With this in mind, here are the top three gainers from the FTSE 100 that you wished you’d bought 12 months ago. 

On the podium

London Stock Exchange (LSE: LSE) has been the third biggest gainer since this time last year, rising 67%. Contrast this with the index that has climbed ‘only’ 7.4% in value. 

Much of this outperformance can be attributed to the company becoming a takeover target. Back in October, however, Hong Kong’s stock exchange withdrew its £32bn bid after the LSE stated that this fell “substantially short” of what it considered to be an appropriate valuation.  Since then, the latter has gone on to report a 12% rise in sales (to £587m) over Q3 and completed the £22bn acquisition of data firm Refinitiv that its suitor was opposed to. 

As a result of the positive momentum witnessed over the last year, LSE’s shares are now changing hands for 35 times earnings, reducing to 30 based on analyst projections for FY20. That seems rather a lot to me, so I wouldn’t be a buyer at the current time. 

Another winner has been engineering, design and information management software provider Aveva (LSE: AVV). Had you bought the stock this time last year and done nothing at all, you’d now be sitting on a gain of 85%. 

One reason for this has been a rise in the proportion of overall revenue that is now reoccurring (from existing clients). Recent results from the company showed this had soared 42.1% over the six months to the end of September.

Like LSE, the only problem is that Aveva’s shares now look prohibitively expensive on 42 times earnings. Should the company achieve the 12% growth expected by analysts in the next financial year, this valuation reduces to 37 times earnings based on the current share price. That’s still high for any stock but particularly so for one whose margins and returns on capital have both significantly fallen in recent years.

By far the best early Christmas present you could have bought yourself last year, however, was retailer JD Sports (LSE: JD). Twelve months later, its share price has more than doubled. Aside from being a superb result for holders considering the carnage in the sector, this is also evidence that you don’t necessarily need to buy into risky small-cap stocks to make good money in the market.

September’s half-year results showed just how well the company is negotiating the pressure on the sector with revenue jumping by 47% to £2.72bn and pre-tax profit 6.6% higher at just under £130m. On top of this, JD commented that its international development continues at pace with a raft of stores opening in Europe, Asia and the US. 

Again, the one question prospective buyers must ask is whether — at 24 times earnings for the current year — all the good news (and some expectation of bumper sales over Christmas) is already priced in to this classy business.

The post If only I’d bought these winning FTSE 100 stocks for my ISA last year appeared first on The Twelfth Magpie.

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Paul Summers 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.

Before I look at why they’ve done so well, and whether I think they can continue to deliver for investors, the table below summarises some relevant data.

As you can see, the Footsie’s flying three operate in different sectors. So we’re looking at company-specific reasons for their high performances, rather than some industry driver floating all boats in one sector.

Increasing enthusiasm

A transformative merger of Aveva and Schneider Electric‘s industrial software business, which completed in March last year, created a global leader in engineering and industrial software. Investors have become increasingly enthusiastic about the prospects for the enlarged group.

Results in May showed a 12% uplift in annual revenue and a 27% increase in adjusted earnings per share (EPS). However, looking ahead, City analysts expect earnings growth to moderate to low teens. Aveva’s forecast P/E of 37.4 is far higher than its ever been in my memory, and I’m unconvinced the growth on offer warrants quite such a high multiple.

It strikes me that even a minor miss on earnings forecasts could see the shares hammered, and that Aveva may have to exceed forecasts to maintain investors’ enthusiasm. As such, I’m minded to avoid the stock at the current level.

Bold move

The LSE share price was already performing strongly this year, before jumping 15% last Monday. This came on the back of news it’s agreed to acquire global provider of financial data and infrastructure Refinitiv in an all-share transaction for a total enterprise value of $27bn.

The deal is a bold move by LSE, and a “compelling” one, according to management. It cites a host of impressive benefits, including “expected adjusted EPS accretion of over 30% in the first full year following completion, increasing in years two and three.” Shareholders are clearly up for it, although with various regulatory approvals also required, completion is not expected until the second half of 2020.

