2 winning stocks offering growth AND income
The World Cup may have raised collective hope that perhaps, one day, an England team might actually lift the coveted trophy again. But it's also had a positive impact on a number of listed companies, notably those involved in sports betting.
Today's post-close trading update for the first six months of the financial year from Ladbrokes and Coral owner GVC Holdings(LSE: GVC) is a case in point.
As can be expected, the company reported "an acceleration in year-on-year growth" over the second quarter compared to the first thanks to the celebrated football tournament. Group Net Gaming Revenue (NGR) climbed 12% at constant currency in Q2 and 8% over the first six months of 2018.
Retail like-for-like growth in the UK and Europe rose 2% and 19% respectively in the last three months to the end of June. That said, performance in the UK -- where fewer punters appear to be visiting traditional betting shops -- is still sluggish, with like-for-like NGR for the whole six months down 3% compared to the same period in 2017. Although GVC attributed this to the poor weather early on, it's hard to deny -- based on today's numbers -- that online is where the future of gambling lies. Here, NGR soared 25% at constant currency in the second quarter and 20% for the year so far.
As far as the actual World Cup was concerned, the £6.3bn cap stated that its performance over the period had been supported by a "better than expected gross win margin" as well as the amount of cash new customers were betting with.
Despite today's solid set of figures, GVC's stock was down over 3% in early trading, perhaps as a result of that slip in UK retail revenue.
Before this morning's update, the shares were trading on 15 times forward earnings. That doesn't seem expensive when compared to rival Paddy Power Betfair (on a P/E of 19). What's more, this valuation is expected to drop to just 13 times earnings in 2019 based on analyst projections.
With a seemingly secure 3% dividend yield, GVC still looks like it's a decent growth and income bet, albeit one with a question mark hanging over its retail estate in the UK.
Also likely to have done rather well from the World Cup is Domino's Pizza(LSE: DOM). Yes, the warm weather may have inspired more people to fire up their BBQs but concern over missing key moments in a match in order to prevent the sausages from burning must surely have led more of us than usual to reach for the phone/app over the last month or so.
Not that Domino's share price has needed much help recently. Having been on a downward trajectory for a decent chunk of 2017, the stock has fared far better of late. Had you purchased a slice of the mid-cap last summer -- when I highlighted how cheap the shares looked relative to historical valuations -- you'd be sitting on a gain of around 25%-35% by now.
Domino's is due to reveal its latest set of interim numbers on 7 August. Although a fair bit of expectation is arguably already reflected in the price of its shares (on almost 22 times expected earnings), I continue to rate the company as a great buy-and-hold option for growth-focused investors who might also be tempted by the 2.7% dividend yield.
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Domino's Pizza and GVC Holdings. 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.