The market has been split recently, with many investors advocating buying into growth shares and others arguing that value shares offer the best long-term potential. This has created significant uncertainty surrounding the future of the market. I have identified two FTSE 250 companies that I think tick both the growth and value boxes, and am considering for my own portfolio.
Cranswick offers a good opportunity
FTSE 250 food producer Cranswick (LSE: CWK) has had a relatively stagnant year compared to its long-term history of growth. This price consolidation could offer an excellent entry point in my opinion.
Cranswick is a highly diversified food producer with a portfolio spanning poultry, pork, convenience foods and gourmet products. In 2019 Cranswick continued to diversify, acquiring three companies that expanded its non-meat offerings, increasingly reflecting consumers’ changing consumption habits. The company is a strong cash generator, focusing on efficiency and supply chain management.
Cranswick sources much of its food from its own fully-owned farms. By doing this Cranswick is able to keep a tight control on costs and improve margins while delivering ‘farm to fork’ quality control. It also gives the company long-term sustainability as Cranswick remains in control of the whole supply chain, reducing the risk of disruptions.
Due to its increasingly diverse revenues and well-managed operations, Cranswick has delivered 30 consecutive years of dividend growth, creating substantial shareholder value. This has been achieved through the company’s incredible top-line revenue performance, which continued into 2020. Considering this strong sales growth combined with a solid dividend yield, a P/E of about 20x makes for an attractive entry price which I am considering acting on for my own portfolio.
Another great FTSE 250 share
Premier Foods (LSE: PFD) owns some of Britain’s best loved food brands, including Mr Kipling cakes, Bird’s custard and Oxo stock cubes. These household staples underpin a solid FTSE 250 business that has a consistent history of delivering revenue growth.
2020 looks like a record sales year for the company as it has benefited from a UK lockdown-driven spike in demand. Previous headwinds have been overcome, with a definitive pension agreement set to save the company £115m to £145m in potential deficit contributions.
The company has also reduced its net debt by £40m to £429m over the past year. This reduction has de-leveraged the company’s balance sheet, bringing down the net debt/EBITDA ratio to 2.7x, ahead of the previously stated target of 3x announced back in 2017.
The past two to three years have also seen a major restructuring of the company and this has delivered a sizeable positive impact to company profits. Following these changes, Premier Foods looks set to combine solid revenue growth with consistently improving earnings. At a P/E of about 11x, this is a share that I am eyeing up for a long-term investment.