The current-year forecast P/E of 36.3 doesn’t reflect the potential future earnings power of the enlarged business. Still, I’m not sure I’d be buying the stock today, but if I owned it, I’d continue to hold.

Outstanding performer

JD Sports is the top performer, not only in the year to date, but also over the last five years, the latter providing shareholders with a terrific gain of more than 700%. A truly outstanding effort.

A leading retailer of sports, fashion and outdoor brands, its UK growth and strong efficiency metrics put many other retailers to shame. Furthermore, it’s expanding fast internationally, including in the most significant global market of all, following last year’s £396m acquisition of US athleisure chain Finish Line.

JD’s forecast P/E of 18.8 is far lower than Aveva’s and LSE’s, but higher than many retail peers. Deservedly so, in my opinion. Annual low teens EPS growth looks sustainable to me, and with management recently confirming encouraging progress in the US, I rate the stock a ‘buy’.

The post The 3 best performing FTSE 100 stocks of 2019 (so far) 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.

As things stand, two FTSE 250 companies are set for promotion to the FTSE 100, with two current blue-chips heading for relegation to the second-tier index. Who are the winners and who are the losers? And should investors be looking to back the rising stars or their out-of-favour counterparts?

Income buy

Flying FTSE 250 insurer Phoenix Group looks nailed-on for automatic promotion to the top index. Its shares ended last week at 700p, giving it a market capitalisation of a bit above £5bn. According to my sums, this would rank it at 86 in the FTSE 100 — one place below wealth manager St. James’s Place and one place above engineering group Spirax-Sarco.

My Foolish colleague Roland Head has written about the attractions of Phoenix’s business. And with its prospective yield of 7% for 2019, I agree with Roland’s assessment that “the stock rates highly as a pure income buy.”

One I’d avoid

Barring a big drop in its share price before Tuesday’s market close, Phoenix’s automatic entry to the elite 100 is assured. But it’ll be a closer-run thing for engineering and industrial software specialist Aveva Group (LSE: AVV). My calculations say it currently sits bang on the automatic promotion threshold rank of 90.

Many of my fellow Fools have cautioned against this stock, due to its high earnings multiple and low dividend yield. Nevertheless, its share price has continued to rise defiantly, closing on Friday at 3,052p, giving it a market capitalisation of £4.9bn.

I view Aveva as an attractive and well-managed business. However, trading at over 36 times current-year earnings expectations, with a skinny prospective dividend yield of 1.5%, I’m inclined to agree with my colleagues that the sky-high valuation makes it a stock to avoid.

I would buy Wood

If Aveva does join Phoenix in the top index, the two companies in line to be culled are current bottom-ranked FTSE 100 stock John Wood Group (share price 533.4p; market cap £3.6bn) and second-bottom-ranked GVC Holdings (LSE: GVC) (share price 631.5p; market cap £3.7bn).

My fellow Fool Roland Head has written positively about oil services business Wood Group. Trading on a modest forward earnings multiple (10.4 at the current price), with a good prospective dividend yield (5.3%), I certainly see this stock as worthy of a ‘buy’ rating.

My pick of the field

However, my top ‘buy’ is multinational sports betting and gaming group GVC. It owns some of the industry’s leading brands, including sports betting-led brands Ladbrokes, bwin, Coral and Sportingbet, as well as games-led brands such as Gala, partypoker, PartyCasino and Foxy Bingo.

It has a further revenue stream from providing online gaming services on a business-to-business basis to a number of third-party operators, including MGM in the US, PMU in France and Danske Spil in Denmark.

This is a highly cash-generative business, with a strong record of delivering value for investors through organic growth and acquisitions. Trading on 10.6 times forecast 2019 earnings, with a prospective 5.4% dividend yield, the shares are a snip in my book.

The post Which stocks will be in and which will be out in the FTSE 100 spring reshuffle? 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 recommended GVC Holdings. 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.

