Hotel Chocolat

High street and online retailer Hotel Chocolat (LSE: HOTC) should be releasing its delayed set of full-year results on 5 October. Normally, a postponement would be taken negatively by shareholders but HOTC’s share price has held up well. In fact, it’s up almost 9% over the last month.

This isn’t completely irrational. Back in July, HOTC said revenue in its last financial year hit £165m. That’s 24% higher than in FY19 — the year before Covid-19 struck. So trading’s clearly far from terrible. 

On the flip side, I’m conscious that only a relatively small percentage of stock is actively traded (CEO Angus Thirlwell still owns over 25% of the company). Such a small free float does mean it’s share price is theoretically more susceptible to violent moves, both up and down.

This matters considering the valuation. A P/E of 42 looks very expensive and HOTC simply can’t afford to rest on its laurels if recent momentum is to continue. Should it disappoint in any way (perhaps in relation to rising costs), I might actually get the entry price I’ve been looking for. 

Tristel

Another steeply-valued small-cap UK growth stock reporting next month is contamination control product manufacturer Tristel (LSE: TSTL). It reveals full-year figures on 18 October. 

Like Hotel Chocolat, Tristel is a stock I’ve long admired but never pulled the trigger on. It’s a high-quality, financially-sound company operating in a niche area. Let’s not forget that Covid-19 has cemented the need to do everything possible to reduce infection in healthcare settings. This should provide the company with a springboard for further sales growth. 

However, I just can’t get away from that valuation. A P/E of 60’s eye-watering, even if Tristel has hinted that a rise in (non-pandemic-related) hospital admissions towards the end of its financial year has increased demand for its disinfectant products.

Regardless of it doing everything right from here, a more general stock market wobble could really hammer the price as investors dash to cash. That makes for an unattractive risk/reward trade-off, in my view. As a result, Tristel remains stuck on my watchlist, for now.

Totally

Penny stock Totally (LSE: TLY) is a final small-cap UK growth stock I’ll be following next month. A Q3 trading update from the healthcare solutions provider is scheduled for 28 October.

Of the three discussed today, TLY shares have performed the best over the last year, almost doubling in value. Based purely on valuation, Totally also looks a lot more palatable than both HOTC and TSTL. Its shares currently command a forward P/E of 22. The balance sheet looks fairly solid and there’s an experienced management team at the helm.

Naturally, there are things to be wary of. The fact that Totally is only trading around the breakeven level right now is the key drawback for me. This is also a low-margin business. And while recent demand from the NHS has clearly been good, it’s worth questioning what happens when the Covid-19 storm finally passes. 

Another interesting UK growth stock then, but not one I’d feel comfortable buying before next month’s update.

The post 3 UK growth stocks I’m watching in October 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 Hotel Chocolat. 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.

Today’s trading update for the year reads pretty well to me. 

Strong sales

Revenue hit £165m over the last 12 months. That’s a jump of 21% from FY20. That said, I think the 24% jump from FY19 is more important, since this was at a time when the word ‘coronavirus’ was uttered only by virologists.

On a shorter timescale, sales have “remained strong” since the company last spoke to the market in May. As one might expect, trade at the firm’s sites in commuter and tourist locations continues to be impacted by travel restrictions. However, it would appear that stores in less prominent locations have “largely offset” this lower footfall. All told, sales in the 10 weeks to 27 June were 34% higher than over the same period in 2019. 

What really impresses me however, is the huge strides HOTC is making with its digital offering. The AIM-listed company now claims to have grown its UK customer database to 3m. That’s a 66% increase since December 2019. Although not every one of those will be actively purchasing chocs, HOTC did say that sales via this medium now represented a “substantially larger proportion” of total revenue.

But what about the outlook? On this front, I remain optimistic. Unsurprisingly, so does HOTC’s management. 

