A short-term hit

The dividend yield calculation factors in the dividend per share and the share price. Therefore, if the dividend hasn’t changed in recent weeks but the share price has fallen, it pushes up the overall yield.

One company this has happened to is Unite Group (LSE:UTG). The share price is down 19% in the past month and 42% over the last year. It’s the largest owner, developer, and manager of purpose-built student accommodation in the UK. As a result, the general selling pressure — partly related to worries over the Middle East — is misplaced for Unite, as it doesn’t have any exposure.

However, the stock has also been hit by a weaker 2026 earnings outlook released in February. The real-estate investment trust (REIT) outlined softer demand for student housing in some markets, suggesting profits could fall this year. Obviously, this isn’t great and remains a key risk going forward.

This has pushed the dividend yield up from 6.5% at the end of last month to 7.99% now. That’s a 23% increase. More than that, I think the dividend is sustainable. As a REIT, it needs to pay out income in order to keep certain favourable tax treatments. Further, the dividend cover ratio is 1.2. This means that earnings comfortably cover the level of dividends being paid. Finally, let’s not forget that student housing tends to be less cyclical than other property sectors because demand comes from universities. So, with a long-term investment lens, I think this could be a good income stock to consider.

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.

Dividend pressure

Not all increases in yield mean that the stock is a great dividend purchase. For example, take Marshalls (LSE:MSLH). The dividend yield has popped from 4.3% last month to 5.34% currently.

The share price fall of 20% in the past month compounds the 41% drop in the past year. It has struggled due to a slowdown in the construction and housing markets. Interest rates in the UK haven’t fallen as quickly as many had expected over the past year. Further, concerns about higher inflation due to the spike in oil prices means investors have repriced their thinking for any cuts in interest rates this year. In fact, I’ve heard talk of raising interest rates to combat inflation! This would hurt Marshall’s future as it could cause mortgage rates to increase, putting off new buyers.

As for the dividend, the company already cut its interim dividend by about 15% last summer. With profits declining, I doubt it will increase any time soon. Therefore, the high dividend yield needs to be treated with caution.

I could be wrong. The company is pushing hard for cost savings, which could act to ease financial pressure. If the Middle East conflict ends quickly, we could see consumers more confident about making large purchases, such as property. However, it’s not an income stock I’d consider right now.

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I’m talking about landscaping and building products supplier Marshalls (LSE: MSLH), which reports its first-half results today. The backdrop is dismal, with the FTSE 250 stock slumping 38% over one year and a brutal 68% over five.

Some investors may wonder why I’m tempted by such a struggler, but I’ve found that buying beaten-down stocks can pay off, given time. The early months of the recovery are often the most dramatic, so it makes sense to get in early. It’s a risky strategy though.

Marshalls share price slides again

Yet just because the stock has plunged 68%, doesn’t mean it can’t fall another 68%. I’ve had my fingers burnt more than once, but the winners far outweigh the losers.

Today’s results didn’t signal the start of the recovery, sadly. Instead, Marshalls shares are down 1.7%. So what’s going on?

Group revenues actually climbed 4% year on year to £319.5m, thanks to a solid showing from its roofing and building products units.

However, its core landscaping division suffered a “modest contraction”, even though its improvement plan “delivered higher volumes and market share gains”.  

End markets remain challenging with subdued demand squeezing prices, while a less profitable product mix hit profitability. The result? Group adjusted operating profit fell 16% to £28.4m, while adjusted underlying earnings sank 15% to £42.9m. No wonder investors aren’t buying.

FTSE 250 recovery stock?

There were positive signs, with adjusted operating cash flow conversion “strong” at 94% and the balance sheet “robust” with net debt cut by 3% to £151.6m.

CEO Matt Pullen hailed the benefits of the group’s “diverse portfolio”, which has helped it withstand today’s subdued market. He also highlighted a plan of action to cut costs and drive profits in its ailing landscaping division. But the downbeat mood was reflected in a 15% cut to the interim dividend, from 2.6p to 2.2p.

Marshalls reaffirmed its revised full-year guidance, forecasting adjusted pre-tax profits between £42m and £46m.

To me, this looks like a good company in a struggling sector. Housebuilding stocks generally are taking a beating, as the cost-of-living crisis squeezes buyers. With inflation set to predicted to hit 4% later this year, the pain isn’t over yet.

Dividend cuts never help

Last week’s Bank of England interest rate cut may help, but analysts warn this could be the last we see this year. With more tax hikes likely in the autumn Budget, Marshalls may find current challenges persist.

Pullen is “encouraged by the Government’s commitment to new housing and infrastructure”, the problem is that progress is likely to remain slow. The UK is nowhere near hitting its target of building 300,000 homes a year.

I’m going to keep watching Marshalls. A price-to-earnings ratio of 12.9 suggests there’s value here. The trailing yield is 3.94%, which is pretty high for a growth stock, today’s cut notwithstanding. I can still see a Marshalls recovery story, just not yet. I can see are more exciting growth shares to consider buying on the FTSE 250 today.

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While that’s frustrating, it’s dragged the price-to-earnings (P/E) ratio down to 16.8. That’s around 30% lower than its historical average of 23.4, and a near-50% discount to its key competitors, Ibstock (38.5) and Forterra (27.6).

In other words, Marshalls looks pretty cheap right now. So is this a screaming buying opportunity? Or is this a warning sign to stay away? Let’s take a closer look.

What happened?

Like most sudden double-digit dips, Marshalls’ recent 20% collapse came on the back of a trading update. The group delivered a slight revenue bump over the first six months of 2025, with sales landing at £319m versus £307m.

Zooming into its individual segments:

• Landscaping Products enjoyed a notable rebound compared to the weak second half of 2024
• Building Products received a welcome bump from steadily rising residential housing build rates
• Roofing Products maintained its momentum from last year, expanding by double digits

On the surface, this all sounds fairly positive. But digging deeper reveals a problem. Demand for Landscaping Products declined significantly towards the end of May. And when combined with industry overcapacity, Marshalls was forced to cut prices to remain competitive, hitting profit margins.

To make matters worse, management doesn’t foresee any near-term respite, resulting in a full-year profit warning. Underlying pre-tax profits are now expected to land between £42m and £46m versus the £52.2m delivered in 2024. And when combining a profit warning with a bleak outlook, investors unsurprisingly jumped ship, triggering a sharp share price crash.

But is this an overreaction?

Room for optimism

While its landscaping segment’s struggling, investors seem to be overlooking the robust gains delivered by its building and roofing businesses in spite of industry weakness. And since these segments contribute the most towards Marshalls’ bottom line, continued growth could eventually offset the expected prolonged weakness within its landscaping operations.

At the same time, the company has been busy accelerating its cost-cutting initiatives targeting a £9m annualised savings by the end of this year, as well as notable margin expansion for landscaping by 2026. Considering the latter’s experiencing competitive pricing pressures, future boosts to profitability could eventually restore earnings even when selling products at lower prices.

The bottom line

Marshalls’ profit warning has cast a shadow of uncertainty over what’s coming in the near term. And seeing the shares dropping to reflect this makes sense. But a 20% crash might be a bit overkill, likely driven by the generally weak investor sentiment surrounding the building materials sector.

2025 sounds like it’s going to be a rough year for this enterprise. But as with most cyclical stocks, the key is to buy at the bottom of the cycle, not the top. With that in mind, long-term investors may want to take a closer look at this growth stock for its recovery potential in 2026 and beyond.

The post After crashing 20% in a day, is this a dirt cheap growth stock? appeared first on The Motley Fool UK.

The stock in question is FTSE 250-listed landscaping and building products supplier Marshalls (LSE: MSHL). It’s had a rotten week, tumbling 22% since issuing a profit warning last Friday (25 July). The Marshalls share price is now down 42% over one year and 66% over five.

