Managing wealth 

IFG (LSE: IFP) is a financial services group based in Ireland. With a market capitalisation of around £150m, the company flies under the radar of most institutional investors, but I believe it could be a great addition to any portfolio.

Over the past five years, IFG’s results have been mixed. Revenue has hardly grown, and the business reported a net loss last year, down from a net profit of around £22m in 2012. These figures are disappointing, but they don’t display the whole picture. Excluding one-off items, normalised earnings per share (EPS) have increased by 150% since 2012.

City analysts are expecting this trend to continue. EPS growth of 37% is forecast for 2018 and 16% for 2019.

It looks as if the business is well on the way to meeting these figures.

IFG’s preliminary statement for the half year ended 30 June shows a 42% increase in adjusted EPS to 4.2p. For the period, revenue expanded 12% and adjusted operating profit grew 54% to £5.7m.

The company has been boosted by rising demand for self-invested personal pensions or SIPPS. For the six months to the end of June, 2,469 new SIPPs were opened with the group’s James Hay wealth management business, and a further 134 clients opened new SIPPs with its Saunderson House business. Overall assets under administration rose 8% to £31.bn.

Unfortunately, the firm is also dealing with the number of legacy issues that have “significant taxation and regulatory components.” Dealing with these problems consumed £3.2m of profit during the first six months of the year.

I reckon this dark cloud is to blame for IFG’s low valuation of just 13.2 times forward earnings. That said, I’m attracted to the company because once these legacy issues are complete, shares could re-rate substantially higher. There is also a 3.2% dividend yield on offer while you wait.

Return to stability 

If IFG’s complex legacy issues have put you off, another small-cap growth stock I’m interested in is Volex (LSE: VLX).

After losing a significant contract in the first half of this decade, Volex has spent the last several years trying to rebuild its business. Fiscal 2018 was the first year in five that the group has reported a positive net profit.

However despite the progress, it looks to me as if the market isn’t ready to give the company the benefit of the doubt just yet. Based on the City’s number for fiscal 2019, the stock is trading at a forward P/E of only 9.7.

I believe this is an excellent opportunity for risk-tolerant investors to buy into the company before the rest of the market. I reckon buyers will return when management can prove it has stabilised the business, which will take several years. Analysts believe normalised earnings per share will grow by around 10% for the next two years. If the group can meet these figures, it should be proof enough that Volex has moved on from its previous troubles.

Adding to the investment case is $10m of net cash on the balance sheet, which only makes this a more attractive investment opportunity in my opinion.

The post Two small-cap growth stocks I’m considering today 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.

IFG announced that revenues fell 4% between January and June, to £38.5m, and as a consequence adjusted operating profit fell to £3.7m from £5.8m a year earlier.

However, the Dublin-based company saw assets under administration and advice gallop to £29.1bn from £24.4bn in the corresponding 2016 period, while it also saw new client activity take off at both of its divisions. At James Hay the number of new clients on its books rose 50% year-on-year to more than 3,000, while Saunderson House added 144 new clients versus 126 a year ago.

The solid first-half performance prompted chief executive John Cotter to declare that the growth in clients and assets at both businesses “[reflects] the quality propositions that they offer our clients, and our ability to compete successfully in our chosen markets.”

He added that “whilst short-term financial performance is being impacted by the low interest rate environment, restructuring costs and the resolution of legacy issues, we expect a much improved second-half underlying performance, particularly in James Hay as the effects of repricing and restructuring start to bear fruit.”

Self-help to pay off

And IFG is confident that restructuring efforts will really begin to bear fruit from next year onwards. Cotter commented that “we are confident that both businesses are on a strong growth trajectory and that the underlying performance will translate into a much improved financial performance in 2018.”

This positive outlook is certainly shared by City analysts, who expect the business to follow a predicted 3% earnings rise in 2017 with a 25% advance in 2018.

These figures leave IFG dealing on a P/E ratio of 19.2 times for 2017, peeking above the widely-regarded value benchmark of 15 times or below. However, this slips to a much-improved 15.4 times for next year.