Of course, it’s possible to generate a higher yield than 4% over the long run. One company which could do just that is J Sainsbury (LSE: SBRY). The supermarket giant’s growth strategy could lead to a higher dividend, which may make it relatively appealing at a time when a number of FTSE 100 and FTSE 250 stocks appear to be somewhat overvalued after a 10-year bull market.

High price

One company which could be overvalued at the present time is engineering and industrial software specialist Aveva (LSE: AVV). It released a trading update on Thursday that showed it has continued to perform well during the first half of its financial year. Its growth included the impact of good sales execution, with a number of contracts being brought forward into the first half, and some benefit of upfront revenue recognition delivered on multiyear rental contracts.

Encouragingly, the integration of the heritage Aveva and Schneider Electric industrial software business remains on track. Progress in implementing costs-saving initiatives has been made, with the financial benefits of the process set to be seen in the second half of the year.

Aveva is forecast to post a rise in earnings of 12% in the next financial year. While its performance is encouraging and its outlook is positive, it trades on a price-to-earnings (P/E) ratio of 39 and has a dividend yield of 1.8%. These figures suggest that although it may be making progress from a business perspective, it seems to lack investment appeal – especially from an income perspective.

Improving outlook

In contrast, the investment potential of Sainsbury’s continues to improve. Its acquisition of Asda could prove to be a gamechanger in the UK retail industry, providing synergies and cost benefits over the long run. At a time when the expansion of other retailers such as Lidl and Aldi is continuing apace, the merged entity may be able to enjoy wider margins, or more competitive pricing potential over the coming years.

With Sainsbury’s having a dividend yield of 3.5%, it’s not the highest-yielding share in the FTSE 100. However, it has the potential to raise dividends at a rapid rate. Dividends are currently covered almost twice by profit, which suggests that they could rise at a faster pace than the company’s bottom line without hurting its financial standing. And with the potentially positive impact of the Asda acquisition, as well as the cross-selling opportunities from Argos, the long-term investment prospects for the business appear to be sound.

Of course, UK consumer confidence remains weak, and could deteriorate further as Brexit progresses. But with what seems to be a strong growth outlook, the retailer could offer better dividend prospects than the FTSE 100 and a buy-to-let.

The post Forget buy-to-let! Why I feel Sainsbury’s is a FTSE 100 dividend stock that could make your cash work harder appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Sainsbury (J). 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.

With that in mind, here is one mid-cap stock which could be worth selling on valuation grounds. A smaller company operating in the same sector appears to have a stronger growth outlook and lower valuation. Therefore, it seems to offer a brighter investment future on a relative basis.

Time to sell?

The FTSE 250 stock which could be worth selling right now is engineering, design and information management software solutions provider Aveva (LSE: AVV). The company has delivered mixed performance in the last five years when it comes to profit growth, with its bottom line falling in two years to generate an annualised growth rate of just 1% during the period.

The company recently merged with Schneider Electric’s industrial software division, and this could lead to improving performance over the medium term. However, its forecast earnings growth rate over the next two years is not especially impressive. It is due to post a rise in net profit of 3% in the current year, followed by further growth of 9% next year. This is below the index average and suggests that the stock may lack a clear catalyst to push its share price higher.

In addition, Aveva has a high valuation at the present time. It trades on a price-to-earnings (P/E) ratio of around 50, which suggests that it lacks a margin of safety. As such, and with a dividend yield of 1.6% which may not rise rapidly due to its modest earnings outlook, the company appears to lack investment potential.

Time to buy?

In contrast, the outlook for sector peer SDL (LSE: SDL) appears to be significantly more positive. On Thursday it reported that trading in its first quarter had been in line with management expectations, and that it has now signed the vast majority of the licence deals that had slipped from the 2017 financial year. This was expected and may help to boost investor sentiment in the near term.

With SDL forecast to post a rise in its bottom line of 16% in the current year and 13% next year, it has an upbeat growth outlook. It trades on a price-to-earnings growth (PEG) ratio of 1.3, which suggests that it has significant upside potential.

