2 ‘under the radar’ stocks offering growth and income

These two growth and income stocks may have more to give over the next 12 months.

| 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.

Shares in Mondi (LSE: MNDI) took a hammering today following a profit warning from the multinational packaging and paper company.

Cost pressures

In a trading update for the three months to 30 September, the FTSE 100 firm said its underlying performance for the full year would likely fall “modestly below market expectations” because of continuing cost pressures and negative currency impacts.

Mondi said a weaker US dollar and a sharply weaker Turkish lira were the main drivers of the net negative currency impact on its third quarter operating profit. Cost inflation also contributed to a weaker than expected financial performance, as prices for its three key input commodities, wood, energy and chemicals were all higher than a year ago.

Should you invest £1,000 in Spire Healthcare 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 Spire Healthcare made the list?

See the 6 stocks

Like-for-like growth

On the upside, the firm is showing steady momentum in like-for-like sales, which had been driven by growing volumes and continued upward momentum in average selling prices. As such, underlying operating profit for the third quarter of 2017 climbed 8% higher than the same period last year, to €245m.

Moreover, free cash flow remains strong as cash generation from operating activities exceeded cash outflows for paying its capex, dividends and interest costs. This enabled the firm to reduce net debt during the quarter, and gives me confidence in the sustainability of its dividends going forward.

Dividends

Mondi’s dividends are covered 2.4 times by earnings, and have grown by a compound annual growth rate of 16.6% over the past three years. And after today’s 8% fall in its share price, you can pick up the stock on a yield of 2.6%, making it a tempting pick for dividend growth investors.

The shares are also attractively valued from a valuation standpoint, as Mondi trades at a lower multiple on earnings than its peers — it has a trailing price-to-earnings ratio of 17, compared to the sector average of 19.4.

This could be a better buy

Rival Dublin-based packaging company Smurfit Kappa Group (LSE: SKG) is also worth a closer look for value-minded investors. Although shares in the company have gained 18% since the start of the year, the firm currently trades on a trailing price-to-earnings ratio of 14.8, with a forward P/E of just 11.4 on this year’s expected earnings.

Although Smurfit Kappa faces similar headwinds to Mondi in terms of cost inflation, the company appears to me to be better placed on the margin front. In spite of these pressures, it has recently been able to grow its margins, due to increased price recovery from its customers and a reduction in its cost base.

Expansion strategy

And on top of organic growth, the company eyes an ambitious global expansion strategy. Although Smurfit Kappa has been quiet on the acquisition front this year, CFO Ken Bowles said the company has financial means to carry out a deal.

We have enough to spend whatever we want. The size of the deal wouldn’t necessarily be an inhibitor, it is about finding deals at reasonable multiples with quality assets that will fit back in with Smurfit,” he said.

At today’s price of 2,218p, the stock yields 3.2%.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

What’s up with the Lloyds share price?

The Lloyds share price is up 26% in 2025, representing one of the strongest performance on the FTSE 100. Dr…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Here’s how a 40-year-old could start investing £100 per week to retire early

If a 40-year-old decides to start investing today, here's how they could potentially turn £100 a week into over £500k…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

The FTSE 100 is up 60% in 5 years. Here’s why — and a big lesson!

The flagship FTSE 100 index has put in a very strong performance over five years. There's a specific reason for…

Read more »

Investing Articles

How much do investors need in an ISA to earn a £2,500 monthly passive income?

Charlie Carman explores how investors could strive for £30k in tax-free passive income each year from a dividend stock portfolio.

Read more »

Investing Articles

How much would a 45-year-old need to invest in an ISA to earn a £1k monthly passive income at 65?

Harvey Jones looks at how much an investor would need to put away every month to build a steady passive…

Read more »

Investing Articles

3 things to do ahead of the new 2025-26 ISA year

It's time for us all to put on our investing boots and get to work on developing our plans for…

Read more »

Older couple walking in park
Investing Articles

Is £150,000 enough to generate £1,000 a month in passive income?

Stephen Wright takes a look at three UK stocks with dividend yields above 8% that passive income investors might be…

Read more »

Investing Articles

Aim to earn a £50k second income in retirement by investing just this much each month

Even with a small monthly investment, it’s possible to earn a £50k second income with a successful investment strategy and…

Read more »