Since I last wrote about British Airways owner IAG (LSE: IAG), the share price has seen an 11% recovery. After a generally positive set of H1 results, I could be tempted into buying the shares in order to capitalise on the potential upside.

IAG shows promise

IAG followed through on its Q1 guidance of achieving profitability in the second quarter. Q2 was, in fact, the group’s first profitable quarter since the start of the pandemic, with an adjusted earnings per share (EPS) of 2.5c.

It was also pleasing to see revenue per available seat kilometres (ASK) and passenger numbers edge closer to pre-pandemic levels. Aside from that, IAG managed to improve its financial position slightly, reducing its debt by €688m, while receiving positive free cash flow.

Therefore, the view of achieving operating profitability by the end of the year is starting to become a realistic possibility. All signs are pointing towards an increasingly promising rest of the year for the FTSE 100 firm.

Striking deals

Apart from the much improved financial performance of the company, IAG also managed to quash fears of future strikes. The company managed to strike a deal with 16,000 workers for a 13% pay rise this year. This should alleviate fears of last-minute flight cancellations, at least for the time being.

Nonetheless, not all is as smooth cruising as it may seem. This is because Heathrow Airport has opted to extend its cap on passenger numbers until the end of October, with no more than 100,000 travellers per day, leading to cancellations of tens of thousands of flights. As Heathrow is the hub of IAG’s most profitable airline, I’m expecting this to impact H2 results.

As a result, CEO Luis Gallego revised the company’s outlook downwards. IAG now expects capacity to hit 78% of 2019 levels, as compared to the previous 80% that IAG had expected. From this, North Atlantic capacity (IAG’s most profitable routes) is now expected to hit 92% of 2019 levels in Q3, compared to the previous guidance of 95%.

Having reservations

While the future outlook for IAG still remains rather promising, I have my reservations regarding its potential upside. Although passenger demand still remains strong, I’m fearful that it’s only a matter of time before sky-high inflation, and a potential recession on the cards, starts hitting consumers harder.

Furthermore, IAG’s long-haul recovery continues to lag that of shorter trips. The continued travel restrictions in large parts of Asia, specifically China, is hindering its growth potential. And with China sticking to its zero-Covid policy, this avenue doesn’t look likely to recover any time soon. Business travel also still continues to lag, only hitting 60% of its pre-pandemic volume. Moreover, as the winter months approach, I’m expecting the number of holiday travellers to start winding down.

Even though IAG shares have the potential to grow plenty, my optimism is hindered by a cloudy economic environment. Overall costs still remain high and, most importantly, the company still has a mountain of debt to pay off, which is expected to increase going into the year end. For that reason, I won’t be investing in IAG shares.

The post Should I be buying IAG shares today? appeared first on The Twelfth Magpie.

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John Choong 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.

One growth stock I purchased for my holdings recently and I am excited about in the longer term is Seeing Machines (LSE:SEE). Here’s why.

AI tech

Seeing Machines is a tech stock with operations primarily based in Australia. It specialises in designing, creating, and selling technology related to artificial intelligence (AI) that will reduce and prevent transport-related accidents. Its technology can be applied in the automotive, rail, aviation, and off-road sectors currently. It counts some major businesses as its customers already, including General Motors and Emirates Airlines.

So what’s the current state of play with Seeing Machine shares? Well, as I write, the shares are trading for 6p. At this time last year, the shares were trading for 10p, which is a 40% drop over a 12-month period. It is not uncommon to see penny stocks fluctuate up and down this much.

The Seeing Machines share price has dropped more so since the turn of the year due to the stock market correction. The correction is linked to macroeconomic headwinds and geopolitical issues.

A growth stock with risks

The biggest risk I must consider as a shareholder of Seeing Machines is that of competition. As with most penny stocks, there is a high likelihood that a larger, more established business in the sector could out-muscle and outmanoeuvre a smaller firm like Seeing Machines. AI-based technology is a growing market and many firms are vying for market share and dominance, some of which are bigger and better known with more financial clout.

Generally speaking, macroeconomic headwinds such as soaring inflation, the rising cost of raw materials and the global supply chain crisis are real threats to the progress of a growth stock like Seeing Machines.

Why I bought the shares

I always look at performance when deciding to buy shares for my holdings, although I do understand that past performance is not a guarantee of the future. Looking back, I can see Seeing Machines has increased revenue for the past four years in a row. It has consistently recorded a profit in each of these fiscal years too, even in the face of tough trading caused by the pandemic in the past 18 months.

