Dividends first appeared in 2022, and they’ve been ramping up at pace ever since.

Looking ahead, City analysts expect an increase of more than 10% in the current trading year to September 2024, then 37% the year following — wow!

Trading well and a positive outlook

Today’s half-year report contains some decent figures, most of which are moving in the right direction. The company reckons it achieved further profitable growth in market share “despite a subdued trading environment, whilst investing for a transformational year”.

Earnings look set to increase by around 27% this year and 15% in 2025, and the progress of the business is being driven by the company’s strategic focus. The core business is retailing bathroom products and accessories to consumers in the UK via the firm’s online platform.

The directors reckon consumers are buying bathroom products and accessories online more and more. However, there’s “a considerable way to go” before that trend will mature.

Chief executive Mark Radcliffe thinks the business will gain further market share in the short term. It aims to take business from traditional retailers, omni-channel operators, and online competitors. Key to the success of the growth campaign is the firm’s strong brand.

Extending its market

The company improved its website in 2022 in a move aimed at driving traffic to the firm’s expansion categories. Radcliffe thinks there’s an “exciting” opportunity to increase the reach of the business with follow-on products.

For example, after buying bathroom products, customers often then go for things like tiles, lighting, décor, and kitchens. In today’s update, the company reported a 19% increase in expansion category sales to £5.6m. That represents just under 2% of last year’s overall revenue figure, suggesting further potential.

A third growth category is the market for selling retail bathroom products and accessories to trade customers such as plumbers, fitters, and other enterprises.

In the first half, trade revenue grew by 9% to just over £32m, which represents just over 11% of last year’s overall revenue figure.

What now?

The directors are focused on expanding the business and the setup strikes me as being entrepreneurial.

But there are risks for shareholders. For example, the sector is cyclical and the kind of big-ticket items being sold can be among the first postponed when economic times are tough.

There’s also some valuation risk here. With the share price near 98p, the forward-looking earnings multiple is around 17 for next year – I see that rating as being up with events.

Nevertheless, this business is delivering decent earnings growth and a rising dividend. It has the potential to expand further and seems well worth further research now with a view to owning a few of the shares.

The post Up more than 15%! — this small-cap company is delivering phenomenal dividend growth appeared first on The Motley Fool UK.

Last year’s bear market for stocks pushed down many share prices. And general economic and geopolitical conditions caused lots of business to suffer operational difficulties. But some enterprises have been healing. And several companies have released upbeat trading updates and positive outlook statements recently. 

Outlooks have been improving

The market’s been catching up with the news. And over the past few weeks we’ve seen many stocks shoot higher when businesses exceed investors’ prior expectations. 

So, there’s great scope for several stocks to return to former glories. And there’s also lots of potential for businesses with previously suppressed trading to generate earnings growth ahead. Therefore, I expect some UK shares to deliver returns near 100% for shareholders through 2023 and beyond. All I need to do is find them.

And on that front, one company I’ve been looking at is Victorian Plumbing (LSE: VIC). The directors describe the enterprise as “the UK’s leading online specialist bathroom retailer.” And that’s a good start, to me, because I’ve always considered the plumbing supplies sector to be resilient. 

The company arrived on the stock market in June 2021 and the share price back then was around 330p. However, today it sits near 90p. And 2022 was bad year for the earnings of the business.

Recovery and growth in motion

Nevertheless, City analysts have pencilled in a robust recovery with double-digit earnings increases for this year and next. And Victorian released an upbeat full-year report in December. Results for the year to 30 September 2022 came in “ahead of expectations”.  And the directors said revenue in the second half of the year grew, thus demonstrating “continued trading momentum and further market share gains.” 

Furthermore, the directors think the macro operating and economic environment is an opportunity to further strengthen Victorian’s market position. And if the business can expand as it hopes, I reckon there’s a chance robust double-digit advances in earnings could continue. 

Nothing is certain, but rising earnings could drive the share price higher, perhaps as far as doubling.

Meanwhile, the balance sheet looks robust and there’s a healthy net cash position sitting in the bank. The directors underlined their confidence in trading and forward-looking prospects by announcing a maiden shareholder ordinary dividend of 1.1p per share. But they didn’t stop there. They also announced an additional special dividend of 1.7p per share.

It seems to me the business is firing on all cylinders. However, over the past year, the share price has slipped by about 20%. Meanwhile, the valuation looks fair with a forward-looking earnings multiple running near 16 for 2024.

It’s possible for my optimism to be misplaced. And Victorian’s growth trajectory could stall in the months ahead. But if I had some spare cash to invest now I’d do a deep dive into researching this opportunity. And I’d aim to buy some of the shares to hold for the long term if satisfied by the outcome of my further investigations.

The post 1 of the UK shares I’d buy now and aim to double my money appeared first on The Motley Fool UK.

Finding inexpensive shares

But what makes a stock cheap? After all, British American Tobacco shares are around £33 each compared to just pennies for shares in Rolls-Royce or Lloyds.

Price is just that – what I pay for something. That is not necessarily the same as value, which is what something is worth.

When I hunt for cheap shares – as I am currently doing —  I look for a mismatch between today’s share price and what I think a company’s long-term value is, based on its business prospects.

A share I bought

Using this approach, I have been buying shares in Victorian Plumbing (LSE:VIC) this year.

Its shares trade for pennies, but that is not why I see them as cheap. Rather, it is because of the value I see in this prominent domestic fittings business.

In the past year, the Victorian Plumbing share price has crashed 66%. At its current price, the company has a market capitalisation of £187m. But as of last month, it had over £43m of net cash on its balance sheet. In other words, the enterprise value of the firm is around £144m right now.

Yet the company generated the same revenue last year as it did in 2021, which was a blockbuster period of sales. Indeed, the company has said that revenue, earnings, and cash flow for the full financial year all came in ahead of consensus market expectations. With results due in less than a fortnight, we will learn exactly what those profits were and also how current trading is looking.

Hunting for value

I think there is an imbalance between the strong business performance and weakening share price at Victorian Plumbing. That is why I have been buying.

There are risks, of course. Tightening household budgets could lead customers to put off expensive home renovations, hurting sales and profits. I will be studying the next trading statement for signs of that.

But Victorian Plumbing matches the definition of “cheap” that I used above.

Building a portfolio

However, I could be wrong about that. After all, retailer boohoo looked cheap to me early this year but it has continued to fall in price. It is 79% cheaper than a year ago.

I still own my boohoo shares and hope that the challenges of inflation and shifting consumer demand will not hurt it in the long term. For now, though, the share price performance is alarming. One risk of hunting for cheap shares to buy is that I can end up owning some value traps. That is why I keep my portfolio diversified – and always look for value, not simply a low price.

Cheap shares may not stay that way when lots of investors understand their value. I am not waiting to buy!

The post I’d find cheap shares to buy before it’s too late! appeared first on The Motley Fool UK.

Tritax Eurobox

Tritax Eurobox (LSE: EBOX) is the smaller sibling of FTSE 250-listed real estate investment trust Tritax Big Box. Like the latter, it specialises in developing and managing warehouses (or ‘sustainable logistics assets’). As the name says, all of these are located in Continental Europe.

Demand for warehouse space from retailers went through the roof during the pandemic. This sent Eurobox’s share price up roughly 50% between March 2020 and August 2021. Since the beginning of 2022 however, the stock has crashed 20% in value.

This strikes me as a potential opportunity, especially as the current economic headwinds all look temporary. That said, a P/E of 23 certainly doesn’t strike me as a bargain valuation and there’s a risk Eurobox could fall some more.

Still, a 5.3% dividend yield isn’t to be sniffed at. It will also come in handy for tackling inflation. So I’m tempted to open a position in this penny stock.

EKF Diagnostics

Holders of AIM-listed EKF Diagnostics (LSE: EKF) have had an awful 2022, by any standard. The share price has been cut in two, leaving the company with a market capitalisation of just £160m.

Looking on the bright side, this valuation is still 60% above where it was when the first national lockdown in the UK was announced. This shows how well the company performed over 2021, thanks to Covid-19-related demand.

Having fallen so far, EKF stock now trades at 18 times forecast earnings. This looks fair considering that Wednesday’s AGM statement highlighted trading in Q1 had been “strong” with revenues “in line” with that achieved last year. That doesn’t sound like a company in crisis to me! The shares yield 3.6% dividend as well.

Analysts are expecting earnings growth of almost 25% in 2023. However, this is likely dependent on new non-Covid products being launched on time. A clear risk.

On balance, I’d be willing to begin building a position here too.

Victorian Plumbing

Bathroom products retailer Victorian Plumbing (LSE: VIC) is a company I’ve followed ever since it was listed in June last year. Concerned that it might be coming to market as the pandemic-influenced boom in DIY reached its peak however, I chose not to dive in. This proved to be a good call. The share price has tumbled 80% since then.

Are investors being too pessimistic? Possibly. Victorian has a good share of its market and benefits from a flexible online-only business model. Founder Mark Radcliffe still owns just under half of the company’s stock.

But, again, there can be no guarantees. With living costs hitting the consumer hard, plans to install a new bathroom suite are easily postponed. Throw in high marketing costs and a P/E of 18 doesn’t exactly feel cheap.

As such, I do wonder if there could be another drop to come if the next set of numbers don’t convince the market. I’ll wait to see evidence of better trading first.

The post These penny stocks have crashed! Should I buy now or keep watching? appeared first on The Motley Fool UK.

Victrex

Victrex (LSE: VCT) may not be well-known, but its customers tend to be large industrial companies. It makes polymers that go in everything from cars to spacecraft.

There are a couple of things about the business that attract me. The first is that the applications to which its products are put are often mission critical. When safety is a consideration, customers are more likely to focus on quality than on cost alone. That gives UK-based Victrex the ability to compete against producers in lower-cost countries. Secondly, the company is a leader in certain polymer technology and has patents on some products, meaning that competitors cannot make them.

That adds up to a recipe for business profitability and last year, post-tax profits came in at £73m. While that was higher than the year before, it remains well below what the company managed in the years before the pandemic. Ongoing supply disruption remains a challenge for the company, along with cost inflation and soaring energy bills. Those things could help keep the share price depressed in the next couple of years.

That makes me regard it as a good stock to buy now for my portfolio. The long-term prospects for Victrex look sound to me. Over time, I expect supply chain issues to get better and inflation to become more manageable without hurting profit margins. The shares offer me a 3.3% yield and I think there is the prospect for share price growth in coming years.

Victorian Plumbing

Digital bathrooms, kitchens and plumbing merchant Victorian Plumbing (LSE: VIC) has also been suffering from investor concerns about the impact of inflation on its profit margins. Another concern is whether demand will fall, hurting revenues. Whereas Victrex’s customers have little choice as to whether or not they need polymers, Victorian Plumbing is selling what in some cases is a discretionary product. If inflation starts to bite household budgets, many people may put a planned bathroom renovation off for the foreseeable future.

That is weighing heavily on the Victorian Plumbing share price, which has fallen 82% in the past year. Yet like the chief executive, who has been purchasing shares lately, I see this as a buying opportunity for my portfolio. The company is profitable and has expanded its customer base over the past couple of years. Its asset light model means it does not need lots of capital to keep growing.

I see both of these companies as having attractive investment cases. I have added them to my portfolio and am hoping to see possible share price growth from them in the coming years.

With £300, I would put £150 into each, sit back and hope to see the businesses do well.

The post 2 UK shares to buy now with a spare £300 appeared first on The Motley Fool UK.

So penny shares do not attract my attention just because they cost under a pound – I also consider their long-term business prospects.

With a focus on the long term, here are three shares I have bought for my portfolio I think could increase in coming years.

boohoo

Retailer boohoo (LSE: BOO) has been facing troubles, such as ongoing reputational risk from supply chain conditions at some of its suppliers and inflation eating into profitability. Indications from rivals such as ASOS suggest consumers may be tightening their belts and spending less on fashion.

But I reckon that might actually help boohoo as it operates at the bargain end of the market. Its large new factory in Leicester shows it is addressing supply chain issues in a meaningful way. I reckon the company can raise prices in the next couple of years to offset inflationary pressures without too much damage to its bottom line.