In March, I said Marshalls looked cheap, but wasn’t ready for recovery just yet. That view has aged well after Marshalls slashed earnings guidance for the rest of 2025, and admitted there’s “no immediate catalyst” for a market rebound.

Can Marshalls bounce back?

In recent years, I’ve made a habit of buying companies after profit warnings, assuming most of the bad news was priced in. But too often, more trouble emerged. It’s a painful lesson. These days, I wait for the dust to settle.

Marshalls did post a 3.9% rise in first-half revenue to £319m, thanks largely to better volumes. But that masked deeper problems. Its core landscaping unit saw sales fall 1% as price pressure and a difficult product mix squeezed margins. Marshalls is battling “structural overcapacity in the UK supply chain”, leaving it little room to protect pricing.

Last Friday, the board downgraded full-year adjusted pre-tax profit expectations to between £42m and £46m. That’s a big cut from the £52m to £53.7m range it offered earlier this year.

FTSE 250 recovery hope

Despite the gloomy backdrop, there are still reasons to keep this cyclical stock on the radar. Marshalls’ price-to-earnings ratio now sits around 12.66, and the trailing yield has crept up to 3.85%. The shares are trading at levels last seen in 2000. Others may see that as a warning, of course.

Encouragingly, building and roofing products are still showing solid growth. Net debt remains under control. The balance sheet isn’t bulletproof, more than 80% of Marshalls’ net assets are intangible, but interest cover is still a reassuring four times, even after factoring in recent woes.

Tempting share, but risky

Analysts tracking Marshalls have a median 12-month price target of 320p. If that proves right, the shares could jump more than 50% from today’s 208p. But those targets were probably set before last week’s slump, so I’ll take them with a pinch of salt.

Longer term, I can see a path to recovery. This is the kind of cyclical business that could spring back to life once interest rates start falling, reawakening the housing market and home improvement sector. Timing is everything here.

There’s a strong argument in favour of buying a recovery stock before the good news is in. The initial bounce is often the biggest. I think investors might consider buying Marshalls once there’s firmer evidence of a turnaround. For now, I’ll keep watching.

The post Down 22% in a week! Is this UK stock now priced for a barnstorming recovery? appeared first on The Motley Fool UK.

The surprise news

On Friday (25 July), the company released a trading update. The main takeaway was that it issued a profit warning, stating that market activity in its core landscaping business weakened sharply from late May and that it sees no meaningful recovery through the rest of 2025.

The firm now expects adjusted profit before tax for 2025 to be in the range of £42m–£46m, down from earlier (and higher) guidance levels. In terms of the key drivers for this, the update spoke about “structural overcapacity in the UK supply chain continuing to exert downward pressure on prices”. Moreover, “cumulative inflation in building materials” has shifted client demand away from higher-margin offerings from Marshalls.

It wasn’t all bad news, with divisions such as Building Products and Roofing Products experiencing revenue growth. Yet in terms of an initial market reaction, the share price fell sharply. The loss from last week means over the past year the stock’s down 37%.

Why I’m not too concerned

Although the news may have come as a shock to some investors, I was encouraged by the end of the report. The management team said: “We have taken action to reduce costs and optimise our national manufacturing network”. So the implementation of change has already begun. Even better, the actions being taken are expected to boost the landscaping division’s profits materially next year.

What we have here is a situation where there are short-term headwinds for the rest of this year for Marshalls. But when we look to 2026 and beyond, the management team believes it’s taking enough action to have things back on track by then. As a result, I think the share price move was a bit of an overreaction.

It’s true that this is my subjective viewpoint. The main risk I see is if trading conditions worsen from here, triggering another update where the company has to further walk back investor expectations.

Let’s also not forget that despite the hit to profits, Marshalls is still expecting to generate a profit before tax in the tens of millions of pounds. If it were loss-making or predicted to flip to a loss, I’d be more concerned. However, any company that makes a profit during a tough period highlights the strength of its business model.

I think an investor could consider adding the stock to their portfolio as a value pick for a recovery over the coming year.

