I don't think Stock Spirits Group(LSE: STCK) will ever become the next Diageo because the firm's brands are not as strong. The company operates in central and eastern Europe, but its main market is Poland and there is fierce competition from other players in the region.
Something is going right
If the firm's customers are easily won over by cheaper competing products, as frequent references to 'competition' in the recent full-year results suggest, how likely is it that any of Stock's brands will emerge as premier market-beating sellers across the world? Unlikely, I would suggest, but we should nonetheless keep alert to gathering strength in the company's brands such as Stock, 1906, Amundsen, Keglevich, Saska, Silver and Boskov.
Stock Spirit's stated goal is to become Central and Eastern Europe's leading spirits business, and something is going right because the shares are up around 68% since December 2015. At today's 175p share price, the forward dividend yield for 2018 runs at 3.5% or so. City analysts following the firm expect earnings to lift 9% during 2017 and 5% in 2018 and to cover the dividend payout around twice.
So, Stock has share-price momentum, growth and a reasonable dividend yield. On top of that, there is always the possibility that one or several of the firm's brands could gain strength and popularity -- perhaps enough to support higher profit margins and a campaign of international expansion.
I think Stock Spirits is an interesting investment proposition and you can pick the shares up on a reasonable-looking forward price-to-earnings (P/E) ratio of just over 14 for 2018.
Restructuring driving growth
I reckon operations must be cyclical at Vesuvius (LSE: VSVS), which serves the steel and foundry industries dealing in molten metal flow engineering solutions for demanding industrial environments. The firm aims to help its customers improve their manufacturing processes, enhance product quality and reduce energy consumption by supplying flow control solutions, advanced refractories and other consumable products, as well as related technical services and data capture.
The company's offering is embedded in the industrial environment and I don't think the firm's customers will invest as much into Vesuvius's products and services when economic times are tough. In the full-year results statement delivered in March, chief executive Francois Wanecq described market conditions as "challenging" during 2016. However, a restructuring programme drove a return to growth in sales, and City analysts following the firm expect earnings to lift 12% during 2017 and 10% in 2018.
The share price is responding well -- up almost 90% since the beginning of 2016 -- and it's hard to ignore the firm's operational and share-price momentum, which looks set to continue, at least in the short-to-medium term.
If you hop aboard the story today you'll receive a forward dividend yield running around 3.4% for 2018 with the payout covered just over twice by those forward earnings. At today's 525p share price, the forward P/E ratio runs at a little over 14 - almost identical to Stock's -- so these two interesting firms make a good comparison. Which do you prefer?
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.