It might not be plain sailing over at Wincanton (LSE: WIN) as the economy cools and fuel costs soar (diesel hit a new record above 178p this week).

But I believe the opportunities for the distribution giant are good enough to overlook the issues as e-commerce grows. Latest financials showed ‘eFulfilment’ revenues up 56% in the 12 months to March. And Wincanton said that “the medium-term outlook for online eFulfilment remains strong” last month too.

The stock’s acquisition of Cygnia last autumn has boosted its ability to capitalise on the online shopping boom as well. Internet sales have been booming following the pandemic and Britain had the highest rate of e-commerce penetration worldwide last year according to Mastercard.

Today Wincanton trades on a price-to-earnings (P/E) ratio of just 9.8 times.

Growing market share

Marketing merchandise business 4Imprint Group (LSE: FOUR) faces near-term turbulence as consumer confidence in the US weakens. The business sources almost all profits from North America.

Consumer confidence in the States has sunk to 11-year lows, data this week showed. The mood threatens to get worse as inflation rises too, threatening company spending on marketing.

However, as a long-term investor I’m still excited by 4Imprint’s investment case. The stock makes mugs, umbrellas, T-shirts, pens and an assortment of other objects on which firms put their company or product name.

This is a market that’s growing rapidly due to its better cost-effectiveness versus traditional advertising. And it’s one in which 4Imprint is growing market share from a very low base. McKinsey & Company puts its share at just low-single-digit percentages.

Most recent financials showed 4Imprint’s orders in North America up 11% between January and April versus the same 2019 period. Right now this cheap UK share trades on a forward price-to-earnings growth (PEG) ratio of 0.6.

Motoring on

I think Motorpoint Group (LSE: MOTR) shares could be a wise investment as the shortage of new cars in the UK worsens.

Huge supply problems concerning components like semiconductors are hitting auto production hard. A knock-on effect is that demand for pre-owned vehicles is surging, an industry Motorpoint specialises in. The problem is getting worse amid a Covid-19 resurgence in China, meaning the prices Motorpoint and its competitors are charging continue to rise.

Latest data from the Society of Motor Manufacturers and Traders showed used car sales rose 5.1% in the first quarter of 2022. Motorpoint is growing the number of branches it operates to make the most of this opportunity and deliver long-term profits growth. In the six months to March alone the company opened three new sites.

Today Motorpoint trades on a forward PEG ratio of just 0.1. Despite the intense competition it faces I think it could be too cheap for me to miss.

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Here are two share prices I think are too low to ignore today.

Too cheap to miss?

The global economy remains shrouded with danger as runaway inflation picks up speed (US consumer price inflation hit new 40-year highs in February, figures showed this week). This creates massive risks to economically-sensitive shares like recruitment firms. Yet at the same time, signs have emerged that the inflation boom could be fuelling the jobs market.

For this reason I’m considering buying Hays (LSE: HAS), a UK share which provides hiring services across the globe. The British labour market remains rock solid and recruiter Totaljobs suggests it could remain so. Its latest survey shows that around two in five Britons are considering better-paid jobs as the cost of living crisis worsens. This is a theme that is likely to be replicated in other countries too.

Indeed, strong trading across all its territories encouraged Hays to lift its full-year earnings forecasts in February. Then it advised that “conditions in all [our] markets are strong, driven by high levels of business confidence, significant job churn and clear evidence of wage inflation”.

Hays is one of many top stocks whose share prices today don’t reflect their bright earnings outlook. City analysts think earnings here will soar 128% in the financial year to June. They believe that profits will advance an extra 23% next year too.

Consequently, the recruitment giant trades on a forward price-to-earnings growth (PEG) ratio of just 0.1. Any reading below 1 suggests that a stock could be undervalued.

Another low share price today

And being undervalued is a characteristic Hays shares with logistics business Wincanton (LSE: WIN). Current forecasts suggest Wincanton’s earnings will rise 17% in the financial year ending March. This means that following recent share price weakness the company trades on a forward PEG ratio of 0.5.

Wincanton had a strong record of consistent annual earnings growth before Covid-19 struck. And thanks to the steady growth of e-commerce City brokers expect a period of sustained profits growth to emerge again. This is perhaps no surprise given the strength of trading recently. Latest financials showed revenues at Wincanton’s Digital and eFulfilment division jump 22% (excluding recent acquisitions) in the three months to December.

The main problems for Wincanton today are those of rising fuel and labour costs. Diesel prices in the UK struck another fresh record (of 170p a litre). Driver salaries are also rising because of a shortage of available workers.

Still, it’s my opinion that these dangers are baked into Wincanton’s ultra-low share price today. I think the potential rewards of me buying both Wincanton and Hays at their share prices today far outweigh the possible risks.

The post 2 share prices I think are too cheap to ignore today! appeared first on The Motley Fool UK.

Earnings are tipped to soar

Commercial transport business Wincanton faces some significant headwinds in the near term as fuel costs rise. Petrol and diesel prices in the UK have just hit record highs and they could keep soaring too as oil supply shortages could persist for some time.

As a long-term investor I’m still thinking of buying Wincanton today however. City analysts believe the business should grow earnings 18% in this fiscal year (to March) and by mid-to-high single digits in the following two years too. These predictions reflect expectations of rising demand for logistics services as the economy bounces back and the continued support led by e-commerce growth.

A cheap stock for the e-commerce boom

In fact, it’s my opinion that the threat posed by increasing fuel costs are baked into Wincanton’s low share price. At 385p per share, the transport titan trades on a forward P/E ratio of just 9.4 times.

I’m actually encouraged by the small-cap’s ability to thrive despite the sharp rise in fuel prices that dates back to last summer. Indeed, Wincanton actually raised its full-year profit forecasts last month, thanks to strong trading across all of its divisions.

I’m particularly impressed by Wincanton’s ability to exploit the online shopping boom. And I think this could be the catalyst for strong long-term sales growth. Revenues at its Digital and eFulfilment division leapt 51% in the three months to December, latest financials showed.

Wincanton bought supply chain business Cygnia last autumn for £23.9m to boost its exposure to the e-commerce revolution. But even without the contribution of the new unit, group sales still soared in the third quarter (rising 22% year-on-year).

Rapid dividend growth

Wincanton’s not just a great buy from a growth perspective, however. I’m also thinking of buying the logistics business because of the bright outlook for its dividends. City forecasters think last year’s total payout will rise 16% to 12.03p per share in the current period. This creates a handy 3% dividend yield.

Dividends are tipped to continue rising strongly in the medium term as well. Full-year dividends of 13.57p and 14.3p per share are predicted for financial 2023 and 2024 respectively. Consequently, the yield rises to 3.4% and 3.6% for these years.

Finally, I also like Wincanton as an income share because current dividend projections seem pretty secure, based on expected profits. Those dividends the City anticipates are covered around 3 times by anticipated earnings. This figure is well above the widely-regarded security benchmark of 2 times.

I believe Wincanton offers brilliant growth and income potential right now. And at current prices I think it could be too cheap for me to miss.

The post A cheap dividend growth stock I’d invest £500 in today! appeared first on The Motley Fool UK.

Making an impression

4imprint Group’s (LSE: FOUR) a great way to ride the continued rebound in marketing spending in my opinion. The business generates almost all of its profits by making and selling promotional products in the US. You know the sort: mugs, pens, USB dongles, bags and the like. This is a steadily-growing industry in which 4Imprint has been relentlessly grabbing market share.

City analysts believe earnings will rise 46% year-on-year in 2022. This leaves it trading on a PEG ratio of 0.7, a decent distance below that benchmark of 1 that suggests a stock could be undervalued. Orders at the business are bouncing back strongly and the total tally for 2021 recovered to an impressive 90% of pre-pandemic levels. Pre-tax profits came in towards the upper end of expectations for the full year, too, a good omen for the new year.

