The FTSE 250 index can be a great place to find lucrative investment opportunities. This index, which contains the largest 250 stocks on the London Stock Exchange outside the FTSE 100, is home to some top companies.
Here, I’m going to highlight two FTSE 250 shares I’d buy right now. Both of these companies have strong momentum right now and their share prices are trending up.
A top FTSE 250 tech stock
One of my favourite stocks is Computacenter (LSE: CCC). It’s a leading provider of technology solutions to businesses and government organisations. Its customers include the likes of Heathrow Airport, Linklaters, and Costa Coffee.
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Computacenter has a lot of momentum right now as it’s benefitting from the ‘digital transformation’ trend. In its full-year 2020 results, posted in mid-March, the group reported a 47% rise in pre-tax profit and a 50% rise in earnings per share.
More recently, CCC advised that in Q1 it had seen “strong demand” across the business, particularly for its Professional Services in the UK and Germany, and “significant revenue growth” in Technology Sourcing in the UK. Looking ahead, the company said that due to the strong recent performance, it expects 2021 to be a year of “good progress” in its reported profits.
One risk to the investment case here is that demand for IT services could slow, post Covid-19. If future growth is disappointing, the shares could experience weakness. With the stock trading on a reasonable price-to-earnings ratio of 20 however, I think the risk/reward position here is favourable. It’s worth noting that analysts at Citi recently raised their price target to 2,985p — 14% above the current share price.
This industry is booming
Another FTSE 250 share I’d buy today is Howden Joinery (LSE: HWDN). It’s the UK’s largest kitchen supplier. Currently, it has around 750 depots in the UK and around 30 in Continental Europe.
The UK home renovation industry is booming right now and Howdens is benefitting. This is illustrated in its recent trading update for the 16 weeks to 17 April. For the period, UK revenue was up 47.1% on the same period in 2020 and up 13.1% on the same period in 2019. In Europe, growth was even stronger. On a local currency basis, depot revenue in Continental Europe for the period was up 108% year-on-year, and up 38% on the figure in 2019.
Looking ahead, I think the outlook here remains favourable. Many Britons have saved a lot of money during lockdown and I expect plenty of this capital to go towards home renovations. Meanwhile, the group plans to open around 35 new depots in the UK and 11 in France during 2021, which should boost sales further. The company has said it remains confident the group is on track with its plans for the year.
One risk here is the cyclical nature of the industry. Sales can fall during periods of economic weakness. Another is the stock’s valuation. A forward-looking P/E of 23.9 probably doesn’t leave much room for error. Overall however, I think the long-term growth story here is attractive.
