Photo-Me International plc Beating Expectations, Cashed-Up Sprue Aegis plc and PayPoint plc Yielding Over 6%

Dave Sullivan is hunting cash-rich quality companies and found these: Photo-Me International plc (LON: PHTM), Sprue Aegis plc (LON: SPRP) and PayPoint plc (LON: PAY).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There’s been plenty of news flow from the investment community regarding the economic state of China, and the price of oil and other commodities that has sent the share prices of well-known blue-chips crashing to new lows.

The volatility that began last year shows no signs of abating with the FTSE 100 swinging from highs to lows within a range of 5,500 to around 6,000 points. It’s worrying though that the lows seem to be getting lower, which could spell trouble.

Scratching beneath the surface

While all of the news is about under-pressure blue-chips, there are plenty of cash-rich profitable companies that are worth a look and I’ve selected three to review today:

Should you invest £1,000 in Phoenix Group Holdings Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Phoenix Group Holdings Plc made the list?

See the 6 stocks

Photo-Me International (LSE: PHTM) is a UK-based company engaged in operating photo booths and coin operated products including washing machines and car washes.

Sprue Aegis (LSE: SPRP) is in the business of the design, sale and marketing of smoke and carbon monoxide (CO) detectors and accessories.

And PayPoint (LSE: PAY), through its subsidiaries, provides clients with specialist consumer payment and other services and products, transaction processing and settlement services.

Beating expectations

True, these companies aren’t the most exciting, but all are profitable and boast plenty of net cash on the balance sheet so aren’t beholden to banks should the economy and trading conditions take a turn for the worse.

However, this isn’t the case currently, especially where Photo-Me is concerned. This morning the company released news that the strong trading that the company had witnessed in Japan as the My Number programme is introduced had continued into the third quarter. It saw a better than expected performance here, coupled with the year-to-date performance of the rest of the business where the recent laundry roll-out is also producing promising results. This led management to believe that pre-tax profits for the full year would be in excess of £40m. However, if trading in Japan continues to be this strong, this figure would again need to be upgraded.

Current forecasts for the company put the shares on a rather punchy 21 times forecast earnings according to data from Stockopedia. However I suspect that this will start to recede as analysts again have to revise up their earnings target.

This bodes well for shareholders as the board revised the dividend policy recently to include a special dividend taken from excess cash over £50m on the balance sheet. Given that there’s currently £66m, I’m expecting a bumper payout in November.

Not to be outdone, Sprue Aegis recently announced it had over £22m, or nearly 20% of its market cap, in cash. This was despite investing in additional stock to avoid any disruption to its supply chain as the Chinese factory that builds most of its products relocated to another site.

PayPoint also reported that the group maintained a strong balance sheet, with cash of £56m, up £10m from 30 September. Although the cash balance includes amounts held to settle short-term client obligations of £28.3m, the cash that belongs to the company equates to around 6% of the market cap and it’s none too shabby.

Dividend appeal

As well as the cash on the books, theese companies are also set to pay dividends in excess of the market as a whole with 4% at Sprue Aegis, 5% at Photo-Me and over 6% at PayPoint – what’s not to like?

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Dave Sullivan owns shares of Photo-me and PayPoint. The Motley Fool UK owns shares of PayPoint. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Close-up image depicting a woman in her 70s taking British bank notes from her colourful leather wallet.
Investing Articles

£10,000 invested in Tesco shares just a fortnight ago is already worth…

Tesco shares went through a sharp wobble a couple of weeks ago, but here's a look at what's happened to…

Read more »

Young female analyst working at her desk in the office
Investing Articles

9.6% yield! Here’s the dividend forecast for Glencore shares to 2027!

At nearly 10%, Glencore shares have one of the largest dividend yields on the FTSE 100. Here's why they could…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

£20,000 Stocks and Shares ISA: how long would it take to reach £1 million?

This writer considers how long it would take an investor to reach a seven-figure sum by maxing out their Stocks…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

UK bonds: a once-in-a-decade passive income opportunity?

Gilts are offering some very attractive yields at the moment. But Stephen Wright thinks passive income investors could still do…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

Down 99%, this stock has been crushed by AI and is now a penny share!

Chegg has gone from being a fast-growth tech stock to a penny share trading for less than $1 in the…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Could this rapidly growing coffee stock be the next Warren Buffett-style winner?

Discover why a fast-growing US coffee chain could be the next big US growth stock, with similarities to stocks picked…

Read more »

Woman riding her old fashioned bicycle along the Beach Esplanade at Aberdeen, Scotland.
Investing Articles

2 high-yielding dividend stocks I continue to double down on

Andrew Mackie explores two FTSE 350 high-yielding dividend stocks he's been snapping up in the last few weeks for his…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Why did the AstraZeneca share price just fall, and what should we do?

The AstraZeneca share price just took a hit as President Trump announced a price war against the US pharmaceutical industry.

Read more »