Meanwhile, the company owns a host of popular brands and has a large customer base. It has been consistently profitable in recent years and is set to keep recording double digit percentage increases in revenues. I think the selloff means boohoo shares now trade well below their potential.

Victorian Plumbing

Like boohoo, Victorian Plumbing (LSE: VIC) has seen its share price collapse in the past year. Its share price has fallen by over 80% in 12 months.

Also like boohoo, the company faces headwinds. The same inflationary and supply chain issues could hurt its profitability. Bathroom and DIY sales may fall sharply now many are spending less time at home than during lockdown.

But, as with boohoo, the company is profitable. I think it has established a strong niche in the market. Another plus is that founder and chief executive Mark Radcliffe has spent another £354,000 buying shares this month. That means he now owns 152m of them.

The price-to-earnings ratio of less than six also looks like a bargain to me. I think if it can maintain profitability the share price can partly recover, even if revenues are flat. I also expect the company’s extensive advertising to help increase revenues. And that should help the share price.

Penny share in financial services

It may seem odd that Lloyds (LSE: LLOY), with its £32bn market capitalisation, trades among the penny shares.

But the financial services giant has been a penny stock ever since the aftermath of the financial crisis. Challenges remain. For example, a recession could lead to higher default rates and that would likely hurt profits at Lloyds.

But with its strong brand name, market-leading mortgage book and well-covered 4.4% dividend yield, I see a number of reasons to regard the shares as cheap.

Lloyds trades on a P/E ratio of six, which looks cheap. Rivals NatWest and HSBC trade on a P/E ratio of 10. If the business keeps performing strongly and the shares are valued more in line with its peers, I see potential upside for Lloyds in the short-term. In the years to come, if the economy is strong enough, I think we could potentially see the Lloyds share price soar.

The post 3 penny shares I think could soar appeared first on The Motley Fool UK.

A penny stock for the EV boom

I think Bluejay Mining (LSE: JAY) could prove an excellent stock to own as demand for electric vehicles (EVs) soars. You see this particular UK mining share is developing a series of projects in Greenland which contain elements like nickel, copper, cobalt and lead.

It also owns various copper projects in Finland which it is assessing for future development. These commodities are critical in the manufacture and the running of these low-carbon vehicles.

The problem with investing in Bluejay is that it isn’t actually generating any revenues at present, meaning it may struggle to afford to get its assets to production. Accruing lots of debt and tapping shareholders for cash are common options for companies in this scenario.

Encouragingly though, Bluejay created a joint venture with KoBold Metals — the mining technology business backed by Bill Gates and Jeff Bezos — to fund the Disko-Nuussuaq nickel, copper, cobalt and platinum project. This has helped remove a large chunk of the risk for Bluejay and its investors.

Bluejay Mining’s share price rocketed following the KoBold Metals news broke. But it’s more than halved since then to current levels of 7.4p. I think this could represent an attractive dip-buying opportunity for my ISA.

A top buy after IPO disaster

Victorian Plumbing Group (LSE: VIC) began trading in London to much fanfare last summer. Its IPO was the largest ever on the AIM market and so it came with lofty expectations. News of difficult trading conditions since then has inevitably yanked it lower.

At 54p per share, Victorian Plumbing trades at an eye-watering discount to its IPO price of 262p. The now-penny stock has been hitting by slowing sales and rising costs as a consequence of broader inflationary pressures. And this threatens to continue for some time (consumer price inflation just surged to 6.2%, data shows today).

However, I still believe in the long-term outlook for Victoria Plumbing. And as someone who loves value I’m highly tempted to load up on the business. At today’s prices, Victorian Plumbing trades on a forward price-to-earnings growth (PEG) ratio of just 0.5. Any reading below 1 suggests that a stock could be undervalued.

I like Victorian Plumbing’s online-only trading model and the steps it has taken to create a cutting-edge internet presence. Its focus on e-commerce is enabling it to exploit the rising popularity of online shopping with consumers and is keeping costs down. The strength of its online offering is one reason for its ‘excellent’ rating with customers on Trustpilot.

