Finding shares with high growth potential may not be all that difficult at the present time. After all, the prospects for the world economy remain generally upbeat, and this means that trading conditions in a number of different sectors may prove to be positive.

However, finding shares with strong growth outlooks at the right price could be more difficult. With that in mind, here are two shares which seem to offer strong growth potential that could help to bring your retirement date a step closer.

Impressive outlook

Reporting on Friday was UK manufacturer, recycler and distributor of innovative window, door and roofline PVC products, Eurocell (LSE: ECEL). The company’s performance in 2018 has been in line with expectations, and it remains on track to deliver on its forecasts for the full year.

In its Profiles division, new account wins in 2017 and a strong performance in new-build have had a positive impact on sales growth. In Building Plastics, the company’s growth has been driven by the branches that were opened last year.

Eurocell has continued to make progress on its strategy. It is seeking to implement initiatives to shorten time to break-even in its branch network. It will open up to 15 new branches this year, while also aiming to build market share. Additionally, it continues to explore acquisitions, as well as the potential to expand its recycling capability.

Looking ahead, the company is forecast to post a rise in its bottom line of 7% in the current year, followed by further growth of 8% next year. It trades on a price-to-earnings growth (PEG) ratio of 1.3, which suggests that it could offer upside potential. And with a dividend yield of 4.1% from a payout that is covered 2.2 times by profit, its income return could be relatively impressive in the long run.

Consistent growth

Also offering a bright total return outlook is distribution and outsourcing specialist Bunzl (LSE: BNZL). The company has a solid track record of growth, with its bottom line having increased in each of the last five years. During that time, its net profit has risen at an annualised rate of over 10%, which suggests that it has a sound business model.

Acquisitions remain a central part of its growth strategy and with what seems to be a solid balance sheet, further progress in this area could be ahead.

With Bunzl expected to continue to generate positive earnings growth over the medium term, it appears to offer an attractive outlook. While the FTSE 100 has gained over 6% in the last month, the reality is that volatility could return over the coming months. Brexit talks are set to ramp-up, and this could affect investor confidence in the near term.

As such, with the company having what seems to be a stable business model that offers dependable growth, it could be a popular choice for long-term investors.

The post These top growth shares could help you retire earlier 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.

I’ll come back to the other company in a minute, but first I’d like to explain why I think Safestyle’s forecast dividend yield of 11% is likely to be a trap you should avoid.

The game has changed

Market conditions may well be tough. But in its latest profit warning, Safestyle also complained about an “aggressive new market entrant”. Presumably this company is forcing down profit margins in the sector with lower prices.

However, it’s worth remembering how profitable Safestyle has been in recent years. In 2016, it reported an operating margin of 12% and a return on capital employed of 48.1%.

Those are very high figures, given that replacement windows are a fairly standard product. I’m not surprised that such high returns are attracting more competition.

The company is safe, but the dividend isn’t

There doesn’t seem to be any immediate risk that Safestyle will go bust. The group reported net cash of £17.7m at the end of June last year, and says that its operations remain cash generative.

But 2018 results are expected to be “materially below 2017 levels”. I expect margins to fall, as market conditions remain competitive.

Current forecasts suggest that earnings could fall by 10% to 12.8p per share in 2018. That leaves very little cover for the projected dividend of 11.3p per share. In my view, a cut is likely. I’d look elsewhere for income.

Try this for size

If you’re attracted to the homebuilding and construction market, you might want to consider Eurocell (LSE: ECEL). Like Safestyle, this door, window and roofline product firm is vertically integrated. In other words, it manufactures and retails its own products.

Eurocell only floated in 2015, when it attracted big name backers including fund manager Neil Woodford, whose funds have a 15% stake in the firm.

The group’s 2017 results suggest performance remains stable. Sales rose by 10% to £224.9m last year, while adjusted pre-tax profit rose by 1% to £24.5m. Adjusted earnings per share were 2% higher, at 20.44p.