The post This FTSE stock just crashed to 52-week lows. Should investors buy now? appeared first on The Motley Fool UK.

While the UK mid-cap index has gained 1.9% to sit at 21,025 points as I write on 29 May, heavy selling means there are some unloved stocks that could be worth a second look.

I think UK landscaping and construction products manufacturer Marshalls (LSE: MSLH) is one that value-focused investors might want to keep on their radar.

Tough industry environment

Marshalls has not been immune to the pressures facing the UK building and housing sector. In 2023, the company issued profit warnings in response to a sharp slowdown in construction activity.

Rising interest rates, weak consumer confidence, and reduced housing starts all hit demand. That in turn led to job cuts and a restructuring of the company’s operations.

As a result, the company’s share price fell significantly, declining more than 60% from the start of 2021 to the end of 2023.

The company isn’t out of the woods just yet. Full-year revenues for the year ending December 2024 fell 8% to £619.2m as the board also reduced the final dividend by 5.3% from the year prior to 5.4p.

At the time of writing, the shares trade at around 286p, giving the company a price-to-earnings (P/E) ratio of around 23 times. That feels quite rich to me.

The stock has a dividend yield of 2.8% — tidy, but nothing to write home about, especially given the outlook.

Neither of these metrics are screaming that now is the time to buy. However, for medium-to-long-term investors, I think there is some potential upside that makes the company one to watch.

Promising signs

Despite the challenges, I think Marshalls remains a fundamentally sound business with a strong position in its sector.

The company supplies products for both private and public sector projects, including paving, drainage, and garden landscaping. This diversification of its product and service lines helps to build some resiliency and de-risk the business.

The UK government is pushing hard to build 1.5m new homes during its term. Whether that target is achieved or not, I think it should drive investment and opportunity in the sector, which may benefit Marshalls.

Inflation in the UK continues to ease and we’ve seen the Bank of England start to cut interest rates. That is good news for housing activity and infrastructure sectors, which tend to be quite sensitive to interest rates.

In its full-year results released in March, the company reported a strengthening order book and early signs of a pickup in commercial project activity. While it is too early to call a full recovery, I think these provide some signs of hope for its long-term trajectory.

Not without risk

Of course, this remains a cyclical stock exposed to ongoing macroeconomic risks. A prolonged downturn in the housing market, delays to public spending, or continued weakness in consumer demand could all affect Marshalls’ recovery prospects.

In my opinion, the current price is too high given these challenges. However, further share price drops could put the stock in a zone where it’s worth considering for the long term, aided by a leaner cost base and lower interest rate environment.

The post Is this under-pressure FTSE 250 stock 1 for value investors to consider? appeared first on The Motley Fool UK.

Demand from easing monetary policy

The first one is Marshalls (LSE:MSLH). Last week, the stock hit the lowest level in a year at 229p. Currently, the share price is down 10% over the past year.

The UK-based landscaping and building products company has struggled in the past year, mostly due to subdued activity in the housing sector. As interest rates have stayed higher for longer, mortgage rates have done the same. This has made it tricky for people to buy houses. Further, with economic growth rather sluggish, some are feeling the pinch on finances and so are putting off home improvement projects. This remains a risk going forward.

However, February inflation data showed a fall from 3% the previous month to 2.8%. This could allow the Bank of England committee to start cutting the base rate faster if inflation keeps showing signs of falling. In turn, this should help to boost client demand for Marshalls.

Further, the latest annual results showed strong cost discipline as the management team focuses on efficiency. Net operating costs were down 10% versus the year before. So even if the company needs to contend with another slow year for revenue, lower costs can offset this impact.

I think the stock is now cheap as the price-to-book ratio is 0.93, the lowest level in a decade. This valuation metric can help investors to assess the market price relative to the book value.

A potential German boost

A second idea is Essentra (LSE:ESNT). Down 39% over the past year and currently at 52-week lows, this reflects a much larger move than Marshalls.