Increased expectations

Based on the recovery in store sales following the first UK lockdown, the company expects a similar trend over the next few months. Although no actual numbers were given, HOTC now believes that underlying pre-tax profit will be higher than previously thought. This helps to explain why the share price is up today. 

The company’s growing presence in overseas markets is another reason to be bullish, in my opinion. Sales in the US and Japan (via its joint-venture partnership) rose 62% and 277% respectively over the last year. Sure, these are still early days. However, it does indicate that the brand is rapidly winning admirers in two of the world’s biggest economies. 

Following a £22m equity raise last year, HOTC also looks to be in decent financial shape to continue investing for growth. New products are hitting the shelves (including Unbelievably Vegan chocolate). The firm’s UK distribution centre has nearly doubled in size too.

Obviously, where the share price goes from here can’t be predicted with any certainty. The fact that scientists are already warning that the pandemic will get worse before it gets better is not something I’d ignore.

However, it does look like HOTC has already done/is doing what it can to mitigate the impact of Covid. Lower rents have already been negotiated at 30% of the UK stores, for example. 

Growth… at a price

Hotel Chocolat’s stock changed hands for a frothy-looking 44 times forecast earnings as markets opened this morning. That said, it also had a price/earnings-to-growth (PEG) ratio of under 1. This suggests the small-cap stock may actually be better value than it initially appears to be.

So long as the rest of my portfolio remains diversified and I don’t mind the potential for greater volatility, I’d be content to buy now.

The post 1 small-cap stock to buy now appeared first on The Twelfth Magpie.

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• 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?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. 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.

A UK share ready to fizz

As a holder of the stock, I never expected today’s final results from drinks firm AG Barr (LSE:BAG) to be all that impressive. And so proved to be the case.

Due to the enforced closure of bars and pubs, the producer of thirst-quenching brands such as IRN-BRU and Rubicon has been hit hard by the pandemic. Revenue fell 11.2% to £227m over the 12 months to 24 January. Pre-tax profit also decreased — by 12.3% — to £32.8m (or £26m once one-off costs were deducted). Despite this, there were a few bits of good news.

Partly as a result of steps taken to control costs, Barr ended the year with £50m in net cash. That’s up significantly from the £10.9m logged at the end of the previous financial year. This comforts me. As an investor, I need to know a business I part-own has a sufficiently robust balance sheet to negotiate inevitable periods of ‘sticky’ trading. 

In other news, CEO Roger White said the company had “the clear intention to recommence dividend payments in 2021.” The fact that it hasn’t done so already is actually a positive for me. As nice as dividends are, I don’t want a business showering me with cash until it’s confident in its outlook. 

All told, I’ve no problem staying invested. That’s not to say I expect the share price to motor back to its 2019 high for a while. 

While the lifting of restrictions should be good news for AG Barr, it would be foolhardy to assume there won’t be obstacles ahead. The possibility of a third wave of the coronavirus can’t be ignored. Especially if the vaccine programme runs into trouble.

This is a UK share for the ‘bottom drawer’. 

Sweet treat

Of course, there are other ‘reopening’ options available in the small/mid-cap space. Chocolatier Hotel Chocolat (LSE: HOTC) is another example of one that could do very nicely in time. 

Now, it’s quite reasonable to say that sales of chocolate are unlikely to rocket as we approach summer. This is particularly the case if we get a heatwave! 

As a counter to this argument, I suspect HOTC’s next update on trading could be better than some in the market are expecting. It should, after all, take into account trading in the Easter period. If reports are to be believed, many in the UK are treating this weekend as a second Christmas and spending lots on decorations and, very likely, chocolate eggs.

On top of this, the recent decision by rival Thorntons to abandon its high street stores could prove a boon to the £500m-cap. It should allow HOTC to assume pole position at the luxury end of the UK market.

Like AG Barr, I wouldn’t buy Hotel Chocolat stock if I were only considering holding it for a few weeks or months. Investing requires patience. Trying to predict where a share price will go in the very near term is asking for trouble.

