Sunday share tips: Smiths Group, Tesco

The Sunday Times's Lucy Tobin tipped shares of Smiths Group, pointing to the enginering outfit's business outlook, solid management and valuation to back up her case.

She noted how the share price had failed to keep up with the company's innovation in multiple fields, including for security scanners, renewables and in artificial intelligence.

Yet Smiths's last set of results showed profits up by a fifth on sales up by nearly as much, capping off nine consecutive quarters of growth.

Furthermore, chief executive officer Paul Keel had told shareholders to expect organic revenue growth of 4-6% in 2024, alongside stronger margins.

Analysts at Stifel meanwhile judged that the company had become more attractive and dependable following the sale of its medical division.

The company's valuation, at a "modest" price-to-earnings multiple of 16.4 was also lagging that of its rivals, she added.

"Like its products, Smiths' management team has been toiling behind the scenes and that looks set to pay off in the coming years, especially as the firm expands into green energy and grows in AI, too," Tobin said.

"The stock is trading at a modest price-to-earnings multiple of 16.4, cheaper than listed engineering rivals. The time looks right to buy Smiths."

The Financial Mail on Sunday's Midas column told its readers to hold onto their shares of Tesco, pointing to the easing cost of living crisis and after the grocer moved to buttress its shareholder payouts.

Tesco's interim adjusted operating profits jumped 14% on a nearly 9% uplift in sales.

And according to its boss the outfit has been growing its market share, amid brisk demand while investing in price competitiveness and rewarding loyal customers.

Analysts in the City were also positive on the outlook for investor returns.

Among them was Martin Maloney at Killik who said that share buybacks and higher dividends were set to improve as Tesco generated more cash than expected.

"Tesco shareholders can afford a turkey or two this Christmas, especially if they bought a year ago," said Midas.

"There's more good news to come as the squeeze on consumers eases. With a prospective dividend yield of 4.5 per cent hold on to your trolley."