The three FTSE 250 stocks I’m looking at today are currently out of favour with investors. They’re among my best shares to buy now, because I believe they’re capable of delivering high returns on a recovery from their current levels. Indeed, I reckon they could help me get rich and retire early.
My three FTSE 250 recovery stocks
None of the three businesses are firing on all cylinders right now. All have endured a Covid-19 impact, or other issues, or both. Of course, it’s because there’s a lack of immediate momentum in these businesses that many investors are overlooking them. I think this is short-sighted.
The companies in question are soft drinks firm Britvic (LSE: BVIC), gold miner Centamin (LSE: CEY), and medical products group ConvaTec (LSE: CTEC).
Britvic’s shares reached a high of 1,068p last autumn. They’re currently 30% below that, at 747p.
The company performed strongly last year, with its earnings and dividend increasing by mid-single-digit percentages. Management said: “We fully expect that we will make further progress in 2020”.
The Covid-19 pandemic put paid to that. Big declines in out-of-home consumption have been only partly offset by strong growth in at-home consumption. Analysts expect a 28% fall in earnings, and a similarly reduced dividend.
However, the CEO has said: “Looking further ahead, I am confident that the strong momentum we built up going into the pandemic will return”. I share his confidence.
A healthy bounce-back in earnings and dividends is forecast for fiscal 2021. Trading at 13.9 times the forecast earnings, with a prospective dividend yield of 3.8%, I see this drinks-brands powerhouse as a compelling FTSE 250 recovery stock.
Centamin’s business and shares were performing strongly earlier this year. On the back of a higher gold price and production, it reported a 57% increase in first-half revenue and a 280% rise in earnings. Its shares reached a high of 232p in August.
However, last month it announced it was deferring production in one zone of its giant Sukari mine in Egypt. This was due to movement in a localised area of waste material. Subsequently, it revised its 2020 production guidance down to 445,000–455,000 from 510,000–525,000 ounces. Furthermore, it gave 2021 guidance of 400,000–430,000 ounces.
At a current 126p, this FTSE 250 miner’s shares are 46% below their August high. I think the fall is way overdone. At less than 12 times forecast 2021 earnings, and a prospective dividend yield of 6%, I reckon Centamin is another stock capable of delivering high returns for buyers today.
FTSE 250 recovery stock #3
Ahead of the February/March market crash, ConvaTec’s shares were up at 220p. By May, they’d recovered to the same level. However, they’ve since drifted lower, and at a current 195p are 11% off their highs.
The company has a market-leading portfolio of medical devices and technologies for the management of chronic conditions. Demographic trends are supportive for growth, but the company hadn’t really been making the most of its strong position, and there were wholesale management changes last year.
The Covid-19 has had some adverse impact on ConvaTec’s progress under the new management. However, I believe the team’s strategy for the business, the structural backdrop for growth, and a sub-20 multiple of forecast 2021 earnings make this another compelling FTSE 250 recovery stock.
The post 3 FTSE 250 recovery stocks I’d buy now to get rich and retire early appeared first on The Motley Fool UK.
G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Britvic. 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.
Motley Fool UK 2020