On a mid-to-long-term basis, however, I’m confident these UK shares could do very well for holders.

The post 2 UK shares to buy for the great ‘reopening’ appeared first on The Twelfth Magpie.

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• 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?

Paul Summers owns shares in AG Barr. The Motley Fool UK has recommended AG Barr. 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.

Today, the online portion of the company still represents around 24% of the revenue stream. The remaining income is brought in from physical stores or partnerships with third-party retailers such as Ocado and Amazon.

The business model is fairly straightforward — it sells chocolates. However, the multi-channel approach to marketing its 400+ flavour catalogue has turned the stock into a debt-free cash cow.

Furthermore, Hotel Chocolat has also expanded in addition to its 127 UK branches to include a café-style lounge. In a similar fashion to Starbucks, it sells various flavours of chocolate-based beverages — including a delicious iced-chocolate shake that I’ve personally tried.

A deliciously innovative capital raising strategy

As previously mentioned, the firm is now free from all debt obligations and has been since 2018. But the original debts themselves weren’t exactly traditional.

Its bonds were famously referred to as “chocolate bonds” because they didn’t pay any interest – at least not in cash. Instead, lenders who bought the £2,000 bonds would receive six boxes of chocolates per year whose value was equivalent to a 6.7% interest rate.

The scheme was actually a huge success. The innovative approach to raising capital demonstrates not only intelligent leadership, but also a product that must be desirable, I feel.

A chocolate-craving customer community

Retaining customers in any business is quite a challenging feat, and the chocolate industry is certainly not short on competition. Therefore, customer loyalty is an essential aspect of the company.

As of July, Hotel Chocolat had over 1.3 million active members in its VIP club that offers a 10%-15% discount on all purchases. It actively engages with its customer community through social media to analyse what flavours are driving the most interest. And behind the scenes, there’s software keeping track of customer spending. This subsequently allows the firm to update customers by mail if a product they like is being revamped or a collection is being expanded.

How much can the FTSE AIM 100 company grow?

The multi-channel approach to doing business exposes the firm to four key markets.

• Chocolate-based gifts with a £195bn estimated global market size.
• Chocolate-based leisure products with a £224bn estimated global market size.
• In-home chocolate-based products with a £3bn estimated global market size.
• Premium chocolate-based alcohol and beauty products with a £102bn estimated global market size.

So far, despite its strong performance, Hotel Chocolat controls less than 0.1% market share in all four.

The bottom line

Chocolate hardly seems the most dazzling investment opportunity within the market when compared to some soaring tech stocks this year. But what it lacks in dazzle, it makes up for in flavour.

The business has a delicious product that is curated with the help of the people buying it. Combining this strong customer relationship with solid financials is a recipe for success, in my eyes. 

I’m currently seeking a new addition for my portfolio, and Hotel Chocolat is definitely looking like a stock I’d buy.

The post 1 FTSE AIM 100 stock I’d buy and hold before 2021 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?

Zaven Boyrazian does not own shares in Hotel Chocolat. The Motley Fool UK has recommended Hotel Chocolat. 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.

An increasing share price isn’t the only thing that makes Hotel Chocolat unique. The chocolatier and cocoa maker is the only company hailing from the UK that grows cocoa on its own plantation.

Its latest results were impressive — the latest half-year period (to 29 December), saw revenue increase 14%, to £91.7n, compared to the same period a year ago. Profit before tax was up 7%.

The strengths 

I worry about the impact an economic slowdown might have, but think Hotel Chocolat has sufficient balance sheet strength to weather an economic storm. There are two things I particularly like about the company and its share price. 

First of all, I like the trend. The company’s revenue has been steadily rising year on year for some time. For example, its annual revenue increased by 63% between the 12-month period ending June 2015 and the the year ending June 2019, from £81.1m to £132.5m. Profit after tax increased even more rapidly, from £4.1m to £10.9m.

Secondly, there is scope for expansion. Hotel Chocolat has opened two stores in the US and three in Japan during the last six months. It’s early stages for international expansion and the company is still in testing mode in these territories, but the potential is obvious. Not that its UK expansion hasn’t got plenty of scope — it opened nine UK stores.

Also going well is its hit chocolate maker Velvetiser, which enjoyed a 200% increase in sales over the last half year compared to the equivalent period a year ago.

Hotel Chocolat Share price

While Hotel Chocolat shares have gone against the wider trend and increased over the last few days, the performance this year as a whole has not been so good — shares have fallen by just over 10% since 1 January. Look back over a longer time period, however, and the story is more encouraging. Shares are up two and half times since the IPO in 2016.

The threat posed by coronavirus and other economic headwinds

If you could somehow take Hotel Chocolat from four years ago and move it today, I wound be concerned. In June 2015, the value of the company’s net asset was negative.

I do think that the coronavirus will take its toll — if the virus spreads further, I think retail stores of any shape will be hit and Hotel Chocolate will be no exception.

The company has a good product and great potential for expansion, but if we see a coronavirus-related economic slowdown, companies, especially those that operate in sectors that entail direct customer contact, will require deep pockets.

Hotel Chocolate’s balance sheet has been steadily improving, and as at 29 December, current assets exceeded current liabilities by £3.2m. Net assets were worth £63.2m, which is a £13.2m improvement on the year before.

I think Hotel Chocolat can cope with a sharp slowdown and come out the other end well placed for renewed growth.

We may be entering difficult times for investors, but quality stocks like Hotel Chocolat will come through it.

The post Hotel Chocolat withstands market turmoil. I think it can continue to bring comfort to investors 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?

Michael Baxter has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. 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.

Today, I’m looking at three great examples, all of which report to the market next month. 

Gaming for growth

Cambridge-based video games developer and publisher Frontier Developments (LSE: FDEV) releases interim results on 5 February. From a business perspective, I doubt those already holding have much to fear.

Earlier this month, the company indicated that total revenue for the six months to the end of November would be £32m – a 28% rise on that achieved over the second half of the previous financial year. That said, it’s worth mentioning that this would be significantly less than the near-£65m achieved over the same period in 2018, highlighting the extent to which sales in this industry can fluctuate according to when games are released.

Having “performed well” over the festive period (and based on the initial success of Planet Zoo – its fourth franchise), Frontier’s management now believes full-year sales will come in within analyst expectations of between £65m and £73m. 

Boasting a strong net cash position and rising returns on capital, this is the sort of company I’d usually get in line to buy. On an eye-watering forecast price-to-earnings ratio of 54, however, a lot of the good news looks firmly priced in.

With shares up 40% in just six months, I’m inclined to wait and see if results day brings out the profit-takers.

In a sweet spot

Another small-cap reporting next month (25 February) is chocolatier Hotel Chocolat (LSE: HOTC).

Like Frontier, the AIM-listed firm enjoyed a sweet 2019, with its share price soaring almost 60%. Hotel is also generating great sales momentum, announcing last week that total group revenue over the 13 weeks and 26 weeks to 29 December had climbed 11% and 14% respectively. 

The company is also growing its presence, both in the UK (nine new stores were opened over the second half of 2019) and abroad (four sites in the US and five in Japan). It boasts over 1.1 million active members in its VIP-Me scheme and is even targeting the vegan market with its new Nutmilk chocolate – deemed an “immediate hit” by management. 

Talk of “modestly higher” costs “due to inefficiencies in the supply chain” may explain why the shares took a temporary dive last week but I think it’s more to do with the valuation – a very steep 44 times earnings.

It’s a great business but I’m conscious that no stock is worth buying at any price, especially a high street retailer.

Cleaning up

A third small-cap showing great positive momentum of late is infection prevention and contamination control product manufacturer Tristel (LSE: TSTL).