Coming up to date, Seeing Machine released a half-year report at the end of March for the six months ended 31 December 2021. It reported revenue was up nearly 20% compared to the same period last year. Furthermore, it managed to conserve more cash and boosted its coffers by nearly 50%. Cash on a balance sheet is a big positive for me in any growth stock. This cash can steady the ship in uncertain times as well as fund growth initiatives.

At current levels, Seeing Machine shares are dirt-cheap, in my opinion. I paid 6p per share and purchased a total of 15 shares at a total cost of just over £1. I don’t see much risk here and if I lost all my money, it wouldn’t concern me too much.

My investing mantra has always been to buy and hold for the long term. I believe Seeing Machines could develop and grow into an AI leader and provide me excellent returns. I rate it as an exciting growth stock and will keep a keen eye on developments.

The post Here’s why I just bought this growth stock for my holdings! appeared first on The Twelfth Magpie.

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Jabran Khan owns shares in Seeing Machines. 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.

Arrival (NASDAQ: ARVL) is an electric vehicle manufacturer that primarily produces lightweight commercial vehicles such as buses and vans. It plans to price its EVs the same as its petrol and diesel equivalents. With van production coming soon, I will be assessing whether to buy more shares in this EV growth stock for my portfolio.

Electrifying prospects

Arrival has created a standard electric vehicle platform that allows it to save costs. This is because the platform serves as the foundation for multiple vehicle categories such as buses, vans, and cars. This, paired with the EV manufacturer’s groundbreaking microfactory concept, makes its manufacturing process extremely efficient. Its microfactories have interchangeable cells, allowing for production of different vehicles, and up to 10,000 vans a year. Therefore, production can be executed on scale without the need for building massive factories.

Arrival has already secured orders from several companies such as UPS, LeasePlan, and FirstGroup. Its number of letter of intents (LOI) also saw a monumental increase to approximately 134k vehicles in its latest earnings report. This goes to show that the firm is gaining traction from renowned companies globally with plenty of tailwinds.

UPS and downs

Arrival’s biggest customer by far is UPS, which is also an investor in the business itself. The courier giant placed an order for 10,000 vehicles last year, with an option for a further 10,000. Management disclosed that it expects the start of production on its Arrival vans in Q3 this year. UPS also announced on its earnings call that it’s expecting 400 to 600 vans to be delivered by the end of the year. Nonetheless, the next hurdle the EV firm faces is getting its van certified. It expects this to be completed by Q2.

As a shareholder, I will admit that I am slightly worried. The expected production numbers this year are lacklustre to say the least. With the company continuing to burn cash without any revenue, 400 to 600 vans isn’t going to cut it. Although CFO John Wozniak mentioned that Arrival expects to end the year with $150m in cash, he also reiterated the firm’s intention to raise capital in the near future. This is to allow Arrival to scale production to meet its ever-increasing LOI numbers.

The Arrival share price is already sitting at penny stock levels, so any equity funding would be a waste at this price. As such, the company will most likely have to take on debt, which isn’t ideal in a high interest environment.

Delayed arrival

To add to my worries, Arrival is yet to announce the confirmation of its bus certification. This was expected to be completed by Q1. Additionally, the company has also postponed the release of its full financial results twice. These factors don’t bode well for its reputation. As a result, I am worried that Arrival may not even be able to hit its van production targets. Consequently, due to Arrival’s complacency, I will not be looking to buy more shares in this EV growth stock for my portfolio.

The post Could this EV growth stock be about to explode? appeared first on The Twelfth Magpie.

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John Choong owns shares of Arrival at the time of writing. 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.

So the bottom is now in?

Obviously, no one can say for sure whether we’ll see a new low in the Scottish Mortgage Investment Trust share price (or any other stock for that matter). There are simply too many factors to take into account in order to come up with a reliable near-term forecast.

Besides, adopting a Foolish mentality means I’m only really concerned about building a nest egg slowly but surely over the long term. Seen purely from an investment point of view, I don’t need to take the awful conflict in Eastern Europe into account, nor where inflation is going next or any other ‘known unknown’.

However, there are a few things I reckon we can be a little more confident about. 

Reasons to be optimistic

First, SMT’s share price is now almost 25% below where it stood at the start of 2022. Are the stocks it holds in the portfolio 25% worse businesses? I don’t think so. Even the most successful companies can see their valuations yo-yo as the market switches from fear to greed and back again. The question to ask is whether the fundamentals of retail titans like Amazon, pharma firm Moderna, or luxury goods maker Kering have really changed. I just can’t see it.

