3 FTSE 250 stocks to watch in October

Here are three FTSE 250 companies with updates due in October. I expect results to be solid, but I’ll be looking for signs of next year’s progress.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

October is not an especially busy month for company news. But we do have some coming from FTSE 250 firms that I will be paying attention to. I’m looking for new ideas for my portfolio in the winter months, and any of these three could make it.

I often get my breakfast from Greggs (LSE: GRG), though I’m cautious of stocks where I have a personal connection. I’d have done well to have abandoned that caution, mind. The Greggs share price has been on a tear since November, and has gained approximately 50% over the past two years.

A previous growth spurt in 2019 came to a rapid halt in the 2020 stock market crash. Now it looks like it’s just carried on from where it left off. But has the rapid rise led to growth share over-valuation? Or is Greggs still one for me to buy? That all depends on the stock valuation, and on whether earnings growth can keep pace with the share price.

First-half earnings per share (EPS) came in at 43.2p, 52% ahead of the same period in 2019. I expect to see trading improve further in the second half. But even then, I estimate a full-year price-to-earnings (P/E) ratio of around 30. To justify that, we’ll need to see ongoing growth. There’s a Q3 trading update due on 5 October, which should give us a clue.

Beating the FTSE 250

The Dunelm (LSE: DNLM) share price has climbed 75% in the past two years, easily outstripping the FTSE 250’s 20%. Results for the year to 26 June showed a 26% year-on-year rise in sales, with EPS up an impressive 47%. Those comparatives are against 2020, though. But the pandemic had only a modest effect on the home furnishings retailer, with EPS dropping just 14% last year. EPS for 2021 is still 25% ahead of 2019’s figure.

The ordinary dividend came in at 35p per share (for a 2.3% yield on the current Dunelm share price). That’s only a modest level of income, but there was a hefty special dividend of 65p per share into the bargain.

It looks like investors are betting on a continuation of Dunelm’s earnings growth into 2022. And we should get some clue how right they are when we see the Q1 trading update due on 14 October. With Dunelm shares on a trailing P/E of 24, even modest growth might be enough.

Slowdown, what slowdown?

The last of my three is FTSE 250 housebuilder Bellway (LSE: BWY). The sector is one of my favourites right now, partly because it’s falling out of favour. The UK’s stamp duty holiday is coming to an end. Many fear interest rates will increase too, especially now that the Bank of England expects inflation to exceed 4% by the end of the year. It’s keeping rates on hold for now, but for how much longer?

That’s leading to pessimism over the housing market. But you know what? Housebuilders don’t appear to be seeing any slowdown. Whether Bellway is the first to report weakening sales is something we’ll know on 19 October. That’s when the company will release results for the year to July.

It will leave us a few months behind the latest economic environment, mind. So I’ll be mostly looking for the company’s outlook thoughts, and at how its forward order book is holding up.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »