Shares in Alumasc Group (LSE: ALU) have gained more than 50% since last June, hitting183p, and theyve almost trebled over the past five years.
But that tasty price growth has been going hand in hand with rising EPSand dividends, so were not seeing a high valuation. Earnings roseby 50% between 2013 and 2016, while the dividend put on 44% in the same period.
Today,the shares are only on a forward P/E of around ninebased on forecasts for the year to June 2017, dropping to 8.5 by 2018, and the progressive dividend looks set to yield 3.7% this year and 4% next. That looks cheap, so whats the story?
The firm provides premium building products, systems and solutions, and theres certainlysome knock-on effect from the weakening sentiment towards the housebuilding sector. And the rising costs of imported raw materials since Brexit-driven inflation set in wont have helped.
Premium segment
But I reckon a company doing such apparently good business in a healthypicksnshovels market, and which had net cash (of 5m) on its books at the end of December, deserves a better rating.
The groupis actually more diverse than it might seem too, and encompassesdivisions addressing solar shading and screening, roofing and walling, and water management, in addition to general housebuilding products.
At the interim stage, Alumasc had an order book to the tune of 27.6m, and chief executive Peter Hooper reckoned the firms chosen specialist markets continue to benefit from one or more of the long-term strategic growth drivers of energy management, water management, bespoke solutions and ease of construction.
Alumasc looks to me like a good one to stash away for your retirement.
Five-bagger
MJ Gleeson (LSE: GLE) shares have done even better, giving shareholders a five-bagger over five years. At 625p today, were looking ata richer rating than Alumascs, but not outrageously so.
In fact, a forward P/E of 14 and forecast dividend yield of 2.9% are very close to the FTSE 100s long-term average, and 2018 predictions would improve those measures to 12.7 and 3.2% respectively. For a company thats quadrupled its earnings in just three years and has further growth forecast,I ratethat a bargain valuation.
Gleeson is anurban regeneration and strategic land specialist, so its also suffering from the malaise thats lingering around the housebuildingbusiness, but interim results looked positive.
Although pre-tax profit gained a modest 1.8% and EPS only 1.2%, the companys net assets rose by 10.7% and cash flow of 8.6m led to a 175% rise in cash and equivalents. And net assets per share of 290p make the valuation of the business itself look attractive.
Chairman Dermot Gleeson told us the company is confident of delivering a result for the full year in line with expectations, so were likely to see modest earnings growth and a well-covered dividend.
Strongly progressive dividend
While a yield of only around 3% might not sound great, the annual cash handout has been growing way ahead of inflation and looks set to continue that way if youd bought shares five years ago at around 110p, youd have locked-in an effective yield of nearly 18% on your purchase price.
I dont see earnings growth continuing at anywhere near the breakneck pace of the past three years, but a steady 5%-10% per year looksplausible. Another good long-term buy, I think.