I think these FTSE 250 shares are too cheap to miss this summer. Here’s why I’d buy them today.
Spire Healthcare Group
Private healthcare providers such as Spire Healthcare Group (LSE:SPI) are thriving as the pressure on the National Health Service (NHS) increases.
The number of patients paying for treatment, or using private medical insurance, is soaring in response to high waiting lists. Meanwhile, the number of patients being referred by the NHS is also growing strongly as state-run hospitals struggle with patient numbers.
Last year, Spire sourced a quarter of revenues from the NHS. It helped push revenues and adjusted operating profit 8.3% and 30.2% higher respectively, to £1.2bn and £105.6m.
Despite government assurances to cut waiting lists, the number of patients seeking treatment continues to steadily rise. In fact, it hit a new peak of 7.6m at the end of June. It seems businesses like Spire will continue to trade strongly, given continued underinvestment in the state service.
City analysts share my take. Supported by the firm’s statement in May that “good momentum has continued from the end of last year”, they think earnings will jump 35% in 2023 and by a further 74% next year. Another 33% increase is tipped for 2024 too.
This leaves the company’s shares looking extremely cheap. A forward price-to-earnings growth (PEG) ratio of 1.1 for this year falls to 0.3 and 0.5 for 2024 and 2025. A reminder that any reading below 1 indicates that a stock is undervalued.
Private healthcare groups like this may have a fight to fill vacancies amid shortages of nursing professionals. In this landscape it can also expect to pay significantly higher wages compared with previous years. But I still expect the firm to continue growing profits strongly.
Babcock International Group
Engineering business Babcock International Group (LSE:BAB) is another value stock on my radar this summer. An increasingly unstable geopolitical landscape suggests sales of its defence products should remain rock-solid.
Global arms spending hit record peaks last year and is tipped to rise strongly for the rest of the decade. Analysts at The Business Research Company, for instance, expect the defence market to record annual revenues above $838bn in 2031. That’s a significant bump from around $474.7bn in 2021.
Babcock — which provides engineering services for boats, planes and land vehicles — is already illustrating its ability to flourish in this environment. Organic revenues rose 10% in the year to March, to £4.4bn, while its contract backlog increased 7% organically to £9.5bn.
Forecasters believe earnings at the FTSE 250 firm will rise strongly over the medium term, at least. Annual profits are tipped to jump 112% in this financial year. A further 11% bottom-line increase is expected for financial 2025 too.
This leaves the company trading on forward PEG ratios of just 0.1 and 0.8 for these years. Despite the constant risk of project development issues, I think Babcock shares are a great buy today.
The post 2 cheap FTSE 250 shares I’d buy during the summer sales! appeared first on The Motley Fool UK.
Should you invest £1,000 in Babcock right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Babcock made the list?
See the 6 stocks
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
- 3 FTSE 100, FTSE 250 and AIM shares to own as the UK economy sinks
- 3 penny stocks to buy now, before it’s too late?
- 5 reasons why Legal & General shares are too cheap
- Learn the passive income secrets of the UK’s ISA millionaires
- Close to its 52-week lows, this Warren Buffett stock looks like great value
Royston Wild has positions in Spire Healthcare Group Plc. 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.