I also believe Victorian Plumbing will continue to benefit from a strong housing market. The favourable mortgage rates of recent years look set to persist, meaning sales of Victorian’s plumbing to both sellers and buyers should be robust.

I fully expect Victoria Plumbing to recover from that disastrous IPO and deliver rock-solid shareholder returns.

The post 2 falling penny stocks I’d buy for my Stocks and Shares ISA! appeared first on The Motley Fool UK.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Today, I’m returning to look at a company that’s been on my watchlist ever since it was listed in June 2021. Should I finally dip my toe in the water?

Penny stock disaster

Based on recent performance, it’s just as well I’ve held back from pulling the trigger on bathroom specialist Victorian Plumbing (LSE: VIC). From jumping to a 52-week high of almost 342p early on, the share price has since collapsed 75% to 85p. What on earth’s happened here?

I don’t think there’s one single factor to blame. As I remarked at the time, it’s clear that Victorian Plumbing’s IPO was opportunistic and designed to coincide with the boom in DIY seen since the beginning of the pandemic. This allowed original investors to make an absolute killing. And I can’t really blame them for wanting to achieve the best price possible for their stakes. 

The issue with being the largest IPO ever on the junior AIM market is that new investor expectations jumped ahead of reality. Since those heady days, Victorian Plumbing has experienced issues with its supply chain (like many other businesses). Revenue growth has also slowed as the rush to buy new bathroom suites replaced with spending on other things.

Buy the (big) dip?

On the one hand, I’m now able to buy stock in a cash-generative company for 17 times earnings, based on analyst forecasts. That’s not screamingly cheap but nor is it is eye-poppingly expensive. Interestingly, VIC also has a PEG (price/earnings-to-growth) ratio of just 0.5. Anything less than one suggests new buyers are getting a lot of bang for their bucks. 

I’m also attracted to Victorian’s online-only/capital-light business model. It’s already profitable (in contrast to a lot of highly-valued fluff out there) and there’s a decent amount of cash on the books.

Furthermore, the company has a sizeable share of the market and customer reviews are generally very positive. To round things off, CEO/founder Mark Radcliffe retains a huge 47% stake. If anyone wants the company to bounce back, it’s him. 

But let not get ahead of ourselves. An obvious risk with this penny stock is that things could get worse before they get better. A military conflict in Eastern Europe has the potential to hit growth stocks like this, even if it’s irrelevant to selling bathrooms. Margins look like being squeezed for the foreseeable future too.

Victorian Plumbing also has a small free float. Just 35% of the company’s stock is available to trade in the market. That could exacerbate an already bad situation. It only takes a small amount of selling to really move the needle. On a more optimistic note, the reverse is also true. 

My verdict

I do feel like the (prolonged) sell-off of this penny stock has been overdone. Nevertheless, I’m inclined to wait until after this month’s AGM (and a potential update on trading) before deciding whether now is the time to strike.

For now, this penny stock stays on my ISA watchlist.

The post 1 penny stock I’m considering for my Stocks and Shares ISA appeared first on The Motley Fool UK.

“Slower than expected” sales

At the time of writing, the share price of video game developer Frontier Developments (LSE: DEV) has tumbled almost 43% in 2021 to date. This isn’t a complete surprise.

Back on 22 November, Frontier announced that PC sales of its latest release — Jurassic World Evolution 2 — had been “slower than expected“, due to a “crowded release window“. That’s despite generally favourable reviews from critics and gamers alike.

Unfortunately, copies of another one of the firm’s titles — Elite Dangerous: Odyssey — haven’t been flying off the shelves either. As a result, Frontier is revising its guidance on full-year revenue to between £100m and £130m. That’s a significant reduction on the £130m-£150m once hoped for. A lot will depend on how the company fares over the run-up to Christmas, hence why investors are understandably skittish.

Opportunity knocks?

Could this be a great opportunity? Possibly. As the company itself notes, the arrival of the new Jurassic World Dominion movie next year could generate better demand for its latest release. There are also Frontier’s first F1 management and Warhammer games to look forward to. Demand for video games (and, consequently, video gaming stocks) could also return if further restrictions are brought in to tackle the Omicron variant.   

