Those figures are impressive, and the firm’s shareholders have been rewarded with a 110% uplift in the share price over the period. Who says ‘elephants don’t gallop’? If Compass had been in my portfolio, I’d be pleased with that outcome, which puts many smaller, so-called growth shares to shame.

Steady gains

Today’s full-year report reveals that Compass is still powering forward at full pace. In terms of the underlying figures, revenue lifted 5.5% year-on-year, free cash flow advanced more than 17%, and earnings per share moved 12.5% higher. The directors expressed their confidence in the outlook by pushing up the total dividend for the year by 12.5%.

During the year, around 63% of underlying operating profit came from North America, which makes the region important. Some 22% came from Europe and 15% from the rest of the world. Chief executive Dominic Blakemore said in the report that “healthy” revenue growth had been driven by “excellent” growth in North America, an acceleration in revenue advancement in Europe, and good progress in the rest of the world, so no regions suffered weak trading. However, there was “a more difficult” volume and cost environment in Europe, “especially in the UK.” But the firm achieved some operating efficiencies in the rest of the business that improved margins slightly and offset margin weakness in Europe.

A positive outlook

Blakemore explained that the firm is focusing on food, and disposing of around 5% of revenues from non-core businesses. Yet, the directors are keeping their eyes open for bolt-on acquisition opportunities “that strengthen our offer and meet our strict returns criteria.” Meanwhile, the outlook is positive for 2019. The pipeline of new contracts is “strong,” and the company sees “significant structural growth opportunities globally,” which have the potential to deliver revenue growth, margin improvement, and further returns to shareholders.  

Based on the company’s previous form, I think there’s every reason to expect more from Compass over the coming years, and I’d be happy to tuck some of the firm’s shares away for the long haul. The market likes today’s results and the shares look perky. Today’s share price at around 1,643p values the firm at just under 20 times forward earnings for the trading year to September 2019, and the forward dividend yield runs at about 2.6%.

I think the quality of growth on offer reflects in the valuation, but the price-to-earnings ratio has been at a similar level all the way up, so far. I see the stock as attractive.

The post Why I think this surprising FTSE 100 growth stock has further to run appeared first on The Twelfth Magpie.

More reading

• 1 FTSE 100 name for growth investors while everyone else is looking at AI stocks
• How could ‘Prime Minister’ Andy Burnham boost these FTSE 100 and FTSE 250 shares?
• This ‘boring’ FTSE 100 stock’s forecast to grow 3x faster than Rolls-Royce shares!

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Compass Group. 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.

Improving performance

Reporting on Wednesday was BATM Advanced Communications (LSE: BVC). The provider of real-time technologies for networking solutions and medical laboratory systems delivered a rise in revenue of 10% in the first half of the year. Gross profit also increased after a period of meaningful investment in new products, capability and bolt-on acquisitions. Such investments have the potential to improve the long-term outlook for the business and place it on a firmer financial footing.

The company made solid progress in its Bio-Medical division, as well as in its Networking and Cyber divisions during the first half of 2017. It expects to make further inroads in these areas, with a target of gaining new customers and developing its sales potential. Government agencies continue to express interest in its Cyber division, with BATM’s order backlog increasing substantially compared to the same time last year.

The company’s increasingly positive outlook has the potential to deliver improved share price performance in future. In the last six months, its share price has fallen by around 10%. While it remains a lossmaking business and a relatively risky investment opportunity, it has the potential to recover in the long term.

Defensive option

Also disappointing in terms of its share price performance in recent months has been food and support services provider Compass Group (LSE: CPG). The company’s share price has declined by 5% in the last three months. However, it could easily recover and make strong gains in future.

One reason for this is the company’s defensive characteristics. It has a long track record of profits growth, and this could appeal to investors given the current geopolitical outlook for the world. Tensions regarding North Korea have already negatively affected investor sentiment and share prices. More could follow, and investors may become increasingly risk-off, thereby seeking more stable companies over the medium term.

With Compass Group forecast to increase its bottom line by 18% in the current year, it seems to offer significant growth potential as well as defensive attributes. Despite this, it trades on a price-to-earnings growth (PEG) ratio of just 1.2 at the present time. This suggests that it offers a wide margin of safety and that it could post significantly better share price returns in future.

Alongside its growth potential, the stock also has a growing dividend. It has risen by 49% in the last four years and with dividends covered more than twice by profit, more growth in shareholder payouts could be ahead. This could boost its 2.1% dividend yield.

The post 2 under-the-radar turnaround stocks with recovery potential appeared first on The Twelfth Magpie.

More reading

• 1 FTSE 100 name for growth investors while everyone else is looking at AI stocks
• How could ‘Prime Minister’ Andy Burnham boost these FTSE 100 and FTSE 250 shares?
• This ‘boring’ FTSE 100 stock’s forecast to grow 3x faster than Rolls-Royce shares!

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Compass Group. 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.

However, the reality is that Tesco is dirt cheap. It trades on a price-to-earnings growth (PEG) ratio of just 0.4. This indicates that it offers not only 20%-plus upside, but also that it has a wide margin of safety. So if its financial performance does come under pressure then its shares could still perform relatively well.

