earnings during 2023.

City analysts have pencilled in chunky double-digit percentage earnings advances for this year and next. That feels intuitively right to me because I’m bullish on the economy and believe many UK-facing cyclical companies will likely experience gathering positive trading momentum.

May’s trading update was cautious in tone. There’s no denying the firm’s vulnerability to the effects of general economic shocks and events. However, the directors pointed to the “strong” balance sheet and the success of prior cost-cutting measures taken. The business is well placed to benefit from recovery in its markets, they said.

Meanwhile, with the share price in the ballpark of 146p, the forward-looking earnings multiple for 2025 is just below eight, and the anticipated dividend yield is above 6%. To me, that looks like decent value, despite the ongoing risks.

Kevin Godbold does not own shares in Eurocell.

Lords Group Trading

What it does: Lords Group is a distributor of building, heating and plumbing goods throughout the UK.

By Jon Smith. Lords Group (LSE:LORD) shares have fallen by 29% over the past year. With the British stock close to 52-week lows, I think it’s a value play.

I get why the specialist distributor of building and DIY goods has struggled recently. The slump in the property market due to high mortgage rates has meant demand has slowed. Further, the cost-of-living crisis has caused some to put off renovation work.

Looking forward, I see an economic recovery alongside falling interest rates. This should act as a catalyst to push the share price higher over the coming year. Lords Group is well positioned to take advantage of this, especially due to the recent acquisitions which should provide economies of scale moving forward.

Sure, a risk is that it takes longer than anticipated for the housing market to recover. Yet as a long-term investor, I can afford to be patient.

Jon Smith does not own shares in Lords Group.

NWF

What it does: NWF is a UK-based distributor of fuels, food and feeds, primarily to an agriculturally focused customer base

By Christopher Ruane. Trading on a price-to-earnings (P/E) ratio of under seven, NWF (LSE: NWF) looks like good value to me.

Excluding lease liabilities, the company had a net cash position of £13m at its half-year point – around 15% of its current market capitalisation. So this is not a company with a low P/E ratio but an ugly balance sheet.

That said, pre-tax profit at the first half fell 35% year-on-year. Volumes in the feeds business fell, while higher volumes in fuel could not stop headline operating profits plummeting as margins weakened substantially. These factors are likely to affect full-year results too.

Still, with a proven business model, entrenched customer base and deep agricultural expertise, I think the company could do well over the long run.

The dividend yield of 4.5% looks tasty to me. I reckon a 35% fall in the share price over the past year means the company is now undervalued relative to its long-term cash generation potential.

Christopher Ruane owns shares in NWF.

Prudential

What it does: Prudential provides life and health insurance products across Asia and Africa.   

By Ben McPoland. There still appears to be a lot of value on offer in the FTSE 100. Yet Prudential (LSE: PRU) shares seem particularly cheap to me, trading at just 9.1 times this year’s forecast earnings per share. 

Others seem to agree, with multiple Prudential executives and directors scooping up shares throughout the summer. And as Wall Street legend Peter Lynch once said: “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”

Of course, that doesn’t mean it will. The share price is down 38% in one year and 53% over five. A lot of the bearishness seems to relate to China, one of the firm’s key growth markets. Consumers there are tightening belts and that could mean less insurance policies. That’s a risk.

Nevertheless, the company also sees great value in its own shares. In June, it announced a huge $2bn share buyback programme to run over the next two years.

Meanwhile, brokers forecast an attractive rise in earnings over this period. I think the stock looks great value under 700p.

Ben McPoland has no position in Prudential. 

TP ICAP

What it does: TP ICAP provides broking, data and analytics services to clients in the financial services, energy and commodity sectors.

By Roland Head. Broker TP ICAP (LSE: TCAP) trades on a forecast price-to-earnings ratio of seven, with a 7% dividend yield. I think this could be too cheap.

The bear case is that TP ICAP’s broking unit – where brokers arrange complex trades for clients over the phone – is obsolete.

True, it’s not as big as it used to be. But broking generated £206m of operating profit for TP ICAP last year. I think it’s still relevant.

In any case, I’m interested in TP ICAP mainly for its highly rated data analytics business, Parameta Solutions.

Earlier this year, City estimates suggested the Parameta business could be worth £1.2bn. TP ICAP’s entire market cap is only £1.7bn.

Given that Parameta only contributed a quarter of TP ICAP’s operating profit last year, the group’s valuation seems askew to me.

The company is “continuing to explore options” to unlock the value this value for shareholders. I’m happy to keep holding.

Roland Head owns shares in TP ICAP.

