Insider: at least one of these four stocks is ‘simply too cheap’

Directors at out-of-favour Costain Group (LSE:COST) and Mears Group (LSE:MER) have shown their support after strong half-year results failed to prevent heavy share price losses during August.

Mears chair Jim Clarke bought £35,000 of shares on Thursday at a price 9% cheaper than before the housing services provider nudged up full-year guidance in its interim figures.

• Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

Uncertainty in relation to its asylum seeker accommodation contract have unsettled the shares, which closed last week at 343.5p compared with 417.5p at the end of May and house broker Panmure Liberum’s post-results target price of 499p.

The first-half figures of Costain also provided reason for cheer, particularly on the margins front and a forward work position more than four times 2024 revenue at £5.6 billion.

However, investors were spooked by a drop in half-year revenues due to previously flagged road contract completions and the rephasing of higher-margin HS2 volumes into later years.

Shares in the infrastructure projects business lost a fifth of their value, although they remain 26% higher year-to-date and more than double their level of March 2024.

Peel Hunt said the post-results sell-off looked overdone given that its 2025 and 2026 earnings forecasts remain unchanged. “We see an interesting opportunity,” the broker noted last week.

Costain chair Kate Rock bought the company’s shares on two occasions in the wake of the results, spending a total of £34,000 at prices between 131.7p and 137p.

Former Amey chief executive Amanda Fisher also picked up shares for the first time since joining the board as a non-executive director in December 2023.

Costain said the purchases since results on 20 August further aligned interests with those of shareholders and “reflects their confidence in the group's outlook and growth prospects”.

Rock now holds 125,000 shares worth £170,000, having become board chair at the end of 2022. She has overseen a significant revival in fortunes, with Costain back paying a dividend and on track for its objective of an operating margin run-rate of 4.5% during the 2025 financial year.

This level compares with 2.6% in the 2021 financial year as Costain under the leadership of chief executive Alex Vaughan reaps the benefit of a much-improved contract portfolio.

The government’s 10-year infrastructure strategy and significant increase in regulatory investment in the sectors of water, energy and aviation underpin expectations for further progress in 2026 before a “step change” in performance in 2027 and beyond.

Panmure Liberum lifted its price from 170p to 190p, noting that the company’s valuation metrics were “simply too cheap” given £173 million of expected cash on the balance sheet.

Peel Hunt also raised its price target from 150p to 180p, reflecting confidence in underlying margin evolution and capital allocation options.

• Shares for the future: why this company is still a top two stock
• Stock pickers strike back as value investing returns
• The Week Ahead: Ashtead, M&G, Curry

At Mears, the provider of property management and maintenance services has seen its shares fall even though half-year results highlighted "increased confidence” for the next financial year.

It lifted the interim dividend by 18% to 5.60p a share after pre-tax profits rose 5% by £32 million, driven by revenue growth of 8% in maintenance-led activities as Mears benefited from 100% contract retention over the last 12-month period.

Management-led activities reduced by 14%, reflecting the continued normalisation of revenues relating to the company’s asylum accommodation and support contract with the Home Office.

While the precise timing remains uncertain, Mears said there is a “clear political drive” to see all hotel accommodation exited during 2026.

Peel Hunt increased its price target to 440p following the results, boosted by the company’s capital allocation options and increasing visibility on 2027 profits and cash.

• Trading Strategies: does Rolls-Royce still offer growth potential?
• Huge month for dividends as Lloyds Bank, BP, Shell, L&G pay out
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

The chief executives of FTSE 250 strugglers Hays and Bloomsbury Publishing led from the front last week by spending significant sums on their respective company’s shares.

The £308,000 of dealings involving Hays chief executive Dirk Hahn took place on three different occasions over the past week at prices between 61.5p and 64p.

His support followed the negative market reaction to the company’s annual results, which included a big dividend cut and 66% slide in underlying profits to £32.2 million.

Hays added that trading in July and August offered no respite from the protracted three-year downturn in trading conditions.

The company’s chief digital and technology officer Mark Dearnley also spent £250,000 on Hays shares, while dealings the previous week saw non-executive Michael Findlay make an investment of £20,000 at a three-decade low price of less than 60p.

• Stockwatch: is this tech stock now an even better buy?
• The sector Buffett’s betting on – and where to find value in it

At Bloomsbury, founder and chief executive Nigel Newton acquired £100,000 of shares on Wednesday at a price of 488.2p.

The stock was 650p prior to May’s annual results, when lower profits of £42 million met hopes and the company said 2025/26 should be “roughly in line” with the City consensus.

The prolonged softness of the academic publishing market due to budget pressures in the UK and US has been one factor in the sell-off, which Peel Hunt said had left shares on 12 times forecast earnings and an approximate 30% discount to the five-year average.

Newton’s purchases followed £135,0000 of dealings earlier in August involving chair John Bason and senior independent director Leslie-Ann Reed at prices of about 471p.