Every month, we ask our freelance writers to share their top value stock ideas with investors – here's what they had to say for August!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]Eurocell
What it does: Eurocell manufactures, distributes and recycles window, door, and non-plasticized polyvinyl chloride (uPVC) products.
Written by Kevin Godbold. I Eurocell (LSE: ECEL) business looks set to bounce back after a period of weak earnings in 2023.
City analysts have penciled in a fee of two percent of revenue this year and next. That sounds right to me because I am economically strong and I believe that more bike companies looking to the UK will probably get a good business boost.
The May trade review was cautious in tone. There is no denying the company's vulnerability to the effects of common economic shocks and events. However, the directors pointed out i “strong” balance and effectiveness of cost reduction measures taken. The business is well positioned to benefit from stability in its markets, they say.
Meanwhile, with the share price in the ballpark of 146p, the forward earnings double to 2025 is just under eight, and the expected dividend yield is over 6%. To me, that seems like a decent price, despite the ongoing risks.
Kevin Godbold has no shares in Eurocell.
Lords Group Trading
What it does: Lords Group is a UK-wide distributor of building, heating and plumbing supplies.
Written by Jon Smith. A group of Kings (LSE:LORD) shares are down 29% over the past year. With British stocks close to 52-week lows, I think it's a value play.
I get why the specialist distributor of building and DIY supplies has struggled lately. The downturn in the property market due to high mortgage rates means that demand has fallen. In addition, the cost of living problem has caused some to abandon the repair work.
Looking ahead, I see economic recovery accompanied by lower interest rates. This should act as a catalyst to increase the share price over the next year. The Lords Group is well positioned to capitalize on this opportunity, particularly with recent acquisitions that should provide economies of scale going forward.
Of course, the risk is that it takes longer than expected for the housing market to recover. However as a long term investor, I can be patient.
Jon Smith has no shares in Lords Group.
NWF
What it does: NWF distributes UK-based oils, food and feed, mainly to agricultural-oriented customers.
Written by Christopher Ruane. Trading at a price-to-earnings (P/E) ratio of less than seven, NWF (LSE: NWF) looks like good value to me.
Excluding lease liabilities, the company had net cash of £13m in its half-year position – around 15% of its current market capitalisation. So this is not a company with a low P/E ratio but a negative balance sheet.
That said, pre-tax profit in the first quarter was down 35% year-on-year. Volumes in the feed business declined, while higher fuel prices could not stop the headline operating profit from falling as margins weakened further. These factors are likely to affect full year results as well.
However, with a proven business model, a strong customer base and deep agricultural expertise, I think the company can do well in the long run.
A dividend yield of 4.5% looks good to me. I think that the 35% drop in share price over the past year means that the company is now considered undervalued relative to its long-term earnings potential.
Christopher Ruane owns shares in NWF.
Prudential
What it does: Prudential provides life and health insurance products throughout Asia and Africa.
Written by Ben McPoland. There still seems to be a lot of value to offer in FTSE 100. However Prudential (LSE: PRU) shares look cheap to me, trading at just 9.1 times this year's forecast earnings per share.
Others seem to agree, with many Prudential executives and directors piling up shares throughout the summer. And as Wall Street legend Peter Lynch once said: “Insiders may sell their shares for any reason, but they only buy them for one reason: they think the price will go up..”
Of course, that doesn't mean it will happen. The share price is down 38% in one year and 53% over five. Much of the strength appears to be related to China, one of the company's key growth markets. Consumers are tightening their belts and that can mean less insurance. That is dangerous.
However, the company also sees great value in its shares. In June, it announced a massive $2bn share buyback plan to be carried out over the next two years.
Meanwhile, traders are predicting an attractive increase in income for this period. I think the stock looks great value below 700p.
Ben McPoland has no position with Prudential.
TP ICAP
What it does: TP ICAP provides retail, data and analytics services to clients in the financial, energy and commodities sectors.
Written by Roland Head. A merchant TP ICAP (LSE: TCAP) is trading at a price-to-earnings ratio of seven, with a yield of 7%. I think this may not be too expensive.
The bear case is that the TP ICAP sales unit – where salespeople arrange complex trades for customers over the phone – is no longer operational.
Of course, it's not as big as it used to be. But the sale generated £206m of operating profit for TP ICAP last year. I think it's still relevant.
In any case, I am interested in TP ICAP mainly through its data analytics business, Parameta Solutions.
Earlier this year, City estimates suggested the Parameta business could be worth £1.2bn. The entire TP ICAP market is just £1.7bn.
Since Parameta contributed only a quarter of TP ICAP's operating profit last year, the group's valuation seems unreasonable to me.
Company i “continues to check options” to unlock this value for shareholders. I'm happy to keep holding on.
Roland Head is a shareholder of TP ICAP.
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