Personally, I am willing to overlook Ashley’s brash way of doing business because it seems to be working. He has created a retail empire with Sports Direct and, if anyone is going to succeed turning around the stable of struggling businesses the company has recently acquired, it will be him.

Buy, build, sell

Buying assets at distressed prices has been Ashley’s playbook for years. Many of the brands owned and stocked in Sports Direct’s stores were acquired at distressed prices but were given new life under the group’s umbrella.

Take Dunlop for example. Sports Direct acquired Dunlop Slazenger for around £40m in 2004, which gave it exclusive rights to the Dunlop, Slazenger and Carlton brands. After more than a decade of ownership, Sports Direct sold Dunlop Brands to Japan’s Sumitomo Rubber for £112m in 2016 an annual return, according to my calculations, of approximately 9% excluding any profits earned.

Ashley’s buy-cheap-and-build model has enabled him to grow Sports Direct into a global retail giant.

For 2019, City analysts believe it can achieve sales of £3.7bn and a net profit of £86m. This profit figure is significantly below where the group was in 2017 (£229m) because the business is spending tens of millions of pounds on new deals, such as the acquisitions of House of Fraser and Evans Cycles.

Ashley seems to believe he’s the only person who can turn these businesses around and rescue the UK high street, but many analysts are sceptical.

Only time will tell if Ashley is doing the right thing. But as he owns around two-thirds of the company’s shares, he has more to lose than most and is highly incentivised to achieve the best result for investors. That’s why I think it could be worth backing him. 

A new deal

Yesterday, Sports Direct announced yet another new deal. The firm wants to buy home shopping company Findel (LSE: FDL) for 161p per share, or £139m in total.

Sports Direct already owns 36.8% of Findel, so it was really only a matter of time before the company made an official offer for its smaller peer. However, Findel’s management immediately rejected the offer saying that it “significantly undervalues Findel and its future prospects.” I agree with them. Only a few weeks ago, shares in Findel were dealing above 170p.

I think this could be an excellent opportunity for investors to snap up shares in Findel as it’s most likely Ashley will be forced to up his offer.

Right now, the stock is changing hands at a forward P/E of just 6.2 times forward earnings and while Ashley likes to buy distressed assets, this multiple appears outrageously low for a profitable, growing business.

City analysts believe net profit will increase 30% over the next two years to £24.5m. On this basis, I reckon in the best case scenario, the shares should command a low single-digit valuation multiple, implying a price of at least 250p per share, or 55% above Ashley’s current offer.

Of course, this is only speculation. But, as I said above, I think it’s likely Sports Direct will ultimately acquire Findel. The only question is when?

The post I think this FTSE 250 retailer trying to take over the world could be worth buying 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.

This impressive performance has earned the firm a place in the FTSE 100. But even Ocado’s biggest fans would probably admit that most of its valuation is based on hopes of future profits.

Today, I want to take a fresh look at the firm and ask if the stock is safe to buy.

Tech, not retail

Founder and chief executive Tim Steiner is quite clear that he wants Ocado to be seen as a technology company, not a retailer.

Although the firm’s UK retail business now has annual sales of about £1.6bn, that’s a drop in the ocean compared to the £100bn+ of goods sold by the big three listed supermarkets each year. Retail profits are minimal too. They certainly don’t justify Ocado’s £5.8bn market cap.

The real value of the UK retail business seems to be that it demonstrates the potential of Ocado’s software and automated warehousing systems. This is the firm’s real product, which it sells to other major retailers to kick-start their online growth.

Good progress

This year has seen Mr Steiner sign a string of deals with overseas retailers. But it’s worth noting that these deals usually seem to require Ocado to invest a fair chunk of cash in building new warehouses. The company says a new warehouse typically has “peak cash outflow” of £30m, due to the cost of installing the firm’s mechanical handling equipment.

Very little financial detail has been provided about the expected profitability of these deals over the coming years. My impression is that it’s likely to be several years — at least — before we see much in the way of profit.

Analysts expect the firm to report another year of losses in 2019. Shareholders were tapped for £143m of fresh cash in February. I suspect another fundraising might be needed before the firm starts generating a profit.

Meanwhile, CEO Mr Steiner sold more than £100m of this own stock during the summer, while the share price was still over 1,000p. I’d follow his example and lock in some profits.