In terms of SDL’s track record of growth, it has been somewhat mixed. In the last five years it has recorded losses in two years, which suggests that it is a relatively volatile entity that could be risky when compared to its sector peers. However, with it seeming to trade well below its intrinsic value, it could offer high return potential. As such, for less risk-averse investors it could be worth buying right now.

The post One FTSE 250 share I’d sell to buy this growth stock appeared first on The Twelfth Magpie.

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Peter Stephens 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.

Identity protection

Shares of identity data specialist GB Group (LSE: GBG) rose by 12% in early trade this morning, after the technology group said that full-year results would be ahead of consensus forecasts.

Adjusted operating profit for the year to 31 March is expected to rise by 53% to £26m, while revenue is expected to be 37% higher at £119.7m. Despite a number of acquisition-related payments during the year, net cash rose from £5.2m to £13.4m.

Identity data services are increasingly important for many businesses. GB aims to meet these needs by “combining trillions of data records relating to people’s identity”. It then makes this data available to more than 15,000 clients in 71 countries. The firm’s services are mainly used for fraud protection, marketing intelligence and employee screening.

There’s more to come

Shares of this fast-growing firm aren’t cheap. But its operating profit has risen by an average of 33% each year since 2012, and it’s expanding into a fast-growing market.

GB Group is now a £700m business. I believe further growth is likely, especially as the new General Data Protection Regulation (GDPR) regulations have created a substantial extra compliance burden for many businesses this year.

Analysts are forecasting earnings growth of about 15% for the 2018/19 financial year. This leaves the stock on a forecast P/E of about 30, with a dividend yield of just 0.7%.

This valuation doesn’t leave much room for disappointment, but I believe earnings are likely to continue growing over the next few years. I’d rate the shares as a growth buy.

Engineering big gains

FTSE 250 industrial software specialist Aveva Group (LSE: AVV) helps companies manage the design, construction and operation of big, expensive engineering projects. Sectors where the group operates include shipping, oil and gas, infrastructure and chemicals.

The firm’s business has been transformed this year by a merger with the software business of French group Schneider Electric. This complex deal only completed in March so we haven’t yet seen any trading results or management guidance for the combined group.

However, what we do know is that City analysts have become increasingly optimistic about the outlook for the company this year. In January, Aveva said that revenue was expected to be ahead of expectations for 2017/18. Since then, broker profit forecasts for both 2017/18 and 2018/19 have edged higher, supporting the stock’s strong momentum.

More to come

I believe that the main driver of further gains is likely to be the growing recovery in the oil and gas sector, which is the group’s largest market.

Although oil producers are already enjoying the benefits of higher oil prices, service companies such as Aveva are only just starting to see improvements. In its January trading update, the firm reported “stabilisation of conditions” and “the closing of a significant contract” with a key global customer.

I believe that growth is likely to continue over the next few years as energy companies start to invest in major new projects. Although Aveva shares aren’t cheap, I believe this stock remain an attractive bet for long-term growth.

The post Could these secret growth stocks rise another 50% this year? appeared first on The Twelfth Magpie.

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Roland Head 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.

With that in mind, here are two companies which now appear to be overvalued based on their future growth prospects.

Improving performance

Reporting on Monday was engineering data and design IT systems provider Aveva (LSE: AVV). The company reported a positive trading performance in the first nine months of its financial year, with an improving growth trend across all reporting regions. There was a particularly good performance in Asia Pacific, with a sharp focus on sales execution a key contributor. There was also a stabilisation of conditions in the Oil & Gas- and Marine-end markets.

The company’s improving performance means that it’s ahead of previous sales expectations for the period. This has helped to improve investor sentiment, with the company’s shares moving as much as 3% higher. News of a contract win with a key Global Account EPC customer may also have helped to push the company’s share price higher on Monday.

A rising share price takes Aveva’s capital gain to 51% in the last year. This puts it on a price-to-earnings (P/E) ratio of 43. Given that it’s expected to report a rise in earnings of 6% this year, and 8% next year, this appears to significantly overvalue the stock. As such, a lack of further growth could be ahead, which may make it a stock to sell at the present time.