Second, Scottish Mortgage Investment Trust’s managers clearly know a good company when they see one. That’s why the share price is still up 170% or so since March 2017. This compares favourably to the frankly derisory 2% fall of the FTSE 100. No, past performance can’t guarantee anything. But it is just about the best thing we have with which to judge the performance of those we trust our savings with. 

Third, innovative companies — the sort that SMT’s managers like and invest in — won’t suddenly stop innovating. This is why I simply can’t bring myself to get involved in the rotation to ‘value stocks’ that we’ve seen over recent months. Yes, airlines and banks might enjoy a brief period in the sun. However, their cyclical nature means the returns they generate will likely remain poor by comparison.

Nothing is risk-free

By now, you’ll probably guess that I’m confident the Scottish Mortgage Investment Trust will eventually recover. And then some. As such, I think now is as good a time as any to continue adding to my portfolio here. Bar an absolutely seismic event, I think the bottom has already been seen.

This is not to say that there aren’t drawbacks to investing now. In contrast to the sensational yields on offer elsewhere, the trust pays virtually no income to holders. That’s entirely understandable. SMT owns businesses that are focused on re-investing profits for even bigger returns later down the line. However, it does mean I’m not really being compensated for my patience.

On top of this, it’s inevitable that a certain number of the companies will disappoint and not achieve the growth they once hinted at. Still, the fact that Scottish Mortgage Investment Trust is diversified across a number of sectors helps to protect investors like me from this eventuality.

The post Scottish Mortgage Investment Trust: have we seen the bottom? appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK has recommended Amazon. 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.

Successful investing is as much about avoiding duds or taking on too much risk as it is picking winners. It’s why Warren Buffett and his business partner Charlie Munger are two of the wealthiest individuals on the planet.

As the latter once remarked: “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.“

Today, I’m going to focus on two UK growth stocks that, thanks to the ‘Sage of Omaha’ and his colleague’s advice, I thankfully never fancied and still don’t. 

70% down!

I was sceptical about global review platform Trustpilot (LSE: TRST) when I first looked at it last September. At the time, the share price had soared 70% or so since its IPO earlier in the year.

Despite such impressive gains, I just couldn’t shake the feeling that it lacked an ‘economic moat‘. This is a term coined by Buffett to describe a business with sufficient competitive advantages to consistently fight off rivals. Might it be possible to copy what Trustpilot has done with sufficient capital and eventually steal its crown? I believe it is. 

But this wasn’t the only red flag for me. As well as being concerned about the potential for Trustpilot’s review system to be abused by bad actors, I was wary that the company was not making a penny in profit. 

Since then, the shares in this growth stock have tumbled almost 70%!  

Trustpilot isn’t without promise. Back in January, the company announced it expected FY21 annual recurring revenue to hit $144m. That’s a sizeable jump from the $119m achieved in the previous year. Based on this, investors might suggest the stock is a potentially lucrative contrarian pick.

With the rotation into value showing no sign of abating just yet, however, the outlook for the share price looks pretty bleak. Like Warren Buffett, I’d prefer to stick to proven quality stocks rather than take on the additional risk here.  

Another struggling growth stock

A second company I’m steering clear of is furnishings and homewares retailer Made.com (LSE: MADE). Just the fact that I’ve never looked at this growth stock until now speaks volumes.

While investors in Trustpilot enjoyed early gains, anyone backing this other relatively new stock will only have seen their stake sink in value. From a 52-week high of 214p, Made.com’s shares are now languishing at 73p a pop.

Again, the lack of economic moat strikes again. With so much competition, is there anything that will compel me to only shop with Made? Not at all. Contrast this with Buffett’s huge holding in Coca-Cola. The owns so much of the beverage titan because he knows a lot of people refuse to drink any other brand. This advantage arguably makes it far less risky. 

On top of this, the rise in the cost of living can’t be good for business. The boom in home improvement we’ve seen since the pandemic arguably peaked long ago too. Yesterday’s news that CEO Philippe Chainieux is stepping down is another unfortunate development.

With a market-cap now below £300m, perhaps the fall has been overdone. The website certainly looks slick and Made appears savvy when it comes to social media. For me however, this mostly presents as another unprofitable story stock that was opportunistically listed. 

