The trending stock making itself hard to ignore

Growth, value and trending. What is there to dislike about this firm?

| 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.

It’s hard to ignore a stock that keeps going up. I’ve written about FTSE 100 paper and packaging firm Mondi (LSE: MNDI) before over recent years but never appreciated the potential for the firm’s shares to glide so gracefully up for so long in a two-o-clock direction.

In 2008, Mondi changed hands around 121p. Today the shares trade at 1,605p. The momentum in the chart seems strong, so is it worth getting involved now?

Business still growing?

In an update today, Mondi reveals underlying operating profit for the third quarter up 3% compared to last year’s equivalent period, but 12% down compared to the second quarter of 2016 because of lower average selling prices and a lower fair value gain on forestry assets. With a year-by-year perspective, that’s still progress we could argue. 

Should you invest £1,000 in James Cropper 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 James Cropper Plc made the list?

See the 6 stocks

Meanwhile, cash generation from operating activities largely offset the cash outflows related to the firm’s capital expenditure programme, acquisitions, and payment of the interim dividend. That said, net debt increased during the quarter to €1.56bn, which works out as around 1.7 times the level of last year’s operating profit. That seems reasonable.

Overall, I don’t think there’s anything in this update to halt Mondi’s robust share price momentum. Looking forward, the company expects to benefit from stable or higher selling prices in a number of its key products in 2017 after seeing downward pressure during 2016. The directors reckon costs remain generally stable, the firm’s ongoing capital investment programme is delivering strong returns, and a clear strategy, robust business model and culture of continuous improvement make the top management team confident of continuing to deliver an industry leading performance.

My one reservation

Mondi talks the talk and the firm’s share price and business walks the walk, it seems. City analysts following the firm have pencilled-in a 4% uplift in earnings for 2017. Not massive, but maybe enough to keep Mondi’s shares on their current trajectory. After all, the firm looks attractive on valuation grounds with its forward price-to-earnings (P/E) ratio of around 13 and a forward dividend yield just over 3% with the payout covered almost 2.5 times by those growing earnings.

Everything looks fine and Mondi could continue to be a momentum winner. My one reservation is that the company’s business must surely contain a sizeable element of cyclicality. If we see a slump in economic activity around the world I feel certain that the music will stop on Mondi’s business and share price momentum. However, there’s no sign of that happening now.

In fairness, the whole sector is doing well. Look at James Cropper (LSE: CRPR), for example. The FTSE AIM firm deals in forestry and paper products and shares that traded around 76p during 2009 now change hands at the 1,137p level. It’s true that Cropper’s valuation is a little more racy than Mondi’s. The forward P/E rating runs at 20 for year to March 2018, but that’s justified by City analysts’ estimates of a 21% uplift in earnings that year.

But there may be an even bigger investment opportunity that’s caught my eye:

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

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.

Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »