It’s been making excellent progress. Last month, in its annual results for the year ended 30 June, it reported a rise in operating margin to 5.6% from 4.8% the prior year and an increase in ROCE to 27.7% from 23.4%. Earnings per share (EPS) advanced 18%.

However, after releasing a trading update today ahead of its AGM, its shares are down 7% at 215p, as I’m writing, valuing this FTSE SmallCap firm at £392m. Has there been a fundamental change to McBride’s growth prospects or is the dip no more than ‘noise’ and a great opportunity to buy a slice of the business at a discount price?

On track to deliver

Ahead of today’s update, the City was forecasting 20% growth in EPS to 15.7p for the year to 30 June 2018. After the hefty fall in the shares, the forward price-to-earnings (P/E) ratio is an undemanding 13.7, while the price-to-earnings growth (PEG) ratio of 0.7, is nicely on the value side of the PEG fair-value marker of one.

McBride said today: “At this early stage of the year the Board is comfortable that the business remains on track to deliver its full-year expectations.” So why the fall in the shares?

The company indicated in last month’s results and reiterated today that it expects the current year’s financial performance to be weighted towards the second half of the year, as increases in revenues from its growth strategy begin to come through. Perhaps the market is concerned by the amount of ground the company has to make up after reporting Q1 revenue today 6.7% lower at constant currency than the prior year.

However, based on management’s excellent record to date, I’m happy to go along with its second-half-weighting projections. As such, I view today’s fall in the shares as a great opportunity to buy at a discount.

More than meeting targets

Arrow Global (LSE: ARW) is another FTSE SmallCap firm with eye-catching financial targets. In fact, it’s currently exceeding its key targets of high-teens EPS growth and mid-20s return on equity.

Arrow buys portfolios of non-performing loans from banks, retailers, utilities and so on at a discount to face value and sets up affordable repayment plans. It’s been growing its business at home and on the continent for over 20 years and has a credible ambition to become Europe’s leading purchaser and manager of debt.

At a current share price of 412p, the company is valued at £722m. City analysts are forecasting EPS growth of 26% to 32.85p for the current year, giving a P/E of 12.5 and a PEG of 0.5. The valuation becomes even more attractive when we look to 2018. EPS is forecast to increase a further 23% to 40.5p, bringing the P/E down to 10.2 and the PEG down to nearer 0.4. As such, Arrow’s shares look very buyable to me at current levels.

The post These small-cap growth stocks could still make you amazingly rich appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. 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.

Even in these conditions though, there are still a number of stocks which appear to be undervalued. Here are two prime examples which could be worth a closer look.

Encouraging start

Reporting on Tuesday was home collected credit lender Morses Club (LSE: MCL). The company announced that its trading performance since the start of the year has been in line with previous expectations. Its net loan book and customer numbers have increased, while impairments are still within its guidance range. This is reflective of the company’s greater focus on higher-quality lending, while territory builds have also contributed to loan book growth.

The company has launched its first online instalment loan product called Dot Dot. Its customer applications are on track, with it offering greater access than its more traditional products. With the receipt of full FCA authorisation and an increasingly flexible product base, it seems to have a relatively bright future.

In fact, Morses Club is forecast to increase its bottom line by 7% in the current year, followed by further growth of 15% next year. This puts its shares on a price-to-earnings growth (PEG) ratio of only 0.7, which suggests they could offer capital growth potential. Furthermore, with a dividend yield of 5.2% which is covered 1.7 times by profit, it could become increasingly popular as an income play – especially with inflation moving higher.

Low valuation

Also offering a wide margin of safety is non-performing loan collection specialist Arrow Global (LSE: ARW). It has delivered three consecutive years of earnings growth, and its future prospects appear to be relatively bright.

With inflation moving higher, the pressure on consumers could increase and lead to higher demand for the company’s services. This is reflected in its forecasts, with Arrow Global expected to report a rise in net profit of 28% in the current year, followed by further growth of 25% next year. This puts it on a PEG ratio of only 0.4, which suggests that its shares could offer excellent value for money.

Although Arrow Global currently yields just 2.8%, its dividend growth prospects are strong. Its shareholder payouts are expected to be almost 60% higher in 2018 than they were in 2016, which puts it on a forward yield of 3.6%. Since dividends are due to be covered 2.9 times by profit, there is scope for further increases in shareholder payouts. This could make the company more popular among investors from an income perspective, which adds to its current value and growth appeal.

The post These growth stocks are trading at big discounts appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. 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.

Today, I’m looking at two companies from the index that I believe have considerable potential to be big winners.

Arrow

Established in 2005 and listed on the stock market in 2013, Arrow Global (LSE: ARW) is valued at just over £700m at a current share price of 400p.

The core of Arrow’s business is acquiring portfolios of non-performing loans from financial institutions, such as banks and credit card companies, as well as from retail chains, student-loan firms, utilities and so on. It buys the loans at a discount to face value and establishes affordable repayment plans for the indebted individuals and businesses. It expects to get back twice its investment over any 10-year period.

Potential FTSE 100 firm

Arrow currently operates in the UK, the Netherlands, Belgium, Portugal, France and Italy. Its aim is to become Europe’s leading purchaser and manager of debt. This is ambitious but credible, in my view, and we could be looking at a future FTSE 100 firm.

Last year, earnings increased 29% and a similar increase is forecast for the current year, giving an undemanding price-to-earnings (P/E) ratio of 12 and a hugely appealing price-to-earnings growth (PEG) ratio of 0.4. There’s also a prospective dividend yield of 2.8%.

With management confident it can deliver a medium-term underlying return on equity percentage in the mid-20s, high-teens earnings growth and a progressive dividend, the current share price looks highly attractive to me and I rate the stock a ‘buy’.

On The Beach

On The Beach (LSE: OTB) was founded in 2004 and joined the stock market in 2015. At a current share price of 380p, its market cap is a bit under £500m.

The company’s disruptive online-only business model has enabled it to rapidly capture around 20% of the UK online short-haul beach holiday market, with its largest competitors being TUI and Thomas Cook. On The Beach is intent on increasing its market share and its recent (earnings-enhancing) acquisition of another established online brand, Sunshine.co.uk, further strengthens its position.

Expanding into Europe

In addition to its growth prospects in the UK, it has a vision to become Europe’s leading online retailer of beach holidays. Scandinavia is its first target and its Swedish business is already growing fast from a low base. Its Norwegian site has only recently launched.

Analysts are forecasting group earnings growth of over 30% for the company’s financial year ending 30 September, giving a P/E of 22 and a PEG of 0.7. There’s also a prospective dividend yield of 0.8%. These value credentials aren’t quite as strong as Arrow’s but are compelling enough in their own right for me to also rate this stock a ‘buy’.

The post 2 growth stocks for ambitious investors appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. 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.

A healthy uptick in collections last year saw revenues at the debt manager jump 42.6%, to £235.9m, a result that powered underlying post-tax profit 28.7% higher to £45.6m. Aside from its operations in the UK, Arrow Global now has a foothold in France, Portugal and the Netherlands, and is set to enter the Italian market in the coming months.

The City expects earnings to keep taking off at the finance specialist as sales stream in across these regions. Growth of 26% and 18% is expected for 2017 and 2018 respectively, leaving Arrow Global dealing on a prospective P/E multiple of 9.8 times.

And the prospect of a swelling top line is also expected to keep driving dividends skywards, resulting in dividend yields of 3.4% and 4.1% for this year and next.

Rocket star

Demand for BAE Systems (LSE: BA) stock has continued to surge in recent weeks, its role as one of the world’s biggest defence contractors attracting waves of safe-haven buying.

And I expect appetite for the weapons-to-cyber-security firm to remain white-hot in the months and years ahead as nations across the globe build up their arsenals.

President Trump’s pledge to go on a hardware-buying spree, combined with demands for NATO countries to boost their own defence budgets, marks the latest steps in the rhetorical battle between the West and geopolitical rivals like Russia and China. These are developments which should keep arms spending on an upward trail.

The abacus movers expect this backdrop to deliver a period of sustained earnings growth at BAE Systems, and they anticipate expansion of 9% this year and 7% in 2018 alone. These projections leave the manufacturer dealing on a forward P/E rating of 14.5 times, below the benchmark of 15 times broadly considered to be attractive value.

And BAE Systems also delivers a tasty treat to income seekers, the firm offering up a 3.5% dividend yield for 2017 alone.