December’s AGM statement from the Snailwell-based business was brief but highly encouraging for those already holding.

Thanks to contributions from recent acquisitions, management reported that pre-tax profit for the first half of the financial year would be “no less than £2.8m” (£2.4m was achieved over the same period in 2018).

This, combined with news that its push for regulatory approval for its products in the US was “progressing well” has only served to send the shares higher.

Like both Frontier and Hotel Chocolate, however, the valuation is looking frothy at 33 times forecast earnings. Having climbed 85% since November, I have my doubts about whether the stock can maintain its current momentum.

Half-year numbers will be confirmed on 24 February.

The post I think these 3 small-cap growth stocks are the real deal. But are they too expensive? 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?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. 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 welcomed a rush of investors over the last few years, attracted by the fat margins and high returns on capital it generated. Yes, AG Barr exuded quality. Until, that is, earlier this year when management warned on profits following its decision to switch focus to increasing prices rather than volume.  

Having lost a third of its value, it’s only natural today’s interim results would attract attention. So, was it a temporary blip, or a sign of tough times ahead? Fortunately for holders, it looks like the former.

Based on trading for the six months to 27 July, the company believes it “remains on course” to meet its revised predictions for the full year, despite ongoing economic uncertainty. That’s not to say that these results were sparkling.

Revenue and pre-tax profit were both down by a little under 11% and 24%, respectively, compared to the same period in 2018. Despite taking steps to address previously-identified issues with its Rockstar and Rubicon ranges, the company also said the benefits “will not be felt until later in the second half of the financial year.” On a more positive note, there’s been an encouraging response to the launch of its new IRN-BRU Energy drink. The Funkin cocktail range continues to perform well too.  

AG Barr’s shares are up almost 6% this morning, suggesting investors are willing to forget the last few months. I can’t blame them. After all, the mid-cap still has a strong balance sheet, ‘sticky’ brands and trading should remain resilient in the event of a recession. A forecast dividend yield of 2.6% isn’t massive but can be considered adequate compensation while things get back on track.

So while a forecast price-to-earnings ratio of 22 certainly doesn’t make this stock ‘unmissable’, I remain bullish on AG Barr’s ability to reward investors over the medium-to-long term.

Ahead of expectations

Another example of a company that experienced a big drop in its share price not too long ago would be chocolatier Hotel Chocolat (LSE: HOTC). The stock tumbled from a high of around 400p back in June 2018 to just above the 250p mark only six months later. Since then however, it’s rebounded strongly. 

Today’s results for the full-year to the end of June go some way to justifying this bounce with the company logging a 14% rise in revenue (to £132.5m) and an 11% increase in pre-tax profit to (£14.1m). According to CEO and co-founder Angus Thirlwell, the latter was “slightly ahead of expectations.”

Over the period, the company opened 14 stores in the UK and ROI, two in the US and two in Japan, with a further five international sites scheduled to open over the next six months. More than 900,000 people have now signed up to its VIPMe loyalty scheme.

The only problem with all this good news is that the valuation — at 34 times forecast FY20 earnings even before markets opened this morning — looks rather frothy. Although further growth is expected, I’m not sure I’d be buying today.

Should markets dip again in the run-up to Halloween (our official EU departure date), Hotel Chocolat might just be worth biting into. 

The post Is this battered growth stock now an unmissable buy? 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?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. 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 reason for this is that successful growth businesses can often multiply in value many times before reaching maturity. Investing relatively modest amounts now could allow you to enjoy an impressive retirement income in the future.

Today I want to look at two businesses I think have the potential to continue expanding for many years.

Customers can’t get enough

Not content with buying chocolates in-store and online, Hotel Chocolat Group (LSE: HOTC) fans are now queueing up to buy the firm’s new Velvetiser in-home Hot Chocolat maker. The company said initial sales of the device — which retails at £99.99 — were six times greater than expected.