The post I’m listening to Warren Buffett and avoiding these growth stocks like the plague! 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.

With a good few decades of investing ahead of me, I’m always on the lookout for great growth stocks to buy. Even better if their share prices are going through a period of temporary weakness.

With this in mind, here are three quality companies now trading near 52-week lows.

Fevertree Drinks

Late in January, one-time market darling Fevertree Drinks (LSE: FEVR) announced that cost headwinds would be more significant than expected, meaning that margins at the mixer specialist are likely to “remain broadly flat in 2022“.

This announcement succeeded in taking away most of the gains made in the second half of 2021. Fevertree’s share price now stands close to its 52-week low. So is now the time to buy the stock?

Well, a valuation of almost 49 times forecast earnings suggests not. Anything this high implies/demands a company should deliver perfectly on its strategy. That’s not easy considering the ‘interesting’ economic outlook right now.

Then again, this is not a stock that’s ever likely to trade at a bargain price. Prior to the pandemic, returns on capital — a key metric for star fund manager Terry Smith — were seriously good. Fevertree’s finances also look solid with hardly any debt on the balance sheet. There’s lots of ‘white space’ left for the company to grow into and it already possesses a great brand. 

I think there’s a good chance of this company recovering strongly, in time. For now however, it stays on my watchlist.

Softcat

IT solutions provider Softcat (LSE: SCT) is next up. The FTSE 250 member’s share price is also getting close to its 52-week low (1,419p, set last April). Considering its stellar track record, this selling pressure grabs my attention.

Like Fevertree, Softcat has a history of generating seriously good returns on the money it invests in the business. It’s clearly benefited hugely from the increased demand for support from clients over the pandemic too. 

That’s not to say Softcat is without risk. Margins, while decent for its industry, are average relative to the rest of the market. The stock also trades on a P/E of 33. That’s pricey, considering that earnings aren’t expected to grow much at all this year. 

Given that the stock could fall further if the rotation into value stocks continues in 2022, Softcat only makes it to my watchlist, for now. 

Games Workshop

A final growth share that’s let off steam has been the fantasy figurine-maker Games Workshop (LSE: GAW). The shares are now down over 20% year-to-date and only slightly above the 52-week low. Product release delays and increasing costs are partly to blame.

Of the three mentioned here, this is the stock I’d be most likely to buy today. While fixating on valuation is never a good idea, a forward P/E of 22 looks very reasonable, considering its dominance of this niche market. Again, its finances are robust compared to many other companies.

Yes, there’s a risk the share price could dip lower if margins continue to be squeezed. As such, it may pay for me to buy in tranches if I end up pulling the trigger.

There was a time when Games Workshop was knocking on the door of the FTSE 100. Assuming it is able to successfully push its Warhammer franchise over the next few years via games and films, I’m confident this could still happen. 

The post 3 top growth stocks near 52-week lows 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 recommended Fevertree Drinks, Games Workshop, and Softcat. 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.

Why investors are walking away 

As one might expect, this isn’t just some random capitulation. Today’s trading update contained what I believe to be pretty worrying news for investors. 

Not that this was immediately apparent. After all, revenue rose 11% to £307m in Q3 — up from £275.6m over the same period in 2020. Direct-to-consumer sales came in 33% higher — a record for the company. Retail sales were particularly buoyant and benefited from more people striding into the stores in October and November.

“So, what’s the problem?“, you might ask. Well, that 11% mentioned above is actually down on the 16% growth achieved in the first half of its financial year. The reason for this probably won’t come as a surprise.

Like many other listed businesses, ongoing supply chain issues are starting to kick Dr Martens where it hurts. A move to prioritise the higher-margin DTC trading led to a 14% reduction at its wholesale arm. So, the company has essentially taken one step forward and one step back.

To make matters worse, revenue in the Asia Pacific region fell by 28% due to Covid-19 restrictions in countries such as China and Australia.

Has the Dr Martens share price fallen too far?

The Dr Marten share price hit a record low of 266p earlier today. Is this simply a case of the market over-reacting? Could the bootmaker turn out to be a canny contrarian buy in time? 

Well, no one knows where share prices will go in the near term. However, my gut tells me that things might get worse before they get better, especially as the company said today that February and March are regarded as “quieter trading months“. Regardless of how confident it is in being able to meet current expectations for its full year, that’s hardly bullish talk. Oh, and the latter is only the case if there is “no significant Covid impact in Q4“. Now, I’m as hopeful as the next person that we’ve reached the pandemic’s endgame. I wouldn’t like to bet on it though. 