Special delivery

While business activity at Royal Mail (LSE: RMG) has been smacked by Brexit-related issues more recently, I am convinced the country’s oldest courier remains a terrific selection for long-term growth investors.

In particular, I reckon Royal Mail should thrive as the internet shopping phenomenon explodes and drives parcels traffic skywards. While slowing from recent months, latest data from the British Retail Consortium still showed UK non-food sales made in cyberspace cantering 8% higher in February from the same month last year.

Royal Mail is expected to suffer some earnings woe as the aforementioned economic trouble weighs on the UK. The firm is anticipated to endure dips of 3% and 1% in the years to March 2017 and 2018 respectively, before getting back to growth with a fractional rise in the following year.

However, a forward P/E ratio of 10 times is bang on the broadly-considered bargain watermark. And Royal Mail’s cash-saving programme should keep dividends growing despite any earnings weakness. Consequently the company sports a gargantuan yield of 5.7% for fiscal 2017 alone.

I reckon now is a great time for long-term investors to pile-in.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Arrow Global announced in November that total revenues detonated 37% during January-September, to £164.4m. And market appetite for the firm continues to fizzle as it follows through on its aim of “becoming Europe’s leading purchaser and manager of debt” — just last month the business entered the Italian market with the acquisition of Zenith for an enterprise value of €17m.

Against this backcloth the City expects the debt collector to keep punching explosive earnings growth for the foreseeable future, and predicts a 31% advance in 2016 to be followed by a 28% rise in the current period.

Consequently Arrow Global deals on a P/E ratio of nine times for the current period, falling below the bargain-basement benchmark of 10 times. Furthermore, a sub-1 PEG readout of 0.3 underlines the company’s exceptional value credentials.

Constructing corking growth

I also believe a healthy US construction market should help deliver resplendent earnings expansion at Tyman (LSE: TYMN) long into the future.

The number crunchers certainly expect the bottom line to keep swelling in the medium term, and have forecast a 15% rise for 2017, following on from an anticipated 12% rise last year. This results in a P/E ratio of just 11.5 times for the current year, as well as a PEG readout of 0.8.

And there’s good cause for such optimism. Latest construction data from across the Pond showed project spending up 0.9% in November, to $1.18trn, the highest since April 2006. And the strong industry upswing is expected to persist through 2017 at least as the US economic revival continues.

But the US isn’t the only bright spot for door-and-window-parts-builder Tyman, the company noting in November that “encouraging growth has continued in European markets and volumes have held up in UK and Irish markets.”

Build a fortune

And I reckon Tyman’s construction counterpart Severfield (LSE: SFR) is on course to deliver solid earnings growth too.

Despite concerns over the impact of Brexit on the construction sector, Severfield continues to rack up new business at an impressive rate. Indeed, Severfield’s order book clocked in at six-year peaks as of November, at £315m, providing the firm with terrific earnings visibility.

And Severfield’s presence in India also provides plenty of revenue opportunities. The company’s JSW Severfield Structures joint venture secured £29m worth of contracts just last month to build a variety of commercial and industrial structures. And the amount of business is likely to keep rising as the Indian economy booms.

The City has pencilled-in a 35% earnings advance at Severfield for the year to March 2017, creating a very-appealing P/E ratio of 15 times. And an anticipated 16% bottom-line charge in fiscal 2018 drives the multiple to a much-improved 12.9 times.

Moreover, PEG numbers of 0.4 and 0.8 for 2017 and 2018 highlight its exceptional value relative to its likely growth trajectory.

The post Are these the best small-cap shares for growth investors? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

But despite this fizz higher, I believe Arrow Global still provides plenty of bang for dividend chasers’ buck. A projected 9.1p per share payment for 2016, up from 7.1p last year, creates a chunky-if-unspectacular 3.3% yield. And the yield leaps to 4% for next year thanks to an estimated 11p reward.

And I expect payouts to keep growing at an exceptional rate as the bottom line swells. Indeed, the City expects earnings to detonate 30% and 27% in 2016 and 2017 alone.

These medium-term dividend forecasts are well covered too. This year’s potential reward is covered 2.9 times by expected earnings, while 2017’s dividend is covered three times, both clearly some way ahead of the widely-regarded safety benchmark of two times.