4Imprint could encounter problems if the US economy begins to stutter, however. A surprise drop in non-farm jobs in January — the first drop since the end of 2020 — certainly caught my eye this week. But as things stand I think there’s more to be encouraged about than worried by at 4Imprint.

A mega-cheap leisure stock

Now that Covid-19 lockdowns have ended, Britain’s ten-pin bowling craze of recent years has exploded again. Ten Entertainment Group (LSE: TEG), which operates almost 50 bowling centres across the UK, is a cheap stock that’s obviously well placed to play this boom.

Ten Entertainment’s sales soared an astonishing 32.4% between 1 May and Boxing Day from pre-pandemic levels. The leisure stock’s January trading update also showed the business had record profits each month since June 2021. Given this evidence it’s perhaps no surprise that City analysts think profits here will soar 260%+ in 2022.

Encouragingly Ten Entertainment is adding venues to maximise its revenues opportunities too. It plans to open four new bowling centres this year alone. The ongoing public health emergency poses an obvious risk as further social restrictions could transpire at short notice. But I think the company’s cheapness reflects this possibility. Ten Entertainment carries a forward PEG of just 0.1.

In the fast lane

I also think Wincanton (LSE: WIN) has a bright future as e-commerce steadily grows. The transport titan offers a range of end-to-end fulfilment services that enable retailers and manufacturers to reach their customers. And it continues to do a roaring trade despite the end of coronavirus lockdowns on physical retail; revenues in its Digital and eFulfilment operation surged 51% year-on-year in the three months to December.

My chief concern for Wincanton is a chronic shortage of van and lorry drivers. This has the potential to cause operational disruptions and push up costs. Still, City forecasters don’t think this will derail near-term earnings growth (an 18% profits rise is predicted for this fiscal year to March 2022. A 9% increase is anticipated for financial 2023 too). I think Wincanton’s forward PEG ratio of 0.6 could make it too cheap for me to miss.

The post 3 super-cheap stocks to buy for £500 in February! appeared first on The Motley Fool UK.

Playing the e-commerce explosion

I’d buy Wincanton (LSE: WIN) shares to try and make big money from the e-commerce boom. City analysts are predicting solid and sustained earnings growth at the warehouse and distribution services provider as online activity rises and parcels volumes increase.

Current consensus suggests bottom-line rises of 10% and 12% for the next two fiscal years are due. I find these forecasts particularly attractive as they leave the business trading on a forward price-to-earnings (P/E) ratio of just 10 times.

Wincanton is making great progress in exploiting the etail boom and last week it announced revenues increased 19% during the six months to September. Also last week, the logistics giant said it had inked a major contract with ABF-owned Primark that’ll see it make 50,000 deliveries over five years.

Even though driver shortages are creating a problem today, I think this cheap UK share is a great long-term buy.

DIY MVP

Sticking with the W’s, Wickes Group (LSE: WIX) is another ultra-cheap British stock on my shopping list today. Trade is booming here as a strong housing market and soaring home improvement spending catapults demand for its DIY products. Latest financials in October showed like-for-like sales up 16.9% in the September quarter versus the same three months in 2019.

Okay, comparable sales were down 1.6% year-on-year. But I think this was a solid result, given the strong results a year earlier when people spent abnormal amounts of time decorating their homes during Covid-19 lockdowns.

My main concern is not whether DIY spending will continue growing robustly as the decade progresses. It’s that the likes of Wickes face increasing cost pressures that are damaging profit margins.

Still, at current prices, I believe the retailer is hard to ignore. City analysts think earnings here will leap 21% and 41% in the next two fiscal periods respectively. As a result, Wickes trades on a forward price-to-earnings growth (PEG) ratio of 0.8.

Here comes the sun

I also think getting in on the green energy revolution is a good idea as demand for low-carbon electricity soars. This is why I’d buy Foresight Solar Fund Limited (LSE: FSFL), an investment company that invests in solar farms in the UK, Spain and Australia.