I suspect this price tag includes a hefty profit margin. But perhaps more importantly, it also ties customers into buying the firm’s single serve hot chocolate pouches, which retail at £12 for 10. This business model reminds me of the runaway success of Nespresso coffee and its imitators. And who doesn’t like “barista-grade hot chocolate”?

Of course, the Velvetiser is only a small part of the firm’s business at the moment. The good news is that growth is continuing elsewhere. During the six months to 30 December, sales rose by 13% to £80.7m, while pre-tax profit climbed 7% to £13.8m.

The company also reported a welcome 18% increase in operating cash flow. Despite opening 14 new stores, the group ended the period with net cash of £21.8m, up from £18.3m one year earlier.

A sweet-tasting buy?

Hotel Chocolat’s financial performance looks good to me, although I think it’s worth pointing out that earnings per share growth of just 7% is not exactly stellar. The group’s operating margin of 11% isn’t that amazing, either.

However, there are two things that do really impress me about this business. The group’s return on capital employed of 26% indicates that money invested generates attractive profits.

And although I’m not personally a fan of the product, the group’s continued growth and recent expansion to Tokyo and New York suggests that Hotel Chocolat could become a genuine premium brand.

The shares trade on 31 times forecast earnings for the current year, and offer a yield of just 0.6%. But if founder Angus Thirlwell can build this into a global luxury brand, I think today’s share price could look cheap in five to 10 years.

An under-the-radar growth bargain?

My next pick is also a branded consumer goods firm. Stock Spirits (LSE: STCK) produces a range of branded spirits which are mainly sold in Central and Eastern Europe and Italy.

The company recently reported a 27.8% share of the off licence vodka market in Poland. It also has a 34.2% share of the spirits market in the Czech Republic. In Italy, Stock is the number one branded grappa business and has strong positions in limoncello and brandy.

Last year, the group’s total sales rose by 8.7% to €282.4m, while operating profit rose by 16.8% to €48.7m. Cash generation looks good to me and the shares offer a useful dividend yield of 3.7%.

In my view, Stock Spirits’ 2019 forecast price/earnings ratio of 14 could make the stock a bargain buy, if the company can maintain recent growth.

The post £3k to invest? 2 growth stocks I’d buy to beat the State Pension 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?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. 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.

As such, it’s no surprise that this morning’s trading statement for Q1 of its financial year has attracted attention. 

“Well-positioned”

Despite recent volatility in the markets, the number of customers using AJ Bell’s services increased by 4% over the three months to the end of 2018. Over 190,000 people now use the company for their investment needs. Inflows also increased by 20% to £1.2bn compared to the same three-month period in 2017. 

That said, recent volatility in the market has seen a 4% decline in assets under administration to £44.2bn (although this does compare favourably to the 11% fall seen the FTSE All-Share index). The number of defined benefit pension transfers also fell compared to the previous year and the fall is “expected to continue” during 2019. 

However, there are reasons to be bullish.

With the Financial Conduct Authority (FCA) expected to report back on its Investment Platforms Market study in due course, CEO Andy Bell stated that his company’s focus on proving value for money and good service should mean that AJ Bell is “well-positioned to benefit from anticipated developments in these areas”.

With the end of the fiscal year fast approaching, I suspect the next quarter will also show similar inflow growth as people rush to open and contribute to ISAs before the April 6 deadline.

AJ Bell’s share were flat in early trading, suggesting that today’s update was exactly what market participants were expecting. After many IPO disasters in recent times, that’s no bad thing in my book. 

That said, I’m inclined to wait for things to cool a little before building a position. A trailing price-to-earnings (P/E) ratio of 48 (according to Stockopedia) is too high for me right now. 

Tasty growth

Also reporting today was chocolatier and retailer Hotel Chocolat (LSE: HOTC). 