One growth stock I’d buy

One online growth stock you may not have considered is retailer Findel (LSE: FDL). This firm was historically a catalogue retailer. It now operates mainly online, selling a wide range of toys, gifts, electricals, homewares, budget fashion and much more through its Studio website.

Findel’s other main business is quite different, educational supplies. This operation offers a wide range of products for nurseries and schools. Both businesses are aimed at the value end of the market.

Gaining momentum?

In an update on Wednesday, the company said that sales from the Studio business rose by 8% during the first 28 weeks of the year. Management remains confident it will hit full-year targets for sales and profit growth.

This business has been through a turnaround period over the last few years, but now appears to be on track to deliver rising profits. Although there’s no dividend, the stock trades on a forecast P/E of 10 for 2018/19 and analysts expect earnings growth of 11% in 2019/20.

I believe this stock could be worth further research as a potential growth buy.

The post Why this small-cap growth stock could trash the Ocado share price 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.

Storming growth

Back in January I saw JD Sports Fashion (LSE: JD) shares as being good value, even after having 10-bagged over the previous five years. And since the beginning of 2018, shareholders have enjoyed an additional 38% with the price now exceeding 470p.

Results released in April helped, with revenue up 33% and pre-tax profit up 24%. And the world cup did its bit too. After the year’s share price climb, we’re looking at P/E multiples for this year and next of around 17 and 15, which are a couple of points higher than at the start of the year. But is there still room for more?

With EPS growth expected to slow, there’s a chance of short-term growth investors jumping off and seeking their next bandwagon. But JD is also expanding internationally, and I can see sustainable rises for a good few years yet, which I expect to turn into cash-cow dividends in due course.

Top end fashion

Burberry (LSE: BRBY) made the news recently by destroying large amounts of surplus stock rather than seeing it sold off at discount prices and damaging the firm’s exclusive brand image.

That’s done the shares no harm, and they’re up 17% over the year so far. Burberry is also making strong inroads into the online market, but bricks and mortar retail has been suffering a little as the stream of high-spending tourists arriving in the UK and Europe has slowed.

One thing that scares me is that Burberry is a single-brand retailer, and it’s surely more susceptible to the fickleness of changing trends than JD Sports. But Burberry has excelled at maintaining the desirability of its brand for decades, and has exported that to Asia with aplomb.

The downside for me is the share valuation, and with P/E multiples of around 25, I’m not really seeing the margin of safety that I’d like. But I could change my mind if we see a strengthening of longer-term growth

Biggest last

The biggest rise of my three picks is small-cap mail-order and educational supplier Findel (LSE: FDL). Its shares have been in the dumps over the past five years, but they’ve surged since last November’s low and have added 46% in value so far in 2018.

My colleague Harvey Jones took a look at full-year figures in June, and they looked pretty decent to me. But there are several things that make me wary of Findel at the moment. One is the erratic nature of the company’s earnings, which have been up and down over the past five years. And though expectations of strong growth in 2018 came good, we’re looking at unexciting predictions for the next two years.

Another is the firm’s net debt of £232m at 30 March, which is more than five times EBITDA. No wonder, then, that there haven’t been any dividends for the past few years and there’s little chance of any soon.

With a forward P/E of 11, last year’s serious undervaluation looks over. And though the share price recovery has been welcome, I wouldn’t buy now.

The post The 3 best retail stocks of 2018 (so far) appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry. 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.

Retailer therapy

Management heralded a “year of growth and strategic progress” in the 12 months to 30 March and the response would probably have been more enthusiastic, if investors had not already been primed to hear some good news today. In April, the group announced that its full-year performance would be “at the upper end of market expectations”, thanks to strong growth in customer numbers. 

Findel’s Express Gifts division, which provides a personal shopping service to around 1.8m active customers through direct marketing and its Studio.co.uk and Ace.co.uk websites, reported strong revenue growth of 9.6% to £285m, with clothing sales particularly strong, up 14.2%.

Back to school

The group has transformed online sales and cut base costs at its Findel Education division, which provides resources to nurseries, schools and other educational establishments. It has cut prices across 800 best-selling products for customers who switch to online ordering. Revenues dropped 6.2%, partly as a result, although customer numbers did grow 5%.

This £212m company recently appointed Phil Maudsley its chief executive and he’s turning it round after the group issued two profit warnings in two years. Past problems continue to weigh on its valuation, which is a tempting 8.6 times earnings. However, City analysts are sceptical, forecasting a 5% drop in earnings per share (EPS) in the year to 31 March 2019, then another 3% drop the year after. Its share price may be up 18% in the past year but retail is a risky sector. Findel’s price is right, but its future could be patchy.

Imperial power

As far as bargains are concerned, I think this one looks a little more addictive. Tobacco manufacturer Imperial Brands (LSE: IMB) currently trades on a cut-price forward valuation of just 10.2 times earnings after a tough year that has seen its share price drop 26.3%.

This is a tough sector to invest in as the number of smokers continues to fall in the developed world. That’s a trend I think will spread across emerging markets as better off, better educated consumers place a greater priority on their health.

Dividend winner

However, the market is not going to collapse overnight, and one major benefit of the Imperial Brands share price crash is that it now offers a whopping forecast yield of 7.2%, covered 1.4 times. It’s now the 11th cheapest stock on the FTSE 100, as measured by its P/E, while offering the fifth highest dividend yield. Better still, as my Foolish colleague Alan Oscroft points out, it has now posted nine consecutive years of 10% dividend growth.

Yes, tobacco sales volumes and net revenue fell 2% at constant currencies in the six months to 31 March, but these were within expectations. It plans to cut £100m worth of costs this year and is making progress in the nascent vaping market (I see more vapers every day). Forecast EPS growth is negligible, but I still feel the yield and valuation are too tempting to ignore.

The post This small-cap and 7%+ FTSE 100 dividend stock could be unmissable bargains appeared first on The Twelfth Magpie.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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.

Specifically, according to today’s press release, management believes “performance is expected to be at the upper end of market expectations” thanks to “strong growth in customer numbers“, particularly in the pre-Christmas trading period. 

Changes yielding results 

Today’s update marks an impressive turnaround for Findel. Only this time last year, the company issued its second profit warning in two years and appointed a new chief executive, Phil Maudsley. 

It seems Maudsley is doing an excellent job. Even though trading was slower than expected during the fourth quarter of last year, due partly to “changes in marketing activity“, the group benefited from stronger collections and recoveries from its credit receivables, which helped improve operating profit by 20% for the year as a whole. 

Meanwhile, sales declines at the Findel Education business have moderated. In the second half of last year, sales fell 2%, following a drop of 10% in the first half. Focus on the group’s digital strategy now means around 50% of sales are coming through online channels “up sharply from c.18% at the start of the year.” 

And finally, the group ended the year with net debt of £74m, down by £7m from the previous year. 

Time to buy

So, what does the above mean for shareholders? Well, after the problems of the last few years, it looks as if Findel is now back on the track and if the firm can stay on its current trajectory, the shares could be too cheap to ignore at current levels. 

Indeed, at the time of writing, the stock is trading at a forward P/E of 10.7 and current City consensus is projecting earnings growth of 13% for the fiscal year ending March 2018. Based on today’s release, it seems as if the company is set to beat this average estimate. Analysts are also forecasting earnings growth of 16% for 2019. 

In my opinion, this rate of growth deserves a mid-teens earnings multiple.

Too cheap to ignore? 

Another turnaround stock that appears to me to be undervalued is media group ST Ives (LSE: SIV). 

For the past two years, the business has reported losses as its turnaround plan, to transform from a struggling publisher into a leading media group, has struggled to gain traction. However, it now looks as if management’s efforts are beginning to pay off. 

At the beginning of March, the company reported an adjusted pre-tax profit of £12.7m, up 34% year-on-year thanks to lower operating costs and a 7% increase in revenues. 

City analysts and management are confident that this trend will continue. Earnings per share growth of 22% is predicted for fiscal 2018, the first significant growth in three years. Based on these targets, the shares are trading at a forward P/E of 6.4. 

Nonetheless, while ST Ives does look cheap, it’s not without problems. The balance sheet is particularly weak. Intangibles account for around 50% of total assets. Stripping these assets out gives a negative shareholder equity value of -£50m, which leads me to conclude that the shares do deserve a low valuation, although a forward P/E of 6.4 seems too harsh. A multiple of 10 times earnings might be more appropriate, in my opinion. 

The post 2 value-growth stocks that could be too cheap to ignore 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.

Investor appetite for Findel (LSE: FDL) has gone crazy in Wednesday trading, a development that comes as little surprise given the strength of today’s latest trading statement.

The retail and education group was last 30% higher from Tuesday’s closing price, breaking out of the recent downtrend that had seen it sink to 17-month lows just last week. And I believe today’s uptick could mark a new beginning for the share price.

Findel declared today that, with revenues jumping 6.1% in the six months to September to £226m, that adjusted pre-tax profit blasted to £11.9m from £1.9m a year earlier.

The positive result again underlined the bright outlook for its core Express Gifts arm. Like-for-like sales here exploded 15.8% in the first half, reflecting in part Findel’s decision to start marketing for the Christmas period in September rather than October.

The small-cap noted that improved marketing activity at its Studio.co.uk brand, combined with its improved customer retention rates, prompted customer numbers to climb by 230,000 from the corresponding 2016 period. It now boasts an active base of 1.7m active users.

Don’t look this gift horse in the mouth

With sales taking off again, City analysts are expecting Findel to recover from recent earnings reverses and deliver stonking profits growth during the medium term — bottom-line expansion of 11% and 14% is currently expected for the years to March 2018 and 2019 respectively.

While pressures on the retail sector are likely to rise in the months and years ahead as British economic growth cools, exacerbating fragile consumer confidence as well as the strain on shoppers’ finances, I am confident that Findel’s focus on the value end of the market should help earnings to continue thriving.

And of course the country’s successful transformation of its Education division should also set it up to enjoy solid sales growth here. Findel said that, following initiatives such as improved customer websites and better prices during quarter two, that online orders had jumped to 25% this month from 10% back in March.

Despite Findel’s share price jump today the share can still be snapped up very cheaply. As well as boasting a forward P/E ratio of just 8.9 times, the company sports a corresponding PEG readout of 0.8. All things considered, I reckon the Cheshire business is an irresistible pick right now.

Jobs giant

Recruitment specialist Hays (LSE: HAS) is another stock predicted to enjoy a bulging bottom line.

The stock, which has a long history of delivering double-digit profits growth, is expected by City analysts to keep the run going with a 14% advance in the year ending June 2018.

These estimates make Hays pretty decent value too. A prospective P/E ratio of 16.9 times may not be much to shout about, although a corresponding PEG readout of 1.2 certainly is.

And there is plenty of reason to expect earnings to keep steaming higher. While pressures in its home market is cause for concern (like-for-like net fees in the UK rose just 1% during July-September), Hays enjoyed quarterly net fee performance in the period thanks to the strength of its overseas operations. In Asia Pacific and its aggregated Continental Europe & Rest of World division, like-for-like net fees shot 14% and 13% higher respectively in the quarter.

The post 2 bargain stocks offering double-digit earnings growth appeared first on The Twelfth Magpie.

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Royston Wild 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.

Improving performance

Reporting on Thursday was UK supermarket Morrisons (LSE: MRW). The company’s third quarter sales performance was positive, with like-for-like (LFL) sales growing by 2.5%, excluding fuel. Total sales, also excluding fuel, were up 2.3% and this continues a period of stronger performance for the business.

Highlights from the period included further development of own-brand products, as well as a focus on price reductions in response to weak consumer confidence. Furthermore, the company continues to focus on improving its efficiency through the introduction of a new ordering system. Such measures may become more important if the UK’s economic outlook remains relatively downbeat as sales growth may come under pressure.

Looking ahead, Morrisons is expected to record a rise in its bottom line of 13% this year. This puts it on a price-to-earnings growth (PEG) ratio of just 1.4 at its current price of 223p, which suggests that it may offer a rising share price in future. Certainly, the UK economic outlook may prove to be difficult, but the company appears to be popular with customers at the present time.

Turnaround potential

Also offering growth at a reasonable price is home shopping specialist Findel (LSE: FDL). The company has been in the process of rationalising its business in recent years, with asset disposals focusing it on its Express Gifts division to a greater extent as it takes advantage of the trend for value prices and gifting growth in the UK market.