Narrow margin of safety

Also lacking upside potential is fellow Software & Computer Services sector company Softcat (LSE: SCT). It also appears to be grossly overvalued given its growth outlook.

Certainly, expectations of a growth rate in earnings of 8% in the current year and next year are higher than for the wider index.  However, after a share price gain of 73% in the last year, the company appears to lack a sufficient margin of safety to merit investment. Its P/E of 24 translates to a price-to-earnings growth (PEG) ratio of 3, which is relatively high. That’s even the case following the FTSE 100’s Bull Run of recent years, with the index and many of its incumbents trading at record highs.

Certainly, Softcat is making good progress as a business. It appears to be delivering on its strategy, and it could report above-average profit growth figures over the medium term. But with investors seeming to be overly enthused about its future, it may be prudent to sell it and invest elsewhere. In this case, a good business does not necessarily equate to a good investment opportunity.

The post 2 Footsie shares that could lose you a fortune 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.

The shares edged higher in early trading to above 2,000p, taking its gains to 60% since a multi-year low in February last year.

Doesn’t move the dial

Aveva’s core end markets of Oil & Gas and Marine, which together account for over 60% of group revenue, have been in a cyclical trough over the last three years. However, the company confirmed today the early signs of improvement in Oil & Gas that it had noted in its annual results in May.

This, together with the full-year in-line outlook, means there should be little, if any change to analysts’ forecasts. Indeed, the fact that the shares have retreated towards yesterday’s closing level of 1,975p, as I’m writing, shows that today’s update doesn’t really move the dial.

Earnings upgrades needed?

The City consensus is for an 8% increase in earnings to 72.2p a share, giving a price-to-earnings (P/E) ratio of 27.4 and a price-to-earnings growth (PEG) ratio of 3.4. These are high ratings and they remain elevated at 25.6 and 3.7, respectively, when we look ahead to forecasts for the company’s 2018/19 financial year.

Aveva is a sound business with a strong balance sheet — net cash has increased to £152m from £131m over the past three months — but it looks to me as if we’d need to see upgrades to earnings forecasts for the shares to move materially higher from their current level.

Prodigious demand

In contrast to the headwinds Aveva has faced, another FTSE 250 tech firm, Sophos (LSE: SOPH), has enjoyed a backdrop of prodigious demand in its area of business.

This cyber-security solutions group has seen its shares soar from an IPO price of 225p in July 2015 to a current 438p, giving it a market cap of just over £2bn. The latest leg-up came after it posted forecast-busting 2016 results in May.

Attractive ratios

For 2017, the City is expecting to see revenue of $628m (£487m at current exchange rates), rising to $732m (£567m) in 2018. This gives a price-to-sale ratio of 4.2, falling to 3.6, which strikes me as attractive for a company whose top line is advancing strongly.

Turning to the bottom line, earnings are forecast to leap 43% from $0.07 (5.4p) a share to $0.10 (7.7p). The resulting P/Es of 81 and 57 are markedly higher than Aveva’s, but Sophos’s much higher forecast earnings growth gives it a far more appealing PEG of 1.3.

Flattering highlights

Not that the company’s management shouts much about such standard numbers as revenue and earnings. Instead they headline things like “billings” (significantly higher than statutory revenue) and other flattering metrics like “cash EBITDA” and “unlevered free cash flow”.

While this irks me (and could be viewed as a red flag), City analysts appear to have no concerns. Of nine brokers tracked by financial website Digital Look, seven rate Sophos a “strong buy”, one a “buy” and one is “neutral”.

The post Could these hot FTSE 250 stocks help you retire early? appeared first on The Twelfth Magpie.

More reading

• 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?

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.

Solid performance

Distribution and outsourcing group Bunzl (LSE: BNZL) gave us a solid trading statement. It showed its trading has been consistent with expectations at the time of the recent annual results announcement. The company’s revenue increased by 18% in the first quarter of the year at actual exchange rates, while it was 4% higher at constant exchange rates. However, of this 4% growth, around half was organic and the remainder came from the positive impact of acquisitions.

