Immunodiagnostic Systems Holdings (LSE: IDH) has been through a tough patch, and its share price has responded with a 50% fall from February 2014’s peak. But that includes a 70% recovery over the past 12 months to today’s 285p, and I reckon we could be on the cusp of an impressive change of fortunes.

A 4% rise in full-year revenue didn’t excite the markets on Wednesday, accompanied as it was by an 8% drop in the like-for-like figure, and as I write the share price is unmoved. But it’s been a consolidation year for the maker of clinical diagnostic kits.. New chief executive Regis Duval said: “We have made good progress in stabilising the financial performance of the group, and believe we are well positioned to return to growth in the medium term.”

That growth is unlikely to be achieved this year, as the company is facing declines from its vitamin D business and antibody royalties, but I’m convinced there’s long-term growth potential here.

Cash flow

From revenues of £40m, adjusted EBITDA rose by 4% to £7.7m (though like-for-like was down 15%), and a turnaround from last year’s bottom-line loss brought in adjusted earnings per share of 14.8p — that’s a P/E of 19, which I don’t think is stretching.

Importantly, free cash flow is up 43% to £4.8m, and Immunodiagnostic signalled its confidence by lifting its full-year dividend from 1.2p last year to 4p — that’s only a 1.4% yield, but it’s well covered and I expect to see significantly more by March 2018.

We can’t ignore the risks, and the recovery won’t be here until we see the colour of the cash, but I’m optimistic for the long term.

Rapid growth

Shares in AFH Financial Group (LSE: AFHP) have climbed 45% so far this month, to 275p, responding belatedly to the previous two years of very strong EPS growth. Big expectations had already been built in to the share price, but we’re seeing valuations back down to tempting levels now.

With EPS forecast to rise more than 90% for the year to December 2017, and another 50% in 2018, the P/E would drop to around 19.5 this year and 12.5 next — that’s a lower-than-average multiple, for shares on a very attractive PEG of only 0.2.

AFH is a full-service wealth manager, growing organically and by acquisition, and its client base of high net worth folk is a market segment that is surely going to prosper in the coming years, whatever Brexit-driven ills befall the bulk of the UK’s working population.

Acquisition plans

At the interim stage, funds under management were up 17% to £2.2bn, producing a 19% rise in revenue to £13.9m and a 34% boost in pre-tax profit to £1.15m.

Cash stood at £12.6m after a £10m placing in March, with the firm speaking of a “strong pipeline of acquisition opportunities.” Increasing size through acquisition should help AFH to drive down costs, which adds to my optimistic outlook for a rosy future. 

My biggest puzzle is what I might have missed that would justify what I see as a seriously undervalued stock — and all I can think is that the company has fallen under the radar, and perhaps investors are put off by the recent strong price gain.

I might indeed have missed something, so be sure to do your own research, but I think AFH could be one of the best growth stock bargains out there right now.

The post 2 hot growth stocks 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.

Improving performance

Reporting on Friday was specialist producer of manual and automated diagnostic testing kits, Immunodiagnostic Systems (LSE: IDH). Its shares jumped by almost 4% following its trading update for the most recent financial year. This takes their gain for the 2017 calendar year to 47%.

The company’s automated business delivered revenues which were around 3% higher than in the prior year at constant exchange rates. It also launched four new CLIA automated assays, which brought the total assay menu with a CE-mark up to 19 assays. This represents expansion of the assay menu of 25% during the year. This and developments made elsewhere in its automated division show it is making progress with its roadmaps for R&D, sales and marketing.

In the company’s manual business, it was able to slow the downward trend. Revenues declined by 11% versus the prior year, but a focus on building the sales process and distribution channels could lead to an end to the decline in revenue at constant exchange rates.

With a sound strategy and performance which could prove to be better than anticipated, Immunodiagnostic Systems could record further share price gains. Revenue growth of 4% indicates that its shares could be a sound buy at the present time.

Growth potential

Also offering potential upside within the healthcare sector is Shire (LSE: SHP). Its combination with Baxalta has the potential to create a dominant pharmaceutical company with a pipeline of new treatments which could positively catalyse earnings growth in the long run. Furthermore, the synergies from the deal may push earnings higher and contribute to a higher valuation for the business over the medium term.

With Shire forecast to deliver a rise in its bottom line of 15% next year, the progress of the combined entity is set to be encouraging. However, many investors are somewhat unsure as to how compatible the two businesses will be, and there are doubts surrounding the level of synergies which may be recorded. As a result, the company’s shares trade on a price-to-earnings growth (PEG) ratio of only 0.7. This indicates that they offer a wide margin of safety and their upside potential could be significant.

Certainly, there are risks in the combination of any two companies. But with a strong pipeline and a low valuation, Shire looks set to deliver robust share price performance after its 115% gain in the last five years.

The post 2 surging growth stocks set to beat the FTSE 100 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?

Peter Stephens 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.

Veterinary profits

Shares in Dechra Pharameceuticals (LSE: DPH) have been performing well, with a 46% gain over the past 12 months to 1,374p, and a five-year climb of 210%.

Today the veterinary specialist updated us on the day of its AGM, telling us that the first quarter is in line with expectations and that its recent acquisitions are performing well — the most recent was the acquisition of Apex Laboratories in Australia for £31.3m, the completion of which was announced just a week ago.

And there’s further good news in the shape of FDA approval for the firm’s generic antibiotic Amoxiclav — two dosage strengths have been approved, with approval for the other two expected by the end of the year.

Dechra’s shares are on a forward P/E of around 26 at the moment, based on forecasts for the year to June 2017, and some might think that’s a bit high, especially with current dividend yields of under 2%.

But we’ve had several years of strong earnings growth, and there’s a further 25% pencilled-in for this year — giving a PEG ratio of 1, which doesn’t suggest a super bargain but isn’t bad for long-term growth expectations. And that dividend is very well covered by earnings and is strongly progressive, being lifted by around 10% per year.

I reckon we could be looking at a very nice long-term investment here.

Small-cap stumble

The much smaller Immunodiagnostic Systems Holdings (LSE: IDH), with a market cap of only a little over £50m, saw its shares tumble by 14% to 178p this morning after the release of a first-half trading update.

Revenue for the half is expected to edge up to £19.5m, from £19.4m earned last year. But on a constant exchange rate basis, that would slip to a 9% fall — the difference is purely down to exchange rates, so we’re seeing more fallout from the UK’s Brexit decision. The company, which makes manual and automated diagnostic testing kits, expects cash of around £28.7m at 30 September, up a little from £23.5m a year previously.

With the shares having slumped by 86% since their high in July 2011, to 172p today, investors must now be questioning the recovery that looked to have been taking hold since June this year.

There’s a big EPS rise forecast for the year to March 2017, to 8.5p per share, which would give us a P/E of 20, though that would be well behind the heady days of just a few years ago when we were seeing around 28p per share. Dividends peaked at 8.5p in 2014 too, before crashing to just 1.2p last year, but analysts suggest that will just about double this year.

The company says its “next intermediate goal is to stabilise the revenue line on a like-for-like basis,” and if it can do that and keep improving its earnings, that longer-term share price recovery could still be on.

But it’s not without risk, and I’ll be waiting to see interim results due on 25 November.

The post 2 shining pharmaceuticals stars to challenge the big guns? 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 has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.