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A few months ago, the FTSE 250 has started to rise while i FTSE 100 he stayed very well.
Is the mid-cap index ready for another spell of beating top-cabinet stocks? Forecasts show capital gains across the board.
Baking success
Greggs (LSE: GRG) shares are up 40% over the past five years, rising well ahead of the FTSE 250. And they just got a further 5% boost (at least at the time of writing) in H1 results released on Tuesday ( 30 July).
The latest figures show a 14% price increase, pre-tax profit up 16%, but that's not what I'm looking at today.
No, I've been looking at the dealer's forecasts. They show a slight drop in earnings per share (EPS) for Greggs for the full year 2024. But the company recently posted a 15% increase in the first quarter.
That is the base diluted value and does not include exceptions. But it suggests that the forecasts may make things a little less.
The salary jumps
City analysts already think Greg's EPS will jump another 20 percent between 2024 and 2026. And I wonder if they might raise that when they grind these H1 numbers.
My biggest fear with this stock is that expected earnings growth may already be factored into the share price.
Before Tuesday's update, shares were trading at 22 times forward earnings. And that price-to-earnings (P/E) multiple will still be above 18 based on 2026 expectations.
Is that too high yet? I am cautious. But it could be good if those strong earnings forecasts hold.
The growth of the bank
My next pick has no issues with a high P/E at all. That's right Bank of Georgia Group (LSE: BGEO), and we're looking at a ratio here of just 3.8. And that's even after the stock price has more than tripled in five years.
There is also a forecast dividend yield of 5.2% again, which is almost in line with our high street banks. But that low P/E is less than half of what a UK domestic bank would have to pay.
Does that make Bank of Georgia shares ring cheap now? Well, maybe not if the risk is doubled.
A dangerous place?
The bank is based in Tbilisi, Georgia, and has operations in Armenia and Belarus. So I suspect it is not the same strict supervision that we have in UK banking regulations. And maybe that extra risk really does exist.
But then I look at the predictions. They suggest that EPS could grow by nearly 50% between 2023 and 2026. That will drive the already low P/E even lower.
Oh, and it looks like the dividend could grow by 28% over the same timescale, so it could beat the UK banks.
Whether this will be a good buy will largely depend on the future of Georgia's economy. And I don't know what that looks like. But with these predictions, I want to dig deeper.
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