This looks set to stimulate its profitability over the short run. Findel is expected to put two years of falling profitability behind it, with forecasts for bottom line growth of 11% in the current year and 14% next year. Despite this, it trades on a price-to-earnings (P/E) ratio of just 8.4 at its current share price of 170p. This suggests that it could offer a wide margin of safety which may mean that its share price delivers a strong recovery following a 15% fall in the last year.

Low valuation

While the FTSE 100 may be trading close to a record high, a number of shares still have low absolute valuations. Mothercare (LSE: MTC) currently has a share price of 98p and this puts it on a P/E of just over 10. This suggests that investor sentiment towards the company is relatively downbeat even though it has generally performed well in recent years.

In fact, following upbeat results released earlier this year, the company has recorded annualised earnings growth of around 47% in the last five years. And with its bottom line expected to increase by 6% this year, followed by a rise of 21% next year, Mothercare seems to have the right strategy to perform well from an investment perspective. With international operations, it could offer a degree of diversity and perform much better than its 8% decline of the last year.

The post 3 great stocks under £3 appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Morrisons and Findel. 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.

High valuation

Reporting on Friday was online electrical retailer AO World (LSE: AO). The company is on track to deliver its long-term strategic plan according to the update, with results for the full year due to be in line with market expectations. Encouragingly, customer satisfaction scores remain high, while the rollout of further categories such as computing continues across the UK and Europe.

Despite high customer satisfaction and being in line with its strategy, the company faces an uncertain trading environment. The major domestic appliances (MDA) market in the UK is seeing lower volumes versus the prior year. This situation could worsen, since inflation is now higher than wage growth. The result could be reduced demand for a range of consumer goods, which could cause AO World’s financial forecasts to come under pressure.

With the company being lossmaking at the present time, its turnaround to profitability is due to take place next year. While this in itself may improve investor sentiment to some degree, it appears as though the market has already factored-in the company’s improved financial outlook. For example, AO World trades on a forward price-to-earnings (P/E) ratio of 203. This suggests there is a lack of a margin of safety and that it may be a stock to avoid.

Improving outlook

While AO World may not be worth buying right now, fellow turnaround stock Findel (LSE: FDL) could have significant investment appeal. It has experienced difficulties for a while, with it being lossmaking in each of the last two financial years. However, after a restructuring and asset disposal programme, the business appears to be in better shape and has a much brighter future.

In fact, Findel is due to return to profitability this year and follow this up with earnings growth of 19% next year. This has the potential to boost the company’s share price through improved investor sentiment following a 4% decline in the last month. And with the company’s shares trading on a price-to-earnings growth (PEG) ratio of just 0.4, there appears to be a wide margin of safety on offer.

Certainly, the risk of investing in Findel may be relatively high. The the company still has some way to go before it is turned around. Downgrades to its earnings forecasts cannot be ruled out. However, with a low valuation and a strategy which seems to be working well, it could be a worthwhile buy at the present time.

The post One turnaround stock I’d buy right now, and one I’d avoid appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Findel. 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.

It announced that group revenues rose 11.3% during the year to March, to £457m, while on a like-for-like basis sales, advanced 10.2% to £452.4m.

However, share pickers were spooked by a huge rise in pre-tax losses, these ballooning to £57.7m from £1.6m a year earlier. This was chiefly caused by the number of one-off expenses swelling to £82.2m from £26.5m in 2016, items of which included the likes of its new bad debt model, and refunds to customers who had purchased financial services products.

But there was still plenty to cheer in Findel’s latest release. At Express Gifts the customer base swelled by an extra 229,000 during the 12-month period to total 1.6m, while like-for-like product revenues leapt 15.6%. And Findel advised that the digital transformation package across the business continues to “progress well.”

Bouncing back

The number crunchers certainly expect the hard work it has put in to be reflected in a healthy flip back to profit from this year onwards. A 19% bottom-line rise is predicted for fiscal 2018, and an extra 28% advance is chalked in for next year.

And these projections make Findel irresistible value, in my opinion. Not only does the small-cap deal on a prospective P/E ratio of 7.7 times, but a sub-1 PEG reading of 0.4 underlines the firm’s attractiveness to value chasers.

