Two spectacular FTSE 250 climbers trading at bargain valuations

Safestore Holdings
Safestore Holdings

Storage specialist Safestore Holdings(LSE: SAFE) has taken good care of investors' assets lately, with the company's share price up 313% in the past five years. Recent performance has also been good, with growth of 40% in the past six months alone. Can it continue?

Safe and sound

At first sight, today's interim results for the six months ending 30 April 2017 looked solid to me, and also to chief executive Frederic Vecchioli, who said they put the company in a strong position and nicely on course to meet full-year expectations. However, investors clearly had even greater expectations, as its share price is down 3.38% in early trading.

Safestore is the UK's largest and Europe's second largest provider of self storage solutions, with 109 stores in the UK, and a further 25 in Europe. Today's results showed a 15.7% rise in group revenue, reduced to 12.4% at constant exchange rates. Like-for-like revenue rose 3.9% in the UK, and 2.9% in Paris. Cash tax adjusted earnings per share rose 15.6% to 10.4p, while investors were rewarded with a 16.7% increase in the interim dividend to 4.2p.

Trouble in storage

The group also reported that all five recently opened stores are trading well, with a new site at Combs-la-Ville in Paris opening this month. Last month it announced a new refinancing deal that should save £3m a year. Vecchioli hailed a good first half as the company built on strong earnings and dividend growth over the last four years, and continues to generate a record number of enquiries despite the uncertain macroeconomic backdrop.

One note of caution. Although today's value of around 10 times earnings looks attractive, that is forecast to increase to 20 times, due to an anticipated drop in earnings per share (EPS). So those are reason why today's investors are holding back, especially after recent strong share price gains.

North star

Commercial light van renter Northgate(LSE: NTG) has also been motoring lately, up 50% in a year and 228% over five years. Despite that, it currently trades at a forward valuation of just 11.2 times earnings, which looks modest given its improving dividend prospects, now trading on a forecast yield of 3.3%.

News flow has been slow since Northgate, which operates in the UK, Spain and Ireland, released a disappointing half-year report last December, which included an 11.9% fall in profits due to lower UK rentals. That evidently hasn't deterred investors, especially with chief executive Bob Contreras assuring them the company is still on track to achieve full-year expectations, with overall revenue growth and Spain and Ireland doing well.

White van men

EPS dipped 4% in 2016 and 5% in 2017 but look set to recover, with forecast rises of 1% and 4% over the next couple of years. Northgate could be hit by a UK slowdown as political and Brexit uncertainty grows, although it does have something to offer cash-strapped companies, as they can trim their costs by using Northgate's fleet rather than running and maintaining their own.

This allows companies to get on with running their core business, and also protects them from wide uncertainties such as a drop in used van prices. Revenue, profit and EPS growth forecasts all look steady, provided the Brexit-wary UK economy avoids bumps in the road.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Northgate. 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.