Looking ahead, further acquisitions appear to be on the horizon. Bunzl’s level of purchase activity has increased during the current year, with five buys announced for a total committed spend of around £260m. With the company’s cash flow and balance sheet being strong, more M&A activity looks set to take place over the medium term.

Despite this positive update and outlook, Bunzl appears to lack capital growth potential. The company trades on a price-to-earnings (P/E) ratio of 20.8 and yet is forecast to record a rise in its bottom line of just 5% per annum over the next two years. This indicates that it may be a stock to avoid until a more attractive valuation is on offer.

A return to form

The update from provider of engineering data and design IT systems Aveva (LSE: AVV) showed that the company has made a return to form. When the positive effects of currency translation are factored-in, its revenue and profit returned to positive growth in the financial year to 31 March. The company therefore anticipates that its results will be in line with expectations and that cash generation will surpass previous guidance. It expects to close the year with around £130m in cash.

Clearly, this is positive news for the company’s investors and it would be unsurprising for Aveva’s share price to move higher in the short run. However, as a long-term investment it seems to be somewhat disappointing. It trades on a P/E ratio of almost 30 and yet is expected to record a rise in its bottom line of just 9% in the current year and 7% next year. Although such growth rates are ahead of the wider index, they appear to be insufficient to justify such a heady valuation.

Looking back, Aveva has experienced a successful year. Its share price has risen by 19% in the last 12 months. But due to such a high valuation, it is difficult to see this level of performance being repeated in the next year. As such, other FTSE 350 stocks may hold more enticing investment outlooks at the present time.

The post 2 ‘overpriced’ stocks that could do serious damage to your portfolio 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.

Market domination

Over the years, Auto Trader has become the go-to place for buying or selling a used car in the UK. In fact, I remember back in the old days, before the internet, buying a copy of the weekly magazine and flicking through its pages looking for affordable bargains. Sadly, after 36 years, the final edition of the printed magazine was published in June 2013, with the company deciding to focus on its online business.

But for both the old days of print to today’s online focus, in my view, the company’s biggest asset has always been its strong recognisable brand. Auto Trader today attracts around 60m cross platform visits each month. Yes, that sounds impressive, but for me what’s most encouraging is that 70% of these visits are now coming through mobile devices. That’s the way consumers are going and the company is giving them what they want. And the marketplace has the largest pool of vehicle sellers, listing over 430,000 cars each day, with 80% of automotive retailers in the UK advertising on the website.

Is there a downside? Well, it’s no secret that Auto Trader dominates the car buying and selling market in the UK and Ireland, and although the City is forecasting good earnings growth over the medium term, I just can’t see it growing at breakneck speeds forever. For that reason I see Auto Trader’s forward P/E rating of 26 a little demanding. I would suggest keen investors wait for further weakness in the share price before buying to gain a more favourable valuation.

Aveva swings to profit

Another mid-cap growth firm that I’m currently having mixed feelings about is engineering software provider Aveva Group (LSE: AVV). In its latest market update, the Cambridge-based business announced a swing to profit for the first half of its financial year, with revenues also rising despite continued tough trading conditions.

For the six months to the end of September the group reported pre-tax profits of £5.5m, compared to an £800k loss for the same period in 2015. Total sales climbed 3% higher to £84.3m, from £82m a year earlier, but this was assisted by favourable currency translation. On a constant currency basis, revenues actually came in 6% lower, and for me that’s a more telling measure of performance.

After two years of decline, analysts reckon Aveva will return to growth this year via an anticipated 14% rise in earnings, with a further 10% improvement forecast for FY2018. But I think that with the firm’s P/E rating of 24, this projected growth is already baked into the price, and at current levels I just don’t see any compelling reason to buy.

The post Why I’m avoiding these growth shares right now appeared first on The Twelfth Magpie.

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