Turning higher

Bolt-and-fastenings behemoth Trifast (LSE: TRI) is another London-quoted small-cap expected to deliver robust earnings growth in the near term and beyond.

For the year to March 2018, Trifast is expected to enjoy a 19% bottom-line boost, up from 22% in the prior year. And a further 4% rise is chalked in for fiscal 2019.

The company saw revenues soar 15.6% to £186.5m in the last 12-month period, Trifast benefitting greatly from sterling’s erosion since the EU referendum. But positive currency movements are by no means the whole story, with sales at constant currencies rising by a chunky 7% year-on-year.

Consequently underlying pre-tax profit rocketed 28.1% to £20.5m.

Trifast has thrown the kitchen sink at bolstering its manufacturing and logistics capabilities around the world, and as a result its position as a critical parts provider to automotive, domestic appliances and electronics OEMs continues to grow. And the company’s robust balance sheet should facilitate further growth through both organic expansion and fresh bolt-on acquisitions.

I believe the Uckfield business offers plenty of bang for your buck at current share prices. Sure, a forward P/E ratio of 17.5 times may soar outside the widely-regarded value benchmark of 15 times or below. However, a PEG reading of 0.9 suggests the stock is actually attractively priced relative to its predicted growth performance.

I reckon Trifast is a great selection for those seeking brilliant long-term growth.

The post Could these growth stocks really make you rich? appeared first on The Twelfth Magpie.

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• 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. 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 result has been a 165% climb in the share price over the period, to today’s 5,195p, while the dividend has been boosted by 35% to reach 135 cents last year — and it was covered 2.7 times, so not at all stretched.

That 2016 dividend yielded a fairly modest 2.6% (with the FTSE 100 average coming in around 3%), but its progressive nature can provide the opportunity to lock-in effective high future yields today.

A good start

Second-quarter results delivered Thursday suggest the growth story is still going well, with adjusted net income of $378m providing a second-quarter adjusted earnings record.

Net revenue guidance for the full year now stands at 3.5% ahead (up from March’s guidance of 3%), while net cruise costs should be up around 1.5%.

Full-year EPS is expected to be between $3.60 and $3.70, up from 2016’s $3.45 figure. The mid-point of that would provide a 6% boost from the previous year, which is not up to the previous few years’ stellar performances, but would provide a very nice annual rise if it’s sustained over the long term.

The figures suggests a forward P/E of around 18, which might seem a little high, but I see Carnival as a quality company that deserves a higher-than-average rating.

And though the dividend yield is not among the highest, I expect to see above-inflation rises continuing. Carnival is also redistributing cash through share buybacks, with $2.7bn achieved since late 2015 and a further $1bn reauthorised.

I see further long-term growth here.

Resurgence

I like companies with a clear focus, and that makes Findel (LSE: FDL), with its diverse coverage of online retail and education, not my typical kind of investment.

But I can’t deny the attractive look of its valuation, especially with growth indicators seeming strong. Its earnings record looks erratic, but EPS has almost doubled over the past three years. And though the year to March 2017 is expected to have brought in a 9% drop, mooted rises of 19% and 28% for 2018 and 2019 suggest PEG ratios of 0.4 and 0.2 respectively — with anything under 0.7 usually making growth investors’ eyes sparkle.

The P/E multiple would drop as low as 6.4 by 2019, which is less than half the FTSE long-term average.

Full-year results are due on 27 June, and April’s trading update told us to expect a 10% rise in like-for-like sales, with pre-tax profit pretty much in line with the predicted EPS fall.

A tale of two businesses

Findel’s Express Gifts arm has seen a 14% rise in sales, with customer numbers up by 21% in the final quarter. Against that, Findel Education “has continued to see difficult market conditions” with like-for-like sales down 4%.

That emphasises for me that this is really two quite disparate businesses masquerading as one, and I don’t see any synergies here or any justification for the partnership. I can’t help wondering if shareholders would be better served by separating them, possibly by selling off the educational business.

Nevertheless, at today’s valuation I see Findel as an attractive growth proposition, though I’d keep an eye on core net debt which stood at £94.5m at the halfway stage — that’s a bit high for a low-margin business.

The post 2 growth opportunities that could make you a million appeared first on The Twelfth Magpie.

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Alan Oscroft 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.