The post Best British value stocks to consider buying in August appeared first on The Motley Fool UK.

Problems in the recent past

Lords Group Trading (LSE:LORD) is a specialist distributor of building, plumbing, heating and DIY goods. It sells mostly to the trade in the UK, but also to the general public. It currently has a market-cap of just under £70m and a share price at 40.5p.

Over the past year, the stock’s moved lower by 31% and closed Friday at a fresh 52-week low. There have been a few reasons contributing to the fall over this period.

Part of it comes from the readjusting of expectations following 2022 results. Over the past year, the company hasn’t kept up with the expected pace of growth in revenue and profitability. Therefore, there’s some disappointment expressed via the lower share price.

Another factor has been high interest rates. This was flagged up in the 2023 annual report. Higher rates hurt Lords because it does have debt, as well as extensive credit facilities. As of the end of last year, net debt stood at £28.5m. This was up from the £19.4m the year before. So the combination of higher debt and the larger cost of servicing it isn’t a positive.

Why I think it’s undervalued

Despite these factors, I think the stock now looks cheap. For one reason, I don’t think the value of the recent acquisitions are fully factored in to the stock. This includes Alloway Timber and Chiltern Timber, both acquired last year.

It takes time to fully integrate these companies and to realise the revenue benefit and the economies of scale. I think this will only start to be seen in the 2024 results. At that stage, I believe investors will be impressed by the value added here.

Another reason why I think it’s cheap is due to the market conditions. I fully accept that over the past year, many consumers have held off doing home projects or getting in tradesmen to furbish new properties. The is due to the cost-of-living crisis and high mortgage rates.

Yet looking ahead, interest rates should fall later this year, and inflation is easing cost pressures. This should make people feel more confident in buying homes or doing improvements. As a result, this should boost demand for Lords, given the sector it operates in.

The bottom line

I don’t think Lords is getting the attention it deserves and is under a bit of a cloud right now. Yet I’m seriously thinking about buying the stock as I think sentiment will change and people will realise the value it has.

The post Why this penny stock’s a bargain, in my eyes, at 52-week lows appeared first on The Motley Fool UK.

In fact, when I’m trying to find stocks with large growth potential, smaller companies can sometimes present the best option anyway. Here’s one I spotted this week.

Running through the basics

The company is Lords Group Trading (LSE: LORD). It has a market-cap of £80m and a current share price of 47p. Over the past year, the stock’s down 30%.

Lords is a specialist distributor of building, plumbing, heating and DIY goods. The firm principally sells to local tradesmen as well as related merchants and construction companies. It’s been in business for several decades and is targeting full-year revenue of £500m. Therefore, I’m not concerned about this being a small business that could go bust tomorrow!

Financially, Lords is doing fine. 2022 revenue was the highest ever, and although we have to wait until next month for the 2023 results, the H1 results stated that “the board remains confident of delivering our strategic targets of £500 million revenue by 2024”.

If this happens, it would be another record revenue performance. Importantly for me, the business has recorded several years of post-tax profit. Especially when I consider penny stocks, I like to see that the firm is profitable.

Recent share price dip

The 30% fall in the share price over the past year is what makes me think the stock’s undervalued. Yet before we get onto that, let’s address the fall.

Part of this can be down to the negative sentiment around the property sector. With high mortgage rates and inflation, a lot of people are pushing back DIY projects and home improvements. Or they’re deciding not to purchase a property, therefore not needing to use tradesmen or construction companies.

It’s true that even though revenue has been rising, the half-year results showed that profitability slipped. This highlights how inflation can eat away at profit margins, ultimately putting more pressure on the business to perform.

Looking cheap to me

Despite these ongoing risks, I think the stock’s undervalued. The price-to-earnings ratio is 5.99, well below the benchmark figure of 10 that I use for a fair value. Over time, I expect the share price to rally in order for the ratio to move higher.

Further, I think the property sector will recover over the coming year or so. Many are predicting that interest rates will fall this summer, which should make it easier for people to get on the housing ladder. This should all eventually flow through to higher spending at Lords for products.

A penny stock’s always risky due to it being a small company. Yet Lords has a strong track record, with a growth plan that should help the share price to outperform in the future. On that basis, I’m thinking about investing.

The post At 47p, this penny stock looks like a bargain to me appeared first on The Motley Fool UK.

Quite a few fitting the bill are due to bring us updates in September. Today, I’m looking at three I think might be worth buying, depending on those figures.

Bricks

Lords Group Trading (LSE: LORD) is in the building materials business. The share price has slumped in 2022, continuing a downward trend since its initial public offering (IPO) on AIM in July 2021. It was an interesting time to float, the year after Covid-19 severely hammered the stock market.

