As strongly as the FTSE 250 has performed in 2024 so far (+7%), some of its members have been on an absolute tear. And there’s one in particular that’s been grabbing my attention recently.
Super stock!
Shares in construction and regeneration company Morgan Sindall (LSE: MGNS) have rocketed 32% in October. Go back 12 months and they’ve doubled in value. Perhaps unsurprisingly, they now sit at a 52-week high.
What on earth’s happened to generate such great gains?
Well, a quick bit of research tells me that this company has dished out nothing but positive news lately.
Back in February, the £1.9bn cap announced that 2023 had been a record year with revenue rising 14% to £4.1bn and adjusted pre-tax profit up 6% to £144.6m. At the time, CEO John Morgan said that the prospect of lower interest rates and falling inflation made him confident on the firm’s outlook. In hindsight, his optimism was justified.
This bullishness was further backed up when interim results arrived in August. Noting that “challenging market conditions” had been easing, the company predicted full-year numbers would now be “slightly ahead” of where it thought they would be.
Which brings us to October and yet another lovely update.
Profits soar
This week, the company stated that it now expected figures for 2024 to come in “significantly ahead” its own previous expectations.
A lot of this was attributed to “material profit growth” from its Fit Out division. This is the largest part of Morgan Sindall and provides office refurbishment as well as interior design and build services. By the end of September, the order book hit £1.3bn. That’s 15% up on where it stood at the end of 2023.
Several of the company’s other divisions also appear to be performing well. Profits at Partnership Housing are now likely to come in “slightly ahead” of previous guidance. Elsewhere, both Construction and Infrastructure look like hitting their targets for revenue. That said, trading in Mixed Use Partnerships — which focuses on transforming urban landscapes — continued to be “subdued“.
Should I buy the stock?
It’s hard not to be tempted to get involved in the hope that such incredible momentum will continue.
A price-to-earnings (P/E) ratio of 15 is fairly expensive relative to the Industrials sector but it’s not at eye-watering levels just yet.
Morgan Sindall has also been good to income hunters over the years and currently offers a dividend yield of 3.2%. That’s far from the highest in the FTSE 250 but it’s almost identical to what I’d get from owning an index tracker.
On the other hand, there are still some risks. While inflation dipped to a lower-than-expected 1.7% in September, there’s always the possibility it could bounce back up. This may lead the Bank of England to press the pause button on cutting interest rates.
The fact that I already have exposure to property via my investment in housebuilder Persimmon also makes me a bit wary to get involved. Margins are also much higher over there.
I’m going to sit on the sidelines for now and reassess once that potentially-very-nasty Budget on 30 October has passed.