The industrial components manufacturer recently posted 2024 annual results showing a 4.4% decline in revenue to £302.4m. Adjusted operating profit fell 7.2% to £40.1m, with the management team citing “softening market conditions” for the overall fall. The business had been guiding towards lower results, hence the move lower in the stock price over several months.

With a price-to-earnings ratio of 12.4, it’s below the FTSE 250 average, making it potentially undervalued from that angle. Yet the other big factor relates to a possible surge in demand from European clients. Recently, Germany announced plans for a huge £420bn infrastructure investment package. With nearly half of firms revenue coming from the continent, it stands to win big if this fund takes off soon. I don’t believe this potential is reflected in the current share price, making it cheap in comparison.

Of course, one risk is that market conditions remain weak for longer than expected, causing the share price to fall further before recovering. This is true, but ultimately an investor should have a multi-year long-term investment horizon.

I think both value ideas are worth considering by investors at the moment.

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I always use my own intel before buying any stock, and would never rely on the artificial kind. But I’m also curious. So I asked ChatGPT to name two FTSE 250 stocks it felt had the ability to recover after struggling for some time.

Can Marshalls shares fight back?

Its first pick was UK-based landscaping and building products supplier Marshalls (LSE: MSHL). It’s certainly been struggling. The shares are down 18% over one year, and 60% over five.

My first thought is that it’s been struggling a bit too much for my liking. Yet it’s undeniably cheap, with a price-to-earnings (P/E) ratio of just 7.57.

ChatGPT said Marshalls has posted “significant growth during previous economic upturns, reaching a market value of £1.5bn”. The cost-of-living crisis has inevitably hit it hard.

2024 revenues fell 7.7% to £671m, which “reflects lower demand from housebuilders and continued subdued activity in private housing repairs, maintenance and improvements”, according to Marshalls.

The board did cut net debt by 23% to £134m, and expects adjusted 2024 pre-tax profit for 2024 to be within markets expectations of £52m to £53.7m. The trailing yield has climbed to 3.38%.

Do I agree with AI? I’m afraid not. Inflation and interest rates to remain stubbornly high, which will hit housing market activity. Marshall has to absorb employer’s national insurance and minimum wage hikes from April. I think there’s a recovery play here, just not yet.

Breedon shares are bouncing

ChatGPT’s second pick was in the same sector, so I assumed it would be subject to the same challenges. But instead, its shares have been on a tear.

Building materials company Breedon Group (LSE: BREE) doesn’t fit the criteria I gave ChatGPT at all. Its shares are up 27% over the last year, and a staggering 545% over five. It’s a momentum stock, rather than a recovery play. ChatGPT responses remain as erratic as ever.

Breedon has “grown significantly over 17 years through strategic acquisitions”, my unreliable robot buddy tells me. It’s defied the domestic UK gloom by expanding into the US, acquiring BMC Enterprises for $300m and Lionmark Construction for $238m.

Today, it’s the US stock market that’s struggling, although Breedon has avoided the recent sell-off. Its share price is up 7% in the last month. Yet the P/E is a relatively modest 13.88.

Breedon was boosted by full-year 2024 results, published on 5 March, which showed underlying EBITDA up 11% to £270m. However, volumes fell 6% due to the weaker UK market (made worse by our dodgy weather).

Another concern is that net debt increased by £235m to £405m, mostly due to the BMC acquisition. Breedon is a banger, but I wouldn’t call it a recovery stock. Also, I feel like I’ve missed out on the excitement.

ChatGPT’s picks are a curious brace. They’re at very different stages of their growth cycles. Both are worth considering, but I wouldn’t buy any stock based on AI’s web trawling. I’ll do my own research, and see what human beings think too.

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I bought the stock a while ago based on its fundamentals and the outlook for the company. And for sometime at least it was a winning stock in my portfolio. The question now, though, is whether it can bounce back or will it continue to languish. 

Trading update has strong positives

The FTSE 250 company reported a decent 7% increase in revenue for the four months of 2022 ending April, compared to the same time last year. It is also positive in its outlook for the rest of the year. It expresses confidence in being able to pass on increases in costs, which should bode well for its bottom line. 