Shareholders will receive a total dividend of 9p per share, a 6% increase from 2016. My calculations suggest this £9m payout should be covered comfortably by last year’s free cash flow, which I estimate at £14.5m after acquisitions.

The way forward

Like Safestyle, Eurocell benefits from good cash generation. Net debt fell by 28% to £14.5m last year, despite the firm investing in 31 new branches. This Alfreton-based company now trades from 190 branches, but the recent rapid pace of growth seems likely to slow.

Chief executive Mark Kelly says that the firm’s focus in 2018 will be “on optimising our branch network” and “expanding further our recycling capability”.

Although “challenging” markets and rising prices for raw materials remain a risk, analysts expect earnings to rise by 10% to 22.4p per share this year. The dividend is expected to rise by 9%. These figures put the stock on a 2018 forecast P/E of 9.5, with a prospective yield of 4.5%. In my view, this could be one of the best buys in this sector.

The post Why I’d avoid this 11% yielder and buy this Neil Woodford stock instead 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 recommended Safestyle UK. 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

Reporting on Wednesday was manufacturer, recycler and distributor of PVC products Eurocell (LSE: ECEL). The company has experienced challenging trading conditions in the 11 months to 30 November, but is on track to meet full-year guidance. It has experienced good sales growth in the new-build marketplace, while it continues to build its prospect pipeline in the Profiles division. Similarly, trading in the Building Plastics division has been robust, although like-for-like growth rates are slightly below those of the first half of the year.

The company continues to mitigate the increasing cost inflation it is seeing for a range of raw materials including resin. However, there remains a time lag in capturing the benefit. Despite this, the firm is making good progress with its strategy and has been able to invest in business expansion, notably through the acquisition of Security Hardware.

With a dividend yield of 4.2%, Eurocell appears to have dividend appeal at the present time. With dividends being covered 2.3 times by profit, next year’s forecast rise in shareholder payouts of 8.8% appears to be highly affordable. Furthermore, with the company forecast to grow its bottom line by 5% in the current year and by a further 6% next year, its price-to-earnings growth (PEG) ratio of 1.5 indicates that it could offer high levels of capital growth in the long run.

Low valuation

Also offering impressive income prospects is insurance company Direct Line (LSE: DLG). It has a dividend yield of 8.2% at the present time, which includes special dividends. Clearly, there is no guarantee that these will continue to be paid. However, the company has a solid track record of paying them and is expected to do so over the next couple of years. Such a high dividend yield means that the firm’s income return is highly likely to remain well above inflation – even if the price level rises at a rapid rate over the medium term.

As well as its income prospects, Direct Line also has capital growth potential. The company trades on a price-to-earnings (P/E) ratio of just 12.7 at the present time. This suggests that there could be a wide margin of safety on offer following its 5% share price fall in the last three months. As such, with a mix of income potential, low valuation and what is a dominant position within its key markets, the stock appears to offer a favourable risk/reward ratio for the long term. This means that now could be the right time to buy it.

The post 2 high-growth dividend shares you may regret missing out on appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Direct Line. 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 company has done remarkably well recently as rising property values and solid economic growth have led homeowners to upgrade to double-glazed windows and doors or add a conservatory to their homes. This has driven demand for the rigid plastic frames that Eurocell makes and distributes.

By acquiring competitors and expanding its retail presence across the country, this growth has continued in the six months to June despite a flat remodelling market in the UK. Year-on-year (y/y) revenue rose 11% to £108.1m as the company opened up 15 new branches and also made inroads into the new build housing market that continues to grow steadily due to restricted supply.

It wasn’t all good news though as rising materials costs due to inflation and the weak pound did send gross margins down from 52.1% to 51.4% y/y, which led to adjusted earnings per share rising by just 8%. However, with net debt falling to just £20.8m, or less than one times EBITDA, management was still able to increase the interim dividend payout by 7% to 3p per share.

If last year’s final dividend payout of 5.7p per share rises by a similar amount, investors could be looking at around a 9.1p payout for the full year that would yield roughly 4% at today’s share price.

