A 76% share-price increase since July demonstrates that plastic pipe manufacturer Polypipe Group(LSE: PLP) is firing on all cylinders operationally and beating management's expectations.
Plumbing the UK
In the UK, no self-respecting plumber is likely to be unaware of the firm's piping systems, and recent double-digit percentage advances in full-year revenues and profits suggest the company continues to win market share in Britain. Around 98% of its operating profit came from the UK, although a sizeable operation in Europe seems to struggle to deliver the levels of profit Polypipe earns at home.
City analysts following the firm expect earnings to advance a further 8% during 2017 and 9% in 2018. Meanwhile, at today's 398p share price, Polypipe trades on a forward price-to-earnings (P/E) ratio of 13.5 for 2018 and the forward dividend yield runs around 2.9%. Those forward earnings should cover the payout 2.5 times.
The valuation seems reasonable and the operational and share-price momentum is undeniable. My only reservation is that the plumbing market can be cyclical. Weakness in the wider economy could translate to weakness in Polypipe's earnings and a reversal of that tempting upward share price trend. However, there's no sign of that happening just now, so Polypipe looks interesting as long as shareholders remain vigilant for any downturn in forward prospects.
Preparing for growth
Restructuring at McBride(LSE: MCB) is going well, as evidenced by a 145% advance in the share price since January 2015. The manufacturer and supplier of co-manufactured and private label products for the household and personal care markets operates all over Europe and in Asia, and although revenues contracted a little last year, the firm is squeezing more profit from operations.
City analysts following the firm expect earnings to elevate 21% for the year to June 2017 and 15% the year after that, which could be enough to keep the shares on their upward trajectory.
The directors report that other firms are showing interest in buying McBride's aerosols business, which could crystallise yet more value for its shareholders if a deal goes through, and free the firm to narrow the focus of its operations. A focused strategy often drives yet more growth, so I think McBride has potential to go much further from here.
A modest valuation?
Today's share price of around 191p throws up a forward P/E of 12.4 for the year to June 2018, and the forward dividend yield runs at 2.7%. Those forward earnings look set to cover the payout almost three times, suggesting the directors see opportunities to invest more of the firm's incoming cash flow into growth initiatives, otherwise they would likely pay more cash out to shareholders with the dividend. I don't think Mc Brides valuation looks too demanding given the firm's growth prospects.
McBride strikes me as a company with renewed entrepreneurial drive. The restructuring program aims to prepare the firm for the pursuit of growth and, so far, things are going well. I think the future looks interesting for the company and its shareholders.
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Kevin Godbold has no position in any 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.