Further, it also acquired Marley, a market leader in roof systems. Marshalls mentions it as being “cyclically resilient”, which could be a definite positive at a time when growth is slowing down. The UK just reported a contraction in economic output in March compared to February. 

In fact, the company itself points out in its update that the Construction Products’ Association has reduced its forecast for growth in UK market volumes for 2022 and 2023, because of a “more uncertain trading environment”. This is probably one reason why investors are downbeat about the stock now. 

Also, while its revenues have grown, the growth has slowed down from last year, which could be playing on investor sentiment towards the stock too. The company chalks it up to a strong comparator period, which included “record seasonal sales volumes”, however. 

Healthy FTSE 250 stock

Keeping everything in mind, I definitely do not see a reason to sell Marshalls now. In fact, considering that the company expects its debt levels to remain in check, I will continue to hold on to it even in the event of an economic slowdown, which could impact it. Also, it posted healthy numbers for last year as well, which is encouraging. It is also a dividend stock, with a yield of around 2.7%. This is marginally higher than that for the FTSE 250 as a whole. 

What I’d do about Marshalls

However, I do see why falling growth could be a deterrent for investors. This is especially so as the FTSE 250 stock is not exactly cheap with a price-to-earnings (P/E) ratio of almost 20 times. This is higher than even many financially healthy FTSE 100 companies. Still its outlook looks good to me. And if its earnings rise, its P/E could drop. I might just buy more of it in the coming days. 

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Construction and building supplier

Marshalls is one of the UK’s leading landscaping product manufacturers. It manufactures and supplies a multitude of products such as natural stone and concrete for the construction, home improvement, and landscape markets. It has roots stretching back to 1890s.

Marshalls sells its products via three main channels. These are to builders merchants and private builders, large construction firms, and direct to consumers.

As I write, shares in Marshalls are trading for 722p, which is similar to this time a year ago when shares were trading for 721p. In the three months, shares have dropped from 845p to current levels. Is now a good opportunity for me to buy cheap shares in an established company?

Positive performance and outlook

Marshalls’ most recent trading update was a half-year report announced in August, which made for excellent reading. It reported that revenue has surpassed 2020 and pre-pandemic 2019 half-year levels, as did gross profit, which shows strong recovery since the pandemic affected it. Debt levels had decreased from 2020 and pre-pandemic levels, which was due to excellent trading and favourable market conditions. An interim dividend of 4.7p per share was declared. This was the same amount as in 2019. There was no interim dividend in 2020. Many UK shares cancelled dividends in 2020 to conserve cash.

Marshalls has a good track record of performance too. I do understand past performance is not a guarantee of the future but I use it as a gauge nevertheless. Prior to the pandemic-affected 2020 results, revenue and profit grew year on year for three years in a row. I expect the next full-year results to surpass 2019 levels if this half-year report is anything to go by.

The outlook ahead is positive for Marshalls in my opinion. The construction sector is booming right now and the UK government has committed to spending £100bn on projects over the next few years. This could boost Marshalls and it is also taking its own steps to grow further. It has decided to spend £21m in 2021 as capital investment to aid growth plans. This includes a new manufacturing plant in St Ives.

UK shares have risks

Despite my bullish stance, I must note credible risks of investing in Marshalls. It is well known that macroeconomic issues affect the construction industry most of the time. Current supply chain issues as well as rising inflation and costs could affect operations, performance, and the bottom line. This could affect investor returns. Furthermore, the pandemic is not over and any new variants could derail performance, like it did in 2020 at the beginning of the pandemic. Other similar UK shares could be affected by similar issues.

I would buy Marshalls shares. At current levels, I think the shares are a tad expensive with a price-to-earnings ratio of close to 30, so if shares were to cheapen I would be even happier to add them to my portfolio. I’m confident the construction boom will benefit Marshalls, and it has a good position in its market to continue growing, performing well, and providing investor returns.

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