It may be a million miles away from AJ Bell’s world, but the small-cap — the subject of a Channel 5 documentary a few days ago — could be another great pick. 

Total revenue for the 13 weeks to 30 December was 15% higher than the previous year with growth seen in all of the firm’s channels (retail, digital and wholesale). 

Bucking the trend seen at many companies with a high street presence, CEO Angus Thirlwell reflected that it had been “another strong Christmas” for the Royston-based business, with new store openings — 15 in the second half of 2018 — contributing 5% of the growth seen over the period.

New locations in New York and Tokyo have also been well-received, according to the company, helping to demonstrate the company’s “ability to travel overseas“.

In addition to this, Hotel Chocolat added an encouraging 400,000 members to its loyalty scheme over the reporting period and sold over three times more Velvetiser hot chocolate-making machines than originally predicted. All positive developments, in my opinion.

Considering trading since December has been “in line with management expectations“, I’d be surprised if the share price didn’t hold its own until February’s interim results (ignoring macro-economic factors).

The only problem is that Hotel Chocolat’s shares were highly rated even before today’s 5%+ price rise (on 27 times expected earnings).

Again, I’d be inclined to wait for a pullback before buying in. 

The post 2 top growth stocks I’m keeping my eye on 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 Hotel Chocolat. 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.

Based on today’s maiden half-year results (and the market’s reaction to them), the company is only likely to get more popular.

Sweet profits

Revenue soared 44% to £8.3m over the six months to the end of September, boosted by the opening of 15 new franchise stores (bringing its total estate to 101) and the launch of new product ranges. Total turnover rose 29% to £14.1m with online sales rocketing 86% to £1.99m. A dip in like-for like sales growth was the only sour note. 

Of course, making the transition to a public company doesn’t come cheap. Once the £599,000 costs of listing were taken into account, however, adjusted pre-tax profit jumped 34% to £1.97m. A slight improvement to gross margin was accompanied by a rise in the company’s cash position to £2.4m. 

While not a stock that’s likely to get income investors salivating, a 17% increase to the interim dividend was another positive and adds substance to CEO Sukh Chamdal’s bullish outlook (having stated that the first eight weeks of trading in H2 had been “encouraging“).

The only trouble is that a lot of good news already looks priced in. Before this morning (and thanks to a 29% rise in value since listing), shares in Cake Box would have set you back the equivalent of 25 times forecast full-year earnings. That’s certainly not cheap. The 2% rise seen today makes them dearer still.

Since one of the keys to building a million pound portfolio is to never overpay for a stock, regardless of its quality, I’d be inclined to wait for traders to bank some profit before building a position.

A tempting alternative?

If Cake Box doesn’t appeal, there are other — albeit even more expensive — confectionery-focused growth stocks on the market that might. One of these is chocolatier and retailer Hotel Chocolat (LSE: HOTC). Like its industry peer, the small-cap has been performing well.

With all channels achieving “growth and cost efficiency“, revenue improved 11% to a little over £116m in the year to the start of July with pre-tax profit “slightly ahead of expectations” at £12.7m – a rise of 13%.

Like Cake Box, Hotel Chocolat is also continuing to expand with a total of 15 new stores in the UK and Republic of Ireland opened over the period. Perhaps most encouragingly, CEO Angus Thirlwell recently said that he was “increasingly confident” about the company’s growth prospects overseas while adopting “a cautious ‘test, learn, grow‘ approach” with regard to its new ventures in Scandinavia, the US and Japan. 

As mentioned, however, Hotel Chocolat’s shares still are looking increasingly frothy. A valuation of 32 times earnings for a company that’s heavily dependent on the run-up to Christmas is too much, in my opinion, especially as data from Black Friday hinted that people are cutting back on spending this year.

Since no stock is worth buying at any price. I’d wait to see how the company fares over the festive period before taking a bite.

The post Can this new growth stock help you to a million pound portfolio? 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?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. 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.