For balance, I do recognise this is a brand loved by millions of people around the world. And it’s clear that the company is holding its own online. Sales here made up 39% of the total mix in Q3; that’s far higher than it used to be just a couple of years ago. Year-on-year e-commerce revenue also climbed 16% in the quarter, despite a “tough comparative“. 

Is this enough though? I don’t think it is. Just knowing that I don’t replace my own pair of boots very often is sufficient to make me question the investment case here. And the £2.9bn cap valuation.

Falling knife

I questioned the valuation of Dr Martens not long after it came to market almost exactly one year ago. Today’s update only serves to make me even more bearish. The shares may be down 36% from where they were one year ago but I think they could get even cheaper, especially with the company’s peak trading period now behind it.

Regardless of how highly I rate its products, Dr Martens looks to me like a falling knife. I won’t be attempting to catch it.

The post What’s going on with the Dr Martens share price? 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.

ASOS: growth potential

After soaring due to the pandemic, and the shift to online shopping, ASOS has struggled over the past few months. This is due to several short-term headwinds that face the company, including supply chain pressures. Such headwinds means that sales growth is only expected to be between 10% and 15% for FY22, far slower than in previous years. Further, costs are also likely to soar.  This includes higher inbound freight costs, labour cost inflation and increases in marketing costs. As such, profit before tax is only forecast to be around £125m, a 30% decrease from this year.

Still, despite these risks, I’m confident in the long-term future of the group. Indeed, the group is targeting £7bn worth of sales over the next three or four years, with operating profit margins of at least 4%. This is significantly higher than the £3.9bn that it recorded this year. 

Further, I feel that there’s significant demand for ASOS’s products, especially as the pandemic has further cemented online shopping as the way forward. With the company targeting growth in the US, there’s also major potential for growth over there. With £200m in net cash, slightly higher than Boohoo’s £100m, the company should also be able to pounce on any opportunities. This means that I’d buy ASOS stock at its current price and hold it for the long term.

Boohoo: supply chain issues

The Boohoo share price has also struggled and is currently at levels not seen since the end of 2018. This is despite the fact that the company saw revenues of £580m in 2018, compared to £1.75bn last year. Nonetheless, such a large fall can be attributed to a few main reasons. First, there was the ‘modern slavery’ investigation last year, in which it was found that some (not directly employed) workers in its supply chain were paid as little as £3.50 an hour.

While it’s making changes, this is likely to be at the expense of the company’s already slim profit margins. In addition, there’s significant competition from Chinese group Shein, which is forecasting £14.6bn in sales next year. This may tempt customers away from Boohoo. It’s equally a risk for ASOS. Finally, it recently reported an additional £26m charge relating to rising shipping costs, which may mean that profits are lower than expected.

But compared to previous years, the Boohoo share price looks extremely cheap. In fact, it currently trades on a forward price-to-sales ratio of 19. Last year, it traded on a P/E ratio of over 50. It’s also slightly lower than ASOS, which has a P/E ratio of around 22. As such, now may seem to be the perfect time to buy the stock. Even so, I’m staying away for the time being. This is because I worry about the firm’s poor environmental standards, which are considered far worse than those of ASOS. I believe that this could have a negative effect on the firm in the long-term.

The post Boohoo share price vs ASOS share price: which growth stock would I buy? appeared first on The Twelfth Magpie.

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Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS and boohoo 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.

Revenue jumps

It’s not hard to see why WOSG’s management is so bullish on the company’s outlook. Revenue was 44.6% higher in the six months to Halloween than achieved in the same period in 2020. 

Sales in the UK were particularly strong, hitting £418.6m. That’s a stonking jump of 42.3%. As a sign of just how successful some of the company’s initiatives have been, roughly 40% of sales came from the company’s ‘By Personal Appointment’ business.

In the US, revenue hit £167.6m — over 50% up on H1 last year. That’s also 66.7% above that achieved two years ago. Indicative just how quickly the company is growing, Q2 revenue was almost 80% higher than over the same three months in FY2020. 

In short, the company is doing very, very well.

What now?

Following this barnstorming performance, WOSG now believes it will generate between £1.15bn and £1.2bn in revenue for the full year. That’s a healthy increase on the £1.05bn-£1.1bn previously suggested.

