Recent market turbulence has caused many investors a few sleepless nights, but for the bargain hunters amongst us it has also revealed a handful of great businesses trading at attractive prices.
One such company is convenience store chain McColl's (LSE: MCLS). The company's share price has dropped over 8% in the past month to 242p, leaving its stock trading at just 12 times forward earnings and offering a very nice 4.2% dividend yield.
I think this may be too cheap for what is a fast-growing business with tailwinds at its back. The group's full year results released earlier this week show just how quickly the business is moving forward with revenue for the year rising 19.1% year-on-year to £1,130m and adjusted EBITDA leaping 20% to £44m.
This growth was mostly due to the acquisition of 298 stores from the Co-op that have helped push the group's sales more towards high-margin grocery goods rather than low-margin items such as cigarettes and newspapers that convenience stores have traditionally relied on. Last year the sale of grocery items rose 40% and they now make up 32% of overall sales, which helped push the group's like-for-like sales up 0.1% even as sales of non-grocery items continued their structural decline.
Gross margins during the year also made progress, up 60 basis points to 25.7% due to the shift towards grocery products. I expect further progress to be made as the group's purchasing power with suppliers increases and management further emphasises their fresh food offerings to consumers.
The debt-funded acquisition has pushed net debt to £142.2m but it was a fantastic opportunity and as cash flow rises, the company should be just fine going forward. With sales, profits and dividends rising, I reckon McColl's is looking very attractively priced for long-term investors.
Learning pays off for investors
Another relatively cheap dividend star that's popped up on my radar is professional education provider Wilmington (LSE: WIL). The company provides working professionals with ongoing education in sectors ranging from risk & compliance for financiers to healthcare insights for charities and medical providers.
The company's share price has pulled back moderately over the past month to 240p and it now trades at only 11.1 times forward earnings while kicking off a 3.5% dividend yield. And while its underlying trading can be a bit up and down quarter to quarter as new contracts roll in, the overall trend is a positive one as demand for its services grow due to regulatory pressure and the group acquires new businesses.
In the half year to December revenue rose 6% to £58.2m thanks to acquisitions, while deferred revenue was up a full 9% to £26.3m. There was less progress made on profits as the company moved into new headquarters in London, acquisition-related spending ramped up, and investments were made in improving its digital platforms but adjusted EBITDA still nudged up a bit to £10m.
And although net debt during the period rose to £45.9m due to acquisitions, the group's very high levels of recurring revenue and rising profits allowed management to boost the interim dividend by 3%. With demand for education from professionals of all sorts only rising in the long-term, I see good potential for Wilmington. Add in a hefty dividend and attractive valuation, and the company is definitely one to watch closely.
Another stock I'm watching that boasts an even more impressive valuation than Wilmington is a top small-cap idea from The Motley Fool, which trades at under seven times earnings.
And with a fast-rising dividend and four consecutive years of double-digit earnings growth, this under-the-radar small cap deserves to be known by a wider audience.
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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.