Kitchens and joinery products supplier Howden Joinery Group(LSE: HWDN) has seen its share price come under considerable pressure this year, with its shares losing around 30% of their value since hitting all-time highs of 531p last winter. Could this be the perfect time to swoop in and buy a slice of the kitchen supplier on the cheap, or should investors be wary of the heavily discounted share price?
In its most recent update, issued earlier this month, the FTSE 250 firm reported a solid performance for the second half of the year so far, and said it remains on track to meet full-year expectations of between £218m and £244m in pre-tax profits. I think that's reassuring given the current uncertain economic climate. But what I like more is that despite the uncertainty, sales from its UK depots actually increased by 4.1% for the second half of the year to the end of October.
As a result, total sales for the first 10 months of the year are up 6.3%, helped by the opening of 20 new depots so far in 2016. Nevertheless, on a same-depot basis, sales are still up 4%, and for me that's a better measure of underlying performance. Since July, Howdens has opened 10 new depots in the UK, bringing the total to 639. I like the fact that the company is still driving forward and expanding its reach to more trade customers and small local builders across the country.
The company has an excellent track record of growth, with total sales rising for the last six years in a row. The City expects this to continue, with analysts anticipating a further rise in revenues from £1.22bn to £1.31bn for this year, together with a £10m increase in pre-tax profits. These projections should translate to a 4% rise in underlying earnings for the full year. Although this is a slower rate of growth than in previous years, I think Howdens still offers good value at just 13 times forward earnings for 2016.
No Brexit impact
Meanwhile, fellow mid-cap company Polypipe Group(LSE: PLP) was also making the right noises in its latest trading update for the year so far, issued last week. The UK's largest manufacturer of plastic pipe systems reported a 23.7% rise in revenues to £370.3m for the first 10 months of the year to 31 October. This represents a £71m improvement when compared to the same period in 2015, with overseas revenue benefitting from the weaker sterling exchange rate.
What I found most encouraging was that the strong like-for-like growth in the UK seen in the first half of the year had continued, with no impact on revenue and order intake since the EU referendum in June. The Doncaster-based manufacturer is a relative newcomer to the stock market, only joining in April 2014, but in those two years has managed to increase its revenues by 17% and double its underlying profits.
Market consensus suggests there's plenty more to come from Polypipe, with a 24% rise in earnings anticipated for the full year to 31 December, and a further 8% improvement pencilled-in for 2017. This would leave the shares trading on a modest P/E ratio of 12, which looks good value to me given the exciting growth outlook.
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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Howden Joinery Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.