This bullish call is despite the company not expecting tourism and airport business to bounce back to normal anytime soon. Then again, this might not be needed. Online sales at WOSG held up well over the period (+28.7%) even though its physical stores were fully open.

As investors might expect, the FTSE 250 member is also planning to continue its invasion of the US. It’s recently agreed to purchase five stores in four new states. This move should generate around $100m in revenue once up and running and bring the total estate to 36 stores in 12 states.

Priced to perfection?

Somewhat understandably, WOSG shares were up 9% in early trading. This means the company’s valuation has climbed 186% in just 12 months and over 300% since listing in mid-2019. Assuming it has a good run-up to Christmas, I wouldn’t bet against this momentum continuing. 

This is not to say WOSG’s fortunes will go on indefinitely. While expensive watches will still sell in good times and bad, the possibility of demand falling in the event of an economic downturn can’t be ignored. After all, the retailer has arguably benefitted from an exceptional period in which (some) people were able to save a lot of cash to spend on discretionary items once restrictions were lifted. 

Aside from this, I reckon becoming a market darling also increases capital risk. When expectations are sky-high, the possibility of being disappointed also increases. This could mean the shares tumble on the first sign of trouble. For me, this would be time to pile in.

Of course, the danger of waiting for a major pull-back in a share price is that it never comes. This is why star investors like Terry Smith never attempt to time markets. 

Quality stock

WOSG gives the impression of being a high-quality, well-run company with solid growth potential. At 33 times earnings, however, its shares is anything but cheap. For this reason alone, I’m not sure it’s the best FTSE 250 growth stock for me to buy today. Even so, it’s hard not to be impressed by recent progress.

The post Is this the best FTSE 250 growth stock to buy now? 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.

Post-pandemic boom

Kitchen supplier Howdens Joinery (LSE: HWDN) looks a good bet for promotion, especially after today’s well-received update on trading.

Having benefited from the home improvement boom, Howdens announced that this momentum had continued into the second half of its financial year. UK revenue from 13 June to 30 October 2021 was just under 21% higher than in the same period last year. This brings year-to-date revenue growth to a stellar 37.7%.

Positively, this performance wasn’t confined to Howden’s home market either. International sales growth was also strong, up 16.6% over the three quarters and 39.2% year-to-date. 

Based on this, Howdens now believes pre-tax profit for the full year will come in “around the top end of current analyst forecasts”. This would be somewhere in the region on £360m. That all sounds rather good to me. So, would I buy today?

Well, despite having climbed 43% in value over the last 12 months alone, HWDN shares still look pretty fairly valued. A forecast price-to-earnings multiple of 21 before markets opened for a high-quality market leader doesn’t seem excessive. After all, the company regularly posts excellent returns on capital.  

Then again, recent momentum could slow, particularly if consumers begin tightening their purse strings. Indeed, Howdens already expects a “more normalised trading pattern and performance in 2022“. There’s also inflation to ponder, even if the company appears to have been successful in passing on higher costs to its customers so far. 

Whether these headwinds are enough to delay Howden’s entry into the FTSE 100 is hard to say. As a Foolish investor focused on long-term returns, however, I must say that I continue to regard this company as a classy outfit. I’d have no issue taking a position in the stock today.

Primed for FTSE 100 promotion?

Another FTSE 250 growth stock that could potentially be moved to the FTSE 100 in the next reshuffle is industrial and electrical equipment distributor Electrocomponents (LSE: ECM).

Half-year numbers from the £5.3bn market cap company are due on Thursday. As things stand, I don’t expect much in the way of bad news for those already invested. 

Last month, ECM stated that trading had been strong in all regions in which it operates. In fact, total like-for-like revenue growth over the six-month period has already been estimated at 31%. That’s despite the Covid-19 ‘pingdemic’ and cost pressures many businesses are wrestling with. This led the company to predict that full-year revenue growth and adjusted operating profit margin would now be “slightly ahead” of previous guidance.

Shares change hands for almost 26 times forecast earnings. That’s not exactly cheap considering the pretty average margins in this line of work (roughly 8%).

Like Howdens, ECM will face tricky comparatives going forward, too. Profit is also likely to be “more weighted to the first half”. To me, this suggests things are as good as they’re going to get for now. 

Still, I can see why investors have been bidding the price up over the last 12 months. This presents as another well-run company with minimal debt. As such, it’s one I’d at least consider buying regardless of which index it features in. 

The post These classy FTSE 250 growth stocks could be FTSE 100-bound 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 recommended Howden Joinery 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.