The shares of Homeserve (LSE: HSV), Rightster (LSE: RSTR), Paypoint(LSE: PAY) and Cranswick(LSE: CWK) amount to just about 1.5% of Neil Woodfords portfolio. Heres why you should keep an eye on them.
Homeserve: AYield Play
Homeserve offershome emergency repair services. Most of its revenues are generated in the UK, but the group is also exposed to Western Europe and the US. Its shares, however, are not especiallycheap.
But Homeserveis a decent business, with solid growth prospects. As it grows abroad, hefty operating and net income margins are likely in the next couple of years. It has a market cap of 1.1bn, which is roughly in line with its enterprise value. So, net debt is negligible.
The groups price to earnings ratio stands at 19x for 2015 and 18xfor2016. A projected dividend yield of 3.5% is appealing. The shares were badly hit by a profit warning in early 2013, which followed an investigation by the FSA, but have registered a gainof 74% since a two-year trough in April last year.
Rightster Promises Growth
Fancy some exposure to theIT services and consulting sector?
Rightsteroffers cloud-based services focusing onthe distribution of live and on-demand video.This is a young business with less than 10m of revenues.
Rightster has a market cap of 67.8m, which implies a forward sales multiple of about 7x. As you wouldexpect, the group doesnt generate positive operating cash flow and doesnt pay any dividends. The shares are not incredibly expensive, according to the sectors standards, but Rightsterremains a risky investment.
You wouldwant to add it to a diversified portfolio, in my view. Along with Mr Woodford, other key shareholders are Invesco and Vesuvius. Proceeds from a rights issue in July were used to fund acquisitions.
Is it an opportunistic buy? Well, the stock hit a52-week low of 32p last week
PayPoint Offers Growth & Yield
PayPoint provides payments systems and services across a wide range of sectors. It generates 200m of gross revenues, some 80% of which are generated in the UK. Its financials are decent: earnings and dividends have nicely grown in recent years and should continue to do so into 2016.
Why does Mr Woodford like PayPoint?
First, its a decent income play.
Second, its five-year performance reads +124%, but the stock currently trades more than 20% below the record high it achievedearlier this year.
Cranswick: Just A Boring Food Producer?
You reckon this is the least exciting business of the four, dont you?
Of course,Cranswick is just aboringBritish producer of foods and pet products, you may think.
You dont like the sector, do you?
Profitability is so low for food producers!
Think again.
Cranswickboats a strong balance sheet.It has a market cap of about 700m, which is in line with its enterprise value.
Its P&L shows a truly impressivetrack record, while forecasts for growth are promising, although its dividend yield is about one percentage point below the markets. Its operating profit could easily grow at an annual clip of 10% into 2017, which would likely boost earnings per share.
Cranswick stock trades around its record highs, but doesnt look too expensive based on forward trading multiples. Its stock performance in the last two years reads +81%.
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Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has recommended Homeserve. The Motley Fool UK owns shares of PayPoint. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