And the financial services giant offers an added sweetener through chunky dividend yields — these ring in at 3.7% and 3.9% for 2017 and 2018 respectively.

Sure, trading may be a little bumpy right now, but I believe IFG’s transformation strategy should deliver decent returns over the long term.

New business booming

Those seeking explosive earnings growth right now should also check out St James’s Place (LSE: STJ) as new business powers ahead. It recorded a net inflow of funds under management of £4.3bn during January-June, up 39% year-on-year, helping total funds under management move to £83bn from £65.6bn in the corresponding half in 2016.

The London company saw new business profits climb to £343m in the period from £228.9m previously, and it is steadily building its adviser base to keep business rolling in — it currently has 3,540 advisers on its books, up 3.7% from the start of the year.

City brokers believe that the bottom line is about to catch fire too, current forecasts suggesting a 95% profits advance in 2017. And an extra 21% rise is forecast for 2018.

Subsequent P/E ratings of 27.9 times and 23.1 times for this year and next may be pretty toppy on paper. However, PEG multiples of 0.3 for 2017 and 1.1 for 2018 suggest that St James’s Place is actually attractively valued relative to its growth prospects.

When you also throw in meaty dividend yields of 3.5% and 4% for 2017 and 2018 respectively, I reckon the financial colossus is worthy of serious attention right now.

The post 2 top growth stocks for clever 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?

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. 

Better than cash in the bank

If you want a bank dividend that was untroubled by the financial crisis, look no further than Arbuthnot Banking Group (LSE: ARBB). Yields might not have been high, but the occasional special payment more than makes up for that.

The year just ended in December 2016 was no exception, with ordinary dividends lifted 6.9% to 31p — for a yield of 2.1% on today’s share price of 1,476p.

But that was overshadowed by the payment of special dividends during the year of 325p per share, which is pretty impressive for a bank that saw net assets per share rise by 23% during the year and climb nearly sevenfold in the past six years. If you want to invest in a company that’s good at generating cash, you could do a lot worse than going for Arbuthnot.

The rest of the figures looked impressive too, with Arbuthnot Latham customer deposits up 11% to £998m, written loan volume up 39% to £227m, and assets under management up 16% to £920m.

Chairman and chief executive Sir Henry Angest described the year as a “momentous and highly profitable” one, in which a number of corporate transactions should allow it to develop over time “into a more significant private and commercial bank“.

What about valuation? We’re looking at a 2018 P/E of a bit over 18 based on current forecasts. That looks a bit high by long-term FTSE standards — and it’s around twice the valuation of Lloyds Banking Group.

But Arbuthnot might just be the best managed bank out there.

Long-term strength

IFG Group (LSE: IFP) shareholders seem less pleased today as their shares dropped 9% to 136p, after the financial services group revealed a fall in 2016 profits which was blamed on falling interest rates.

While the group’s James Hay and Saunderson House subsidiaries saw combined revenue perk up by 10% to £78.5m, overall pre-tax profit from continuing operations fell 26% to £6.4m and IFG’s adjusted earnings per share dropped by 7% to 7.57p. 

There were exceptional costs to the tune of £1.7m too. But the reaction looks a little overdone to me, as the balance sheet firmed up a little with net cash up 3.3% to £28.2m and there’s no debt on the books. Chief executive John Cotter said: “We enter 2017 with both businesses in stronger positions than last year” and spoke of “positioning the group for sustainable growth“.

Forecasts do make the shares look attractive, with two strong years of earnings growth dropping the P/E to only around 12.5 by 2018. We’re also looking at attractive PEG valuations of 0.3 this year and 0.7 next, and it’s pretty rare for a financial services firm to exhibit attractive growth prospects like that.

But it’s the long term that counts, and I see see IFG’s progressive dividend policy as a big plus, with a 2018 yield expected to reach 4%. The firm’s markets, serving high-net-worth clients, should also be quite lucrative over the next decade and more, and I see IFG as one to buy and tuck away for years.

The post 2 great dividend stocks for the next five years 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?

Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.