My issue with Frontier, however, remains its valuation. A P/E is 47 isn’t excessive compared to some tech-related shares. It is, however, very rich for a stock that depends on a small number of titles performing as expected.

Without a compelling margin of safety, Frontier stays on my watchlist for now. That said, further slippage in the share price could force my hand.

Another growth stock disappoints

Online bathroom-related products seller Victorian Plumbing (LSE: VIC) is another growth stock that’s crashing in 2021. Since hitting a high of almost 342p back in June, its value is now down over 70%. 

A good proportion of this fall came following last Thursday’s full-year numbers. Despite posting a 29% rise in revenue to just under £269m, investors were shaken by the company’s rather subdued outlook on trading as the UK home improvement/DIY boom shows signs of having run its course. This was a risk I raised not long after the firm’s IPO.

Does a slowdown in growth justify such an awful share price collapse? I’m not so sure. In fact, Victorian Plumbing shares could offer great value now, even if gross margins fall, as expected.

Barriers to entry aren’t exactly high, but Victorian should continue growing its already significant presence through a hefty marketing budget. Other attractions include a solid balance sheet and a strategy to target more trade customers going forward. Founder and CEO Mark Radcliffe also remains a major shareholder. This should make him even more determined to see the company recover. 

Like Frontier, Victorian Plumbing remains on my watchlist. However, a lot of bad news does look to be priced in. A bounce could be on the way if trading proves even slightly better than a now very pessimistic market is predicting.

For now, I’m letting the dust settle.

The post These UK growth stocks have crashed! Time to buy? appeared first on The Motley Fool UK.

However, I’ve gained a good impression of this business since its listing. Sales rose by nearly 30% during the year to 30 September and the group is generating plenty of profit. I reckon today’s share price crash might have left Victorian shares trading at bargain levels.

Good and bad news

Today’s warning came alongside a strong set of results. Victorian Plumbing’s sales rose 29% to £269m last year, while underlying pre-tax profit rose 23% to £29.1m. Customer numbers rose by 13% to 638,000 during the year, as the business benefited from the lockdown DIY boom.

That was the good news. The bad news is that things are expected to be tougher this year.

Sales since October are said to be “broadly the same as last year”, with shoppers spending more on leisure and less on home improvements. That’s no real surprise, in my view. But it does mean it will be harder for Victorian to hit growth forecasts for this year.

To try and solve this problem, it looks like the company is planning to absorb higher product and labour costs in order to keep its prices down. Founder and CEO Mark Radcliffe hopes this will enable the firm to expand its market share and generate further sales growth.

Will profits keep rising?

Based on the numbers provided today, my sums suggest that Victorian Plumbing’s profits may be flat this year. Depending on how market conditions change, I think we could even see a drop in earnings.

However, I think the longer-term growth opportunities are still attractive. The brand appears to be popular with customers, with an Excellent rating on Trustpilot, with over 142,000 reviews.

Sales have doubled since 2018 and the group’s operating profit margin of 10% is higher than either Topps Tiles or B&Q-owner Kingfisher.

Radcliffe is targeting continued growth by adding new products, such as tiles and lighting, and by offering a dedicated service to trade buyers. This all sounds sensible to me.

Victorian Plumbing share price: too cheap?

I normally avoid recent IPO stocks that have crashed. But I can see a lot to like about Victorian Plumbing.

The group has no debt and is still led by its founder, who has a 45% stake in the business. Although he pocketed an eye-watering £212m in June’s IPO, I reckon he should still be motivated by his large shareholding.

I thought the shares were too expensive when they floated in June but, right now, they’re starting to look cheap to me. After today’s slump, I estimate VIC could be trading on around 12 times 2022 forecast earnings. For a growing online business with no debt and proven management, I think that’s attractive.

The main risk I can see is that the slowdown in sales will be worse than expected. Last year’s DIY boom was unusual, after all. We don’t know what will happen next year.

For this reason, I plan to wait for the company’s next trading update before deciding whether to buy. But I’m definitely tempted. I think this business is worth watching.

The post The Victorian Plumbing share price just crashed. Should I buy the stock now? appeared first on The Motley Fool UK.