Lord is set to deliver first-half results on 6 September, following July’s trading update. Revenue in the half appeared largely flat, and the company said trading was in line with full-year expectations.

The market expects revenue of £435m, with adjusted EBITDA of £26m. The company also says it’s on track for £500m revenue in 2024.

Why do I think it might be one to buy in September? Investors seem very wary of building-related stocks right now. But we just heard that house prices are up 10% year on year. So Lords might just be undervalued.

Medical

First-half results from EKF Diagnostics Holdings (LSE: EKF) should be here on 20 September. August’s trading seemed positive enough, with things largely in line with 2021.

That seems good to me, considering Covid contributions to medical businesses are declining. The EKF share price has fallen over the past 12 months, presumably as the pandemic factor recedes.

Forecasts suggest a forward price-to-earnings (P/E) ratio for EKF of around 26, which might seem a bit high. But with further predicted earnings growth, that would drop to around 16 by 2024.

EKF is involved in a number of medical diagnostics, from lab-based to point of care in surgeries and clinics. I’m looking for evidence of non-Covid growth potential in the upcoming results. And if I see it, EKF might be one to buy for long-term growth.

Property

I think Regional REIT (LSE: RGL) is worth a closer look, with its shares down nearly 25% in 12 months and falling 33% in five years.

It invests in commercial properties outside of the M25. And considering the wreckage that Covid created, I think that’s actually a reasonably resilient share price performance.

As a real estate investment trust (REIT), it must pay 90% of its rental profits as dividends. The 6.5p paid in 2021 was only just covered by earnings, in a very tough year. But it yielded a very nice 6.9%.

For the current year, the trust has already announced a 3% increase in its latest quarterly dividend, to 1.65p. And forecasts indicate better than 9% for the full year. That suggests confidence, as UK workers increasingly get back to the office. First-half results are due on 15 September.

Penny shares

I’d never buy a penny share just because its price makes it look cheap. And I’d dig into the risks of all these before I made any decision. But I do think results from all of them should be worth investigating.

The post 3 penny shares to buy in September appeared first on The Motley Fool UK.

Roll with it

Toilet and kitchen roll manufacturer Accrol Holdings (LSE: ACRL) could face a rough ride as rising paper costs hit profits. But it’s my opinion that falling consumer spending power could supercharge demand for its lower-cost private label products and, by extension, profits.

Real wages in the UK are falling at their fastest rate since 2014 because of rocketing inflation, recent data shows. Consumers will have to shop more smartly to make ends meet, which bodes well for Accrol. But the penny stock is not just a great buy for today. The importance of good value to consumers has been rising steadily for more than a decade now.

And Accrol has remained busy on the acquisition front to exploit this opportunity. Recent major acquisitions include Leicester Tissue Company and John Dale.

Penny stock nobility

I’d also consider buying Lords Group (LSE: LORD) following recent share price weakness. Like Accrol, this building materials supplier has also been busy with M&A action to increase its scale. Since the start of 2022 alone, it has spent more than £26.8m to bring builders’ merchant AW Lumb and roofing specialist Advance Roofing Supplies under its wing.

This will give Lords Group better geographic and product coverage and therefore better chances to capitalise on the the booming Repairs, Maintenance and Improvement (RMI) market in the UK. The penny stock has designs on driving revenues to £500m by 2024 (it clocked up sales of £179m in the first six months of 2021, latest financials showed).

Shortages of raw materials are a problem that could push up costs and result in empty shelves at its depots. However, the company’s exciting growth plans still make this an attractive UK share for me right now.

Off to market

In usual times, stocks that have exposure to the housing market are in danger when economic conditions worsen. This is hardly a surprise as a weakening buyer affordability and consumer confidence hits homes demand. So with runaway inflation hurting the domestic economy shares like OnTheMarket (LSE: OTMP) might be considered risky ones to own.

But the reality is that home sales continue to impress despite the worsening economic outlook. A mix of historically-low interest rates and fierce competition among mortgage providers means that borrowing conditions remain extremely favourable. Ongoing government support through Help to Buy also means that market activity remains strong, causing British house prices to continue to rise at breakneck pace.

OnTheMarket allows homebuyers to search for properties through its online platform. And in late 2021, it unveiled a website and brand revamp to help it better take on industry giants like Zoopla and Rightmove. Strong market conditions prompted the penny stock to increase profits expectations in recent months. And I fully expect trading here to remain impressive for the foreseeable future.

The post 3 penny stocks to buy after recent share price falls! appeared first on The Motley Fool UK.