Even though the stock has only added 4% since my last article, the underlying business has continued to push ahead. Numbers published today show revenue jumped by 32% to £24.9m for the six-month period ended 5 July. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increased 35% to £4.1m. 

A growth business 

Usually, I avoid using EBITDA figures for evaluating a business because they can be easily manipulated. In this case, however, I’m happy to bend the rules because Everman is still in its early stages of growth. The firm only has 2.5% of the UK cinema market (up from just under 2% in June 2017) and is aggressively chasing market share. One new venue was added during the six months to the beginning of July and management has committed to a further 15 new sites, almost doubling the current 22 venues in operation. Including the cost of opening new cinemas, Everyman’s profit for the period was just £768,000. 

Still, even after including opening expenses, the stock seems cheap after adjusting for growth. Analysts are forecasting earnings per share (EPS) growth of 163% for 2018. The stock is changing hands for 40 times forward earnings, but after factoring-in EPS growth, it has a PEG ratio of 0.9, indicating that the shares are undervalued based on the company’s growth potential. 

With this being the case, and considering the pipeline of opportunities still to come, I reckon Everyman is one of the best growth stocks out there.

Double your money 

Another growth champion is FTSE 250 speciality chemical enterprise Synthomer (LSE: SYNT). 

Over the past five years, Synthomer’s growth has blown the lights out. Net profit doubled between 2012 and 2017, while normalised EPS (before accounting adjustments) have jumped 150%. The stock has added around 140% over the same period. 

As the firm builds on its established business, the City is expecting more of the same for the next few years. EPS growth of 12% is pencilled in for 2018, and 10% for 2019. These figures put the stock on a forward P/E of 17. 

What I like about Synthomer is that it is a well-established business in a niche market — supplying aqueous polymers.  In my mind, this gives the firm a substantial competitive advantage that justifies a high earnings multiple. 

What’s more, it is a highly profitable, cash generative business. For the six months to the end of June, the firm booked a pre-tax profit margin of 10%. Synthomer reinvests the bulk of earnings back into the business and is always on the hunt for bolt-on acquisitions to help it break into new markets and reinforce its position in old ones, which should ensure that the group stays at the top of its game for many years to come. 

That’s why I believe this FTSE 250 growth stock is well worth your further research time.

The post Could this FTSE 250 growth stock double your money again? appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Synthomer. 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 strategy seems to be working. Today the company reported that for the 52 weeks to the end of December, revenue grew 37% to £40.6m, and cinema admissions expanded 32% to 2.2m. 

It appears the bulk of this growth was at existing premises. Specifically, today’s release notes that just two Everyman venues opened during 2017, expanding the portfolio by 10% to 22 sites. The company also undertook some significant renovations of its existing portfolio throughout the year, including adding to new screens to its Muswell Hill and Oxted venues.

A premium offering

Everyman’s strength is its premium offering, which consumers are more than happy to pay for according to the firm’s figures. Last year the company recorded an average box office ticket price of £11.28, and average food and beverage spend per head of £5.97. These figures are more than double those reported by Cineworld. For the period to the end of June 2017, Cineworld achieved an average ticket price per head of £5.27 and an average retail spend per person of £2.04.

That said, nine of Everyman’s 22 screens, or 40% of the current portfolio, are based in London where prices are higher than the rest of the UK, but so are operating costs. Still, Everyman is more profitable than Cineworld overall with a gross profit margin of 60% compared to Cineworld’s 26%.

And when it comes to growth, the young upstart has an edge over its older, more established peer.

Set for growth

Everyman exchanged contracts on nine news sites during 2017 funded through an equity raise of £17m in October. Another deal was completed in January of 2018 when the firm exchange contracts on a freehold site in Crystal Palace, London for £3.3m. (With only £7m of debt on the balance sheet at year-end, and a net cash balance of £11.4m, I wouldn’t rule out more of these deals in 2018.) 

As these new venues begin to open, City analysts believe net profit could grow by as much as 40% in 2018 and earnings per share could hit 4.9p. Based on these numbers the shares are trading at a forward P/E ratio of 39.4, which looks expensive, but when you consider the company’s cash-rich balance sheet and rapid growth rate, it is clear the business deserves a high multiple.

Meanwhile, following the acquisition of US cinema group Regal, (completed in February) City analysts are expecting Cineworld’s revenue to jump 225% in 2018, and net profit is expected to double. However, because the company relied on a rights issue to finance part of the deal, earnings per share are only expected to grow by 22% thanks to the dilution.

Further, the group is drowning in debt following the merger, with analysts estimating that net debt to earnings before interest, taxes, depreciation and amortisation will be 4 times this year, leaving management little room for manoeuvre if things don’t go to plan.

Considering all of the above, even though shares in Cineworld look cheaper than Everman (the shares are trading at a forward P/E of 12 and support a dividend yield of 4.4%) I’d stay away from the group. Everyman appears to offer a better all-round proposition for investors. 

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

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Rupert Hargreaves owns no share 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.