Arrow Global could be a beneficiary of a possible downturn in the British economy should bad loan levels rise, a scenario that may also provide fresh debt purchasing opportunities for the firm.

And I expect the financial specialist’s ongoing European expansion to fuel shareholder returns too — last month the business expanded its presence in the Netherlands by purchasing the real estate financing activities of Rabobank’s RNHB Hypotheekbank along with CarVal Investors.

On the up

Improving momentum across its main businesses also makes me optimistic about the dividend outlook for Stobart Group (LSE: STOB) this year and beyond.

Stobart has long kept the dividend locked at 6p per share. But the abacus bashers expect the business to light a fire under the payouts from this year, and have forecast rewards of 11p and 12p for the periods to February 2017 and 2018 respectively. These figures yield a spectacular 6.5% and 7.1%, smashing the blue chip forward average of 3.5%.

Many investors will be concerned by a lack of dividend coverage — indeed, 2017’s projected payment dwarfs expected earnings of 5.8p per share. And next year’s dividend outstrips anticipated earnings of 6.5p.

However, Stobart’s ongoing divestment scheme should calm investors concerned about these projections, in my opinion. The company raised £37m in cash through the sale of its Speke property site in May and said last month that “we anticipate further disposals in line with our plan in the second half.”

Meanwhile. Stobart’s much-improved profits outlook should keep payouts firing well beyond next year. The company’s Energy division has already booked enough contracts to enable it to meet its goal of supplying 2m tonnes worth of biomass by 2018.

And with business also bubbling nicely at Infrastructure and Rail — and its Aviation division locked in “advanced talks” with low-cost carriers and full service operators concerning London Southend airport — I reckon Stobart is an exciting stock for growth and income investors alike.

The post Are these stocks Britain’s best-kept dividend secrets? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Interim results announced this morning suggest the data-driven approach to collections is working as year-on-year revenue leapt 34% and pre-tax profits were up 24.7%. So with astounding top line growth, high margins and dividends offering a 2.8% yield with room to grow, why are the shares trading at a mere 9.9 times forward earnings?

Perhaps surprisingly for a company that buys defaulted loans, the company is comfortable tacking on significant amounts of leverage. At the end of June the company owed some £739m, good for 3.8 times EBITDA. And, while Arrow believes it will bear little ill effect from any Brexit-related slowdown, there’s always the risk customers without a job will be less likely to pay off old loans.

Building profits

Unless you’re big into DIY home repairs or are in the building industry, Grafton (LSE: GFTU) may be one of the biggest companies out there you haven’t heard of. Grafton sells building supplies to retailers and contractors alike and business is booming with revenue over the past six months climbing 14% year-on-year to reach £1.2bn.

As you can imagine though, margins in this industry are very tight. That’s why statutory operating profit for the same period clocked in at a meagre £66.1m. That means operating margins were a very low 5.3%.

The good news is that Grafton has a healthy balance sheet with only £95.7m of net debt and earnings covered dividends a very safe 3.3 times over last year. It’s always good to see a company’s management remain level-headed during the boom years and avoid over-leveraging to fund unsustainable growth and pay huge dividends.

However, reliant as it is on the continued health of the homebuilding industry and offering quite low margins, I believe there are better options to gain exposure to the sector.

Room to grow

Irish Continental Group (LSE: ICGC) is another name that may not mean much to many, but if you’ve ever taken a ferry between Britain and Ireland it’s likely you set sail on one of their vessels. Alongside passenger and freight ferries, the company also runs cargo terminals at the Belfast and Dublin ports.

This business is inextricably tied to the health of economies on both sides of the Irish Sea and with the Celtic Tiger roaring once again, times have been good. Interim results released today showed revenue up 5.2% and operating profits up 27% year-on-year to €150.5m and €20.8m respectively.

With the fallout from the last time the Irish economy collapse fresh in its mind, management hasn’t allowed itself to be carried away by bumper results. Net debt was whittled down to a mere €18.9m at the end of June while dividends rose a sustainable 5%.

ICGC’s business may not be very exciting but it’s relatively reliable and the current 1.9% dividend yield has room to growth with earnings covering payouts a solid 2.6 times over.

The post Do today’s results make these under-the-radar large caps stellar opportunities? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.