October is not a particularly busy month for company news. But we are coming from something FTSE 250 The organizations I will focus on. I’m looking for new ideas for my portfolio in the winter months, and any of these three could make it.
I often get my breakfast from Greggs (LSE: GRG), though I’m wary of stocks where I have a personal connection. I would do well to abandon that caution, the mind. Greggs’ share price has been falling since November, and has gained nearly 50% in the last two years.
Previous growth in 2019 was halted by the 2020 stock market crash. Now it seems to have been carried from where it left off. But has the share of growth been assessed as a result of rapid growth? Or is Greggs still to buy me? It all depends on the valuation of the stock and whether the increase in earnings can keep pace with the share price.
Earnings per share (EPS) came in at 43.2p, up 52% from the same period in 2019. I hope trading will improve further in the second half. But even then, I estimate that the full-year price-to-earnings (P / E) ratio is about 30. To justify this, we need to see ongoing growth. There is a Q3 trading update on 5 October, which will give us a clue.
Defeating FTSE 250
The Dunelm (LSE: DNLM) The share price has risen 75% in the last two years, easily surpassing 20% of the FTSE 250. The June 26 results for the year show a 26% increase in sales, with EPS up an impressive 47%. Although those comparisons are against 2020, but the epidemic had only a modest impact on home appliance retailers, EPS fell only 14% last year. EPS for 2021 is still 25% ahead of 2019 figures.
The general dividend came in at 35p per share (for a yield of 2.3% on the current Dunelm share price). It was just a modest level of earnings, but the deal had a huge special dividend of 65p per share.
Investors seem to be betting on the continuation of Danelm’s earnings growth by 2022. And when we see the October 1 Q1 trading update, we should know how accurate they are. With Danelum shares in P / E behind 24, even a slight increase may be enough.
Recession, what recession?
My last three FTSE 250 house builders Belway (LSE: BWY). This sector is one of my favorites right now, in part because it is becoming more and more favorable. The UK stamp duty holiday is coming to an end. Many fear that interest rates will rise, especially now that the Bank of England expects inflation to exceed 4% by the end of the year. It has kept the rate for now, but for how long?
This is leading to frustration in the housing market. But you know what? House builders don’t seem to be seeing any recession. We will find out on October 19 whether Belway first reported a weakness in sales. That’s when the company will release results from July to July of the year.
This will take our current economic environment, a few months back from the mind. So I’m looking at thinking mostly from the company’s perspective, and how its forward order books are held.
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Alan Oscroft has no position on any of the shares mentioned. Motley Flower UK has no position on any of the shares mentioned. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.