2 value stocks for smart investors

With the FTSE 100 and FTSE 250 at or near all-time highs, value investing options are becoming a rare bread. But I think I've found two great companies trading at very attractive valuations in food-to-go manufacturer Greencore (LSE: GNC) and specialised property firm Mountview Estates (LSE: MTVW).

Everybody has to eat

Despite increasing earnings by more than 60% over just the past five years, shares of Greencore are trading at a relatively sedate 13.5 times forward earnings. This low valuation comes despite continued record-breaking profitability from its UK operations and a large acquisition in the US that has given it profitable size and scale on both sides of the Atlantic.

This acquisition is the reason shares are trading so cheaply as its largest customer, US food giant Tyson, recently bought a competitor, stoking fears that it will drop its contract with Greencore in favour of the new in-house option. However, I believe fears about this are overblown as the two have co-invested in a factory and breaking this long-term contract would be both costly and incredibly disruptive; it's highly unlikely Tyson could take over manufacturing without a very quick and very costly expansion of its production facilities.

Leaving aside the Tyson contract fears, Greencore is also performing incredibly well. In Q3, group revenue clocked in at £636.5m, 11.8% ahead of the year prior on a pro forma basis. This came from growth in both divisions with the UK business trading 15.3% ahead year-on-year (y/y) while US sales were up 6.6% y/y due to expanded contracts with existing customers and finding new customers.

Looking ahead, there's good reason to expect this growth to keep up as the food-to-go market in the UK is still expanding and Greencore's new acquisition Stateside will, for the first time, allow it to sell directly into grocery stores. All told, with a good balance sheet and a strong record of sales and margin improvement, I think Greencore's shares are very attractively priced today.

Patience pays off

I've also got my eye on Mountview, a family-run company that buys up buildings with rent-controlled flats, waits until their tenants leave (a process that can take many years), and then sells them on at market rates. This is by necessity a long-term business and earnings can be choppy as buildings go up for sale on a irregular basis. But the company has a great record of success and I reckon its shares are attractively priced at just 12 times trailing earnings.

In fiscal year 2017, the company's revenue shrunk 2% y/y and pre-tax profits fell 7% y/y. But these challenges mainly reflect downward property valuations due to Brexit and a strong comparative period the year prior due to a rush to buy property before stamp duty increases went into effect. Wisely, management kept dividends level at 300p per share although these payouts were still very safely covered by earnings per share of 929.1p.

The fact that management was able to keep earnings and dividends remarkably high even in a challenging year shows just how well run the business is. With a constantly replenishing group of assets, a very healthy balance sheet with just 8.5% gearing, and a management team with plenty of skin in the game, I reckon Mountview is a great stock to own for the long term.

But if Greencore and Mountview are still a bit too pricey for your tastes, I recommend checking out the Motley Fool's free report on one top stock trading at just eight times earnings. This stock isn't just for value investors either as it has increased earnings by double-digits four years in a row.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Greencore. The Motley Fool UK owns shares of Mountview Estates. 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.

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