Foresight Solar’s collection of solar PV assets isn’t the only reason I like this cheap UK share however. The former penny stock also owns a 50% stake in the Sandridge Battery Storage after acquisition action in the spring.

This represented the company’s first foray into the battery storage market and more action on this front can be expected. Battery storage assets are essential in letting power suppliers balance energy supplies, and they play a critical role in the fast-growing renewables sector. I’d buy Foresight Solar despite the huge costs it incurs to keep its solar farms running.

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Robert Walters had risen to its most expensive since August 2018, at 797.7p, earlier in the session.

Robert Walters’s profits jump

In a trading update covering the second quarter, Robert Walters said gross profits soared 31% at constant currencies to £89m. It commented that “trading momentum continued to accelerate through the second quarter,” and that activity in June was “particularly strong.”

Gross profits had fallen 11% during the first three months of 2021. But robust trading between April and June meant profits were up 8% year-on-year for the first half.

In its core Asia Pacific market, second quarter gross profit ballooned 48% at stable exchange rates to £40.9m. Each of its markets in the region enjoyed net fee growth above 25% in the period. And net fee income in Malaysia and Mainland China more than doubled year-on-year.

In Europe (excluding the UK) profits climbed 26% to £23.4m. Meanwhile, gross profits in Robert Walters’ other international markets rose 20% to £6.7m. In the UK, profits rose by a solid-if-unspectacular 9% to £18m.

A bright outlook

Chief executive Robert Walters said: “Due to a very strong close to the quarter… profit for the full year is expected to be significantly ahead of current market expectations”. He added that “we will be investing in additional headcount in those geographies and disciplines showing the strongest signs of sustained growth. We enter the second half of the year with cautious optimism and confidence that we are very well positioned to continue to take advantage of market opportunities as they arise.” 

Wincanton spooks over driver shortages

News coming out of Wincanton (LSE: WIN) wasn’t nearly as reassuring for UK share investors on Wednesday. Consequently the company has fallen 9% to 430p per share and away from yesterday’s record peaks.

Wincanton’s share price is still up nearly 140% over the last year. But it’s fallen today after the firm warned that while “positive momentum” has continued in the early part of the new financial year, it added that it is “mindful of the sector-wide pressures related to the availability of drivers.”

The logistics giant said that it is recruiting permanent employees and accelerating staff training to address the problem.

“Significantly” higher profits

Strong trading during the final six months of its last fiscal year (to March 2021) continued into the first quarter of financial 2022. The business has enjoyed “sustained growth and an attractive pipeline of opportunities in each of [our] four sectors,” it noted.

Wincanton is thus trading in line with expectations, it said, with profits “significantly” higher than they were in the corresponding quarter last year.

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Bank of England officials for example suggest that overall spending levels will rise when Covid-19 lockdowns end. Bank governor Andrew Bailey says that “after you lock people up for this long they go for it.” Britons have saved an extra £125bn since the pandemic began, Threadneedle Street estimates. And Bailey reckons consumers could end up spending more than the 5% of those savings that the BoE currently estimates.

A UK share for the e-commerce boom

This bodes well for supply chain specialists like Wincanton (LSE: WIN). This UK share offers warehouse and transport services that allow retailers and product manufacturers to reach their customers. And it operates across a broad variety of sectors, from the defensive grocery and energy segments to the more cyclical home furnishings, DIY and construction arenas.

Latest financials showed how the home shopping boom is lighting a fire under Wincanton’s top line. Revenues at its Digital and eFulfilment unit soared 40% in the final quarter of 2020, it said in January. As a consequence, turnover at group level rose a healthy 10% year on year.

Automation in the supply chain is also becoming more and more important as businesses try to improve efficiency and improve the customer experience. It’s a field in which Wincanton is also an expert following heavy investment in recent years. The company’s Winsight in-cab technology, for instance, allows real-time tracking of deliveries. Meanwhile its ProGlove hand scanner improves scan times and helps reduce the rate of errors.

Dividends tipped to soar

All this explains why City analysts expect Wincanton’s earnings to go from strength to strength over the next few years. Current estimates suggest the UK stock’s earnings will fall 16% this fiscal year (to March 2021). They do, however, also reckon that annual earnings will balloon 9% and 20% in financial 2022 and 2023 respectively.

As a consequence the number crunchers anticipate ripping dividend growth over the next few years too. An estimated full-year payout of 8.3p per share for this fiscal period moves to 10.2p for next year and to 12.1p for the following year. As a consequence this year’s yield of around 3% eventually improves to 4.5% for the end of this full year period.

Sure, investors can get bigger yields from other UK shares today. And shareholder returns could take a hit in the near term if consumer confidence wavers. Sales could suffer from retailers and manufacturers, which would then damage demand for Wincanton’s services, hitting profits and potentially pulling its share price lower. 

But for those like me looking for strong and sustained dividend growth over the long term I think Wincanton is worthy of close attention today as the e-commerce market continues to grow.

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At 307p the logistics giant is trading at its most expensive levels since the same point last January. Here’s why this UK share has soared 13% from last night’s close.

Profits to beat forecasts

Wincanton — which provides logistics and supply chain services — said it had returned to sales growth in the final three months of 2020.

The small-cap business has “seen a continued improvement in revenues and profitability since the initial impact of Covid-19 early in 2020”. Because of this, it saw group sales rising 10% year-on-year in its third fiscal quarter following recovery and stabilisation in prior months.

This strong trading led Wincanton to predict that full-year profits for the current fiscal period (to March 2021) will come in “materially” ahead of expectations. This is on the proviso that the business doesn’t endure any “unforeseen severe Covid-19 impact in the closing months of the year,” it said.

Incidentally, it also said current coronavirus lockdowns aren’t expected to have a “significant” impact on its trading performance.

Wincanton reports broad-based growth

The company enjoyed revenues growth across all four core segments. And the business reported its strongest growth in Digital and eFulfilment. The UK share saw revenues here ballooning 40% from the same 2019 period as Covid-19 lockdowns increased online shopping volumes.

In addition, its said its third-quarter revenues in  the Public and Industrial sector had “been boosted by strong volumes in construction and the increased utilisation of the Group’s shared transport network.”

And it noted that the business benefited in recent months from a series of recent contract wins. These include a mandate to provide logistics services at several Inland Border Clearance Centres. A contract for the storage, order fulfilment and delivery of testing kits to priority locations has boosted work volumes too.

Meanwhile, Wincanton added that “further significant new business in Digital and eFulfilment for both Waitrose and Dobbies will commence before year-end.”

Optimistic words

That’s all good news James Wroath, chief executive of Wincanton, was upbeat. He said: “The strong performance of our underlying business and the new contracts we are implementing in our strategic growth markets are clear evidence that we are delivering on our strategy even in the difficult current climate.”

City analysts reckon Wincanton’s full-year earnings will slip 24% in the current fiscal period. But they reckon annual profits will rebound 14% in financial 2022. At current prices, this UK share trades on a forward price-to-earnings (P/E) ratio of 11 times.

The post This is why the Wincanton share price has soared 13%! appeared first on The Motley Fool UK.

Barclays crashed hard

My words in November came true faster than I imagined: “If we see a cyclical downturn, I reckon the dividend, which is yielding around 5% at Barclays, could disappear in short order.” Indeed, Covid-19 arrived, drove the economy into recession, and Barclays axed the dividend. The firm’s profits and its share price plunged.

Of course, I didn’t know the pandemic was coming, but I did know banks are vulnerable to the effects of economic downturns. And the valuations of banks such as Barclays suggested the stock market was pricing in a downturn. Indeed, trading had been buoyant for the banks for some time and cyclical plunges in trading begin when profits have been high for a while.

