To me, construction, regeneration and housebuilding specialist Morgan Sindall (LSE: MGNS) looks like one of the best UK stocks to buy now for the recovery from the coronavirus pandemic.
I’m keen on the company’s good showing against value and quality indicators. And the balance sheet’s strong. Indeed, Morgan Sindall has carried a net cash position for several years. And it’s been getting bigger.
Barnstorming half-year results
At the beginning of August, the half-year results report packed some punchy figures. The firm presented the results by comparing them to the interims of 2019 — two years ago. And that neat trick stripped out the anomaly of the dent from the pandemic last year. So we can really see the underlying operational progress in action.
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And the directors said in the report, the six-month trading period to 30 June delivered an outcome “substantially ahead” of pre-pandemic 2019 levels. For example, compared to the 2019 interims, revenue grew 10%. And adjusted earnings per share rose 45%.
Considering the challenges caused by the pandemic in the middle of that two-year period, I think those figures are impressive. And the firm delivered a top-quality cash performance too. The net cash figure on the balance sheet in June was £337m, up from just £114m over two years.
The pleasing results led the directors to ramp up the interim shareholder dividend by 43% compared to 2019. And that gives me confidence the management team is keeping shareholders involved in the company’s success.
Chief executive John Morgan pointed out that the directors upgraded profit guidance three times as the period rolled out. It seems the company had trouble keeping up with its own progress. And Morgan described “significant” operational and strategic momentum in all the firm’s activities.
He emphasised how important it is for the company to continue its focus on cash generation and the balance sheet. He reckons the process of maintaining a robust cash pile provides a “significant” competitive advantage. The directors can then make the “right” decisions for the business. And that includes positioning it for “continued sustainable long-term growth.”
I think this is one of the best UK stocks to buy now
Looking ahead, Morgan thinks the bulging order book and ongoing trading strength will deliver “another strong performance by the Group in the second half.” And, overall, he’s “excited” by the opportunities ahead. And so am I. The ‘build back better’ theme governments are shouting about will likely help to create a healthy trading environment for the business in the coming years.
Meanwhile, the valuation looks undemanding. With the share price near 2,422p, the forward-looking earnings multiple for 2022 is just over 12. And that drops a bit if we adjust for the cash pile. But there’s also a handy anticipated dividend yield running near 3.6%.
But despite this rosy picture, I think there are particular risks worth bearing in mind. After all, the sector is cyclical and any future general economic downturn could hurt the business and my investment in the shares.
However, Morgan Sindall has a multi-year record of success. And I think it’s one of the best UK stocks to buy now for the recovery. So I’d embrace the risks to buy and hold it now for the long term.