That said, the markets it targets are very reliant on continued economic growth and rising property values. And the fact that companies such as Safestyle UK that operate in the same sector have recently warned on profits is not a good sign. Eurocell continues to grow nicely and offers a healthy dividend yield, but the cyclical nature of the sector scares me and I reckon there are safer income stocks out there.

Too good to be true?

While Eurocell looks cheap and its dividend yield is impressive, both figures pale in comparison to those posted by NAHL Group (LSE: NAH), which offers a 14.6% dividend yield while trading at just 5.4 times forward earnings.

These figures may look incredibly appealing but when something looks too good to be true, it generally is. I believe this holds true in the case of NAHL. The group’s core business is operating the National Accident Helpline that connects those injured in accidents with a lawyer in exchange for a small fee.

This was a tidy little business for a long time but proposed regulatory changes have the potential to damage it. The main alterations would be an increase in the maximum claims ceiling that could be sought in small claims court, which would mean less need for lawyers, and changes to how personal injury cases are compensated. The market has understandably reacted negatively to these proposals and sent the share price of NAH plummeting 45% over the past year.

There’s still hope for NAH as it is diversifying its revenue streams, remains highly cash generative and has low debt. But until we see for sure what effect these proposed changes will have on NAH’s bottom line, I won’t be picking up its shares.

The post 2 super-charged income stocks trading at ultra-low valuations appeared first on The Twelfth Magpie.

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• 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 recommended Safestyle UK. 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.

Quality-driven success

Staffline has been around since 1986 and operates in the UK recruitment market specialising in the areas of logistics, e-tail, manufacturing, driving, food processing and white-collar recruitment. As well as supplying and managing workforces, the firm reckons it uses training and business improvement techniques to drive increased levels of efficiency so that client organisations gain commercial advantage.

Such quality control seems to have been a hit with customers judging by the company’s record on earnings per share (EPS), which have shot up more than 200% over the past four years. Looking forward, City analysts following the firm expect EPS to lift 3% this year and 4% during 2018.

Attractive-looking valuation

Meanwhile, we can pick up the shares on a forward price-to-earnings (P/E) ratio of just under 11 for 2018 at the current share price around 1,315p. The forward dividend yield runs at 2.3% with the payout covered a comfortable-looking four times by anticipated earnings. The valuation seems undemanding and the directors’ cautious approach to dividend payments strikes me as a good thing. After all, the staff recruitment business is notoriously cyclical and a downturn in the economy could pull the rug from under Staffline’s profitability and cash flow down the line.

That said, there is no denying the firm’s attractive metrics for the time being, and directors reckon demand for the firm’s services remains robust despite the Brexit vote. We’ll get a further update on 26 July with the interim results.

Trading well

Back in May, Eurocell (LSE: ECEL) updated the market on trading for the first four months of the year. The firm makes and recycles PVC window, door and roofline products and enjoyed a positive start to 2017 with trading in line with expectations. City analysts following it predict growth in EPS of 10% for 2017 and 8% for 2018. It seems the company is firing on all cylinders, which could be one reason that well-known fund manager Neil Woodford’s fund is listed as a major shareholder, a position consistent with his recent bullishness on UK-facing cyclicals.

Eurocell is facing raw material price pressure, particularly for resin, and the directors’ solution is to push up selling prices. But I don’t think such a move is likely to hold sales down because inflation is expected by most people these days. Indeed, the firm is rolling out its offering and had opened 10 new sites by the time of the May update, with 30 new branches planned for the whole of 2017.

We’ll get a further update with the half-year results around 2 August, but in the meantime, you can pick up some of the shares on a forward P/E rating just under 11 for 2018 and collect a forward dividend yield running at almost 4%.

The post 2 hot value shares that could help you retire early appeared first on The Twelfth Magpie.

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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?

Kevin Godbold 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.

However, auxiliary homebuilding stocks, such as component suppliers may still prove to be good investments, and I believe I have found two such stocks that fly under the radars of most investors.

Hiding from the rest of the market

Abbey (LSE: ABBY) is a property development, plant hire and property rental firm operating in Ireland, the UK, and the Czech Republic. With a market value of £256m, the firm is certainly not small, but it does fly under the radar of most investors. 