However, the coronavirus crisis affected operations at Wincanton as well. In today’s half-year report the company said the crisis created a temporary, “but significant,” drop in demand for all the firm’s divisions. However, operations have come roaring back since the lockdowns lifted.

But today’s figures show the damage caused by the pandemic. Revenue slipped back by 2.4% compared to the prior year and underlying earnings per share plunged by just over 27%. The directors had suspended the dividend earlier in the year because of the crisis but reinstated it today. The interim payment will be almost 27% down on last year’s though.

A positive outlook for Wincanton

But it’s not all bad news in the figures. The company produced a good cash flow performance in the period and built up its net cash position to just over £63m. That compares to net debt on the balance sheet last year of almost £15m. The directors said in the report the happy outcome was driven by “good working capital management and deferral of VAT, corporation tax and pension payments.”

Looking ahead, chief executive James Wroath said the firm has won several new contracts so far this year. And Wincanton is set to become “a key partner” for some of Britain’s biggest brands and public bodies. On top of that, there’s a healthy pipeline of new opportunities.  Meanwhile, he reckons the first-half performance has been “resilient” and he expects results for the full year to be “materially ahead of market expectations.”  

The share price has been climbing recently. And at 229p it’s around 11% below its position when I wrote my article a year ago. And with Barclays’ share price at 108p, the stock still languishes around 37% below its level back then. So far, I was right to put my faith in Wincanton and not in Barclays. And I’d buy some of Wincanton’s shares today.

Indeed, the valuation looks undemanding with the forward-looking earnings multiple for the trading year to March 2022 is just under eight and the anticipated dividend yield is almost 4%.

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Supporting everyday economic activity

I’d rather invest in a company such as Wincanton (LSE: WIN), which also has an anticipated dividend yield of around 5%. The firm describes itself as “the largest British third-party logistics company,” and as such, I reckon it has a decent position in the market supporting everyday economic activity. The financial and trading record has been steady over the past few years and the valuation looks modest.

The shares are up more than 5% today on the release of the half-year results report – the stock market appears to like it. Compared to the equivalent period the year before, revenue rose 1.9% and underlying earnings per share elevated by almost 10%. There was also encouraging progress with the balance sheet because net debt fell by almost 39% to just under £15m.

That figure is just below 30% of the level of last year’s operating profit, which strikes me as a modest amount of borrowings. On top of that, the pension scheme reported it had a surplus of £8.1m on 30 September 2019, which compares to a deficit of almost £30m a year earlier. The directors said in the report the improved position with the pension scheme is due mainly to cash contributions of £9.7m made by the company in the first half of the year.

A steady cash performance

Overall, Wincanton’s cash performance appears to be travelling in the right direction. Meanwhile, the directors applied their own seal of approval and displayed confidence in the outlook by pushing up the interim dividend by just over 8%. And that’s the kind of steady progress I’d expect from an investment in Wincanton in the years ahead. City analysts following the firm have pencilled in high single-digit percentage advances in the dividend for the current trading year to March 2020 and for the year after that.

The firm made decent operational progress in the period and among other business wins, struck a five-year deal with Morrisons to provide transportation, vehicle maintenance and fuels distribution. There were also “key” renewals with Ibstock, Müller, Adidas, Williams Sonoma and Cormar Carpets.

Chief executive James Wroath put his feet under his desk for the first time in September, and change at the top of any business is a potential tick on the stock-selection form for me. I reckon there’s a good chance we could see renewed drive and enthusiasm from the management team leading to positive change. Indeed, while acknowledging the previous efficiency drive and the positive culture embedded in the business, he said in the report that he’s started to review the opportunities facing the firm “as part of our wider strategy.”

The outlook is positive and growth is on the agenda. And with the shares at 258p, the forward-looking earnings multiple is just over seven for the trading year to March 2021, with the anticipated dividend yield a smidgen under 5%. I think the valuation is attractive.

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