Furthermore, Tesco is in a very different position to where it was in the last recession. Today, it’s much more focused on selling a narrower range of goods at higher volumes, while it has also improved the efficiency of its supply chain. Tesco has also invested heavily in improving customer service and is therefore better placed to react to a deteriorating consumer outlook than was the case during the credit crunch. As such, now could be a good time to buy it.

Bucking the trend?

Also offering 20%-plus upside is Standard Chartered (LSE: STAN). The Asia-focused bank is unlikely to be hurt by Brexit due to its geographic exposure and this means that it could act as a useful hedge against UK-focused stocks.

However, there’s more to Standard Chartered than a ballast against Brexit fears. It’s in the midst of a turnaround that’s seeing its management structure streamlined, its compliance function improved and its lucrative position within emerging markets used to successfully grow earnings in the coming years.

For example, Standard Chartered is expected to return to profitability in the current year and then increase its pre-tax profit from £775m to £1.9bn next year. This rate of growth would be staggering and could be enough to cause investor sentiment to rapidly improve and push Standard Chartered’s share price significantly higher.

Certainly, it’s well below the £6.8bn pre-tax profit recorded in 2012, but it indicates that at a time when many global banks are struggling to post high levels of growth, Standard Chartered may be able to buck the trend.

Sound business model

Gains of 20% are also on the cards for food services company Compass Group (LSE: CPG). It continues to offer investors a very consistent and reliable top- and bottom-line growth profile, with Compass’s sales having increased at an annualised rate of over 4% during the last five years. And with earnings up by 8.9% per year during the same period, Compass seems to have a sound business model that can perform well in almost any economic environment.

In a post-Brexit world, this robust performance is likely to appeal to investors and Compass’s shares may become increasingly in-demand. While a price-to-earnings (P/E) ratio of 24 indicates that its shares may be overvalued, when this is combined with its growth rates over the next two years it equates to a PEG ratio of 1.8. Given its sound financial standing, resilient business model and defensive nature, that seems to be a very attractive price to pay.

The post 3 stocks with 20%+ upside appeared first on The Twelfth Magpie.

More reading

• 1 FTSE 100 name for growth investors while everyone else is looking at AI stocks
• Here’s what a surging Tesco share price has done to £10,000 invested 5 years ago
• How could ‘Prime Minister’ Andy Burnham boost these FTSE 100 and FTSE 250 shares?
• This ‘boring’ FTSE 100 stock’s forecast to grow 3x faster than Rolls-Royce shares!
• Are Tesco shares losing their momentum?

Peter Stephens owns shares of Standard Chartered and Tesco. 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.

Take a bite

Shares in catering and support services provider Compass Group (LSE: CPG) have been extremely volatile since the start of 2016, although prices have stomped higher more recently and gained more than a tenth over the past fortnight.

The Chertsey business received further fuel in Thursday’s session after announcing that total organic revenues surged 5.9% between October and December. Compass Group saw sales rise across all regions, including a solid 7.9% advance in North America, thanks to strong customer retention and new contract wins.

And the company remained upbeat over its outlook for 2016 and beyond, claiming that “growth in North America is strong, Europe is improving, and we are managing the challenges in the Rest of World region.”

The City expects Compass Group to rack up a 4% earnings rise in the year to September 2016, resulting in a slightly-elevated P/E rating of 20.7 times. But I believe the firm’s terrific momentum in all of its major territories merits such a premium.

Soaring higher

Budget flyer Ryanair (LSE: RYA) also greeted the market with a bubbly update in Thursday trade, although moderating risk sentiment across financial markets pushed the stock 3.8% lower from the midweek close.

Ryanair advised that passenger numbers charged 25% higher during January, to 7.5 million, while the load factor improved by 500 basis points to 88%. The Dublin airline advised that a combination of low prices and the success of its ‘Always Getting Better‘ customer service programme helped to drive numbers.

And as demand for cheap flights from leisure and business customers continues to take off, and Ryanair expands its base network to harness such growth  (the company opened new hubs in Berlin, Corfu, Gothenburg and Milan between October and December alone ), I fully expect earnings to continue moving higher.

On the retreat

Precious metals producer Randgold Resources (LSE: RRS) has also enjoyed a fresh bump higher on Thursday thanks to a chunky rise in the gold price.

Indeed, the miner has risen 23% since the turn of the year as the commodity’s value has gained ground. And the ‘safe-haven’ metal burst back through the $1,150 per ounce marker just today, taking it to levels not seen since the end of October as the US dollar continued to lose value.

With Randgold Resources also steadily hiking output and doubling-down on its cost-saving measures, the City expects the company to bounce from an anticipated 25% earnings fall in 2015 with a 21% rise in the current period, resulting in a high P/E rating of 27.2 times.

But I am unconvinced that the stock can maintain this strong momentum. Given that fresh greenback strength is likely in the coming months, and physical gold demand remains extremely patchy, I reckon gold prices could find themselves on the retreat again in the near future. Consequently I believe Randgold Resources is an unappealing pick at current prices.

The post Should You Buy Randgold Resources Limited, Compass Group plc & Ryanair Holdings Plc On Thursday? appeared first on The Twelfth Magpie.

More reading

• 1 FTSE 100 name for growth investors while everyone else is looking at AI stocks
• How could ‘Prime Minister’ Andy Burnham boost these FTSE 100 and FTSE 250 shares?
• This ‘boring’ FTSE 100 stock’s forecast to grow 3x faster than Rolls-Royce shares!

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.