Over the past four trading days, only 1,252 shares in the company have changed hands, that’s an average of 313 per day. The long-term average is close to 150 shares per day.

Still, even though Abbey is hidden away in a corner of the market it doesn’t mean that the company is not successful. Over the past five years, pre-tax profits have grown from £12m to £61.5m and earnings per share have increased nearly 500%. Analysts expect the company’s growth to slow over the next two years with earnings per share falling to a low of 126p for the fiscal year ending 30 April 2018, before rebounding to 136p for the following year. 

Still, even based on these estimates, shares in Abbey look relatively cheap. At the time of writing shares in the group are trading at 1,269p, for a cyclical low P/E of 10.1. Looking to 2019, the shares are trading at a forward P/E of 9.3 making them one of the cheapest in the homebuilding sector. Over the past five years, shares in Abbey have returned 170% and it looks as if these gains are set to continue.

Undervalued growth 

As well as Abbey, PVC windows and doors manufacturer Eurocell (LSE: ECEL) also looks to be a cheap play on the UK’s booming housing market. 

Like Abbey, Eurocell has grown rapidly over the past three years but the market has failed to recognise this growth. Earnings per share have nearly doubled since 2014 and City analysts are forecasting 10% earnings per share growth for the year ending 31 December 2017, followed by 8% growth for 2018. Despite these steady growth forecasts, shares in Eurocell are currently trading at a forward P/E of 12, falling to 11.2 for 2018. 

And unlike Abbey, which only offers shareholders a dividend yield of around 1%, shares in Eurocell currently yield 3.5% and the payout is covered twice by earnings per share. What’s more, management has a record of hiking the company’s dividend by around 1p per year and based on historical growth, the payout is set to hit 10.2p for 2018, giving a yield of 3.9%.

The post These 2 bargain growth stocks are great plays on the UK housing boom appeared first on The Twelfth Magpie.

More reading

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• 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?

Rupert Hargreaves 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.

Dividend growth

Reporting on Thursday was specialist components manufacturer and distributor Essentra (LSE: ESNT). Its trading update showed its performance since the start of the financial year has been in line with expectations. Like-for-like (LFL) revenue has modestly declined, as expected, although the trend in all three of the company’s divisions has been better than in the same period a year ago.

The actions taken in its Component Solutions and Filter Products divisions have put the two key segments on a more stable financial footing for the future. Now the company will focus on its Health & Personal Care Packaging sector, which has reported a significant decline in sales and profitability in recent months.

However, the difficulties faced by the business have not led to dividend cuts. Essentra currently yields around 3.9% from a dividend which is covered 1.3 times by profit. This shows its current level of payout is sustainable. And with profit due to grow by 15% next year, there is scope for a rise in shareholder payouts over the medium term. This could boost its share price performance and lead to capital gains – especially with Essentra trading on a price-to-earnings growth (PEG) ratio of just 1.5.

Cheap dividend potential

Also offering upbeat income prospects is UPVC windows manufacturer and distributor Eurocell (LSE: ECEL). It has performed relatively well in the last couple of years and has been able to grow earnings by over 50%. This growth trend is forecast to continue in the current year and next year, with earnings growth set to average around 9% per annum during the periods. This should allow dividend growth of almost 10% per annum over the course of 2017 and 2018.

Despite such a rapid growth in dividends, Eurocell looks set to offer a highly sustainable level of shareholder payouts. Its dividends are currently covered 2.4 times by profit, which indicates they could increase at a much faster pace than profit without hurting overall financial strength. And since its shares trade on a PEG ratio of just 1.4, there seems to be significant upside potential on offer, too.

Clearly, an uncertain economic outlook could mean there is scope for downgrades to its financial performance. However, with a generous yield of 3.5% and a relatively low valuation, the market may have already priced a degree of volatility into the company’s share price.

The post 2 Footsie dividend stocks that could boost your retirement prospects 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?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Essentra. 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.