Global growth

The FTSE 250-listed company has come a long way since issuing a profit warning in 2017, and is growing rapidly in the Americas, Asia Pacific, France, Germany and Spain, although UK revenues did temporarily slip due to network rationalisation.

The £3.9bn group’s Q3 statement in November hailed “continuing strong revenue growth, excellent franchising and enterprise account momentum”. It added another 66 new locations in the quarter, taking its worldwide total to 3,348, while revenues grew 15.5% across all its centres, with strong performance in every region, including the UK this time.

Cash is flowing, it has launched a share repurchase programme, spending £22.4m in the quarter, and cut net debt further to £301.2m, putting it in a strong financial position.

After striking master franchise agreements in Japan, Taiwan and Switzerland, IWG now boasts 27 franchise partners across 22 countries. Its strong pipeline of global franchising opportunities suggests scope for further growth.

The only obvious downside I can see is that the stock trades at 35 times forward earnings, which makes it a little expensive. That means it must continue to grow rapidly to keep investors happy and the share price bubbling along. However, with earnings forecast to rise 17% this year, and 19% next, IWG still appears to have momentum on its side.

Not so hot

By contrast, education specialist Pearson Group (LSE: PSON) has endured another dismal year, and is in danger of losing its place in the FTSE 100. The stock is down 37% over the last year, and 57% measured over five years.

Last September, a profit warning sent the Pearson share price crashing 15% in a day. That came as it continued to suffer problems in its US educational business, as the shift from print to e-books hit sales, and the internet broke down barriers for entry, allowing more nimble competitors to take market share. So far, the group hasn’t come up with an answer.

Pearson has been restructuring in response, but its latest update shows educational revenue down 12%, although it is growing other areas, such as Online Program Management, Professional Certification materials, and the Pearson Test of English Academic.

I was surprised to see the group preparing a £350m share buyback. This may reward investors, but I’m a bit old-fashioned, and prefer to see companies reinvesting that kind of money back into the business, to build growth.

City analysts expect earnings to fall 19% this year and 2% next, which hardly bucks me up. You do get a yield of 3.5%, though, covered 2.5 times, while its valuation of 12.3 times forecast earnings will tempt bargain seekers. Pearson might pull it off, but I’m not rushing to buy it at the moment.

The post £1k to invest? I’d buy this double-your-money FTSE 250 growth stock appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Pearson. 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.

IWG, or Regus as it was formerly known, calls itself a “global operator of leading co-work and workspace brands.” Business is booming in this section of the office market as self-employment and flexible working becomes the norm for millions of workers around the world who want more from their jobs. Larger companies are also rushing to lease space because providers like IWG offer more flexible contracts, unlike traditional leases, which can tie tenants in for decades. 

IWG has invested hundreds of millions of pounds in its office estate in the past few years to attract more customers and it seems to be working.

Earnings growth

For the six months ended 30 June, revenue increased 17.3% in actual currency, and gross profit increased 7% year-on-year. Profit after tax, including discontinued operations, jumped 579% to £294m. Earnings per share from continuing operations came in at 4.2p for the first half of IWG’s 2019 financial year. 

Its income in the period received a boost from its £320m partnership transaction in Japan, which was just one of the “multiple” franchise agreements the group has signed over the past few months. Including cash generated from operations, this transaction boosted IWG’s cash inflow to £385m in the first half. 

Management is investing around two-thirds of this income back into its office portfolio, and the rest is being paid out to investors. The interim dividend is rising 10.3%, and the firm is spending £100m repurchasing shares. 

These results seem to put the company well on the way to meeting City growth forecasts for the year. Analysts have pencilled in earnings of 12.3p per share for 2019, and 14p for 2020, putting the stock on a forward P/E of 29.3. This is above what I would usually be willing to pay for a low-growth business like IWG.

However, the company’s international presence, cash generation and record of returning excess funds to investors lead me to the conclusion that this might be an attractive investment for your stocks and shares ISA today. The dividend has doubled over the past five years, and the current yield stands at 1.9%. 

Defensive income

Another income investment that I think might be worth your research time is healthcare facility provider Assura (LSE: AGR). I think this healthcare real estate investment trust is one of the most defensive investments you can buy today.

The business model is simple. The company buys specialist healthcare facilities and then leases them to healthcare providers, predominantly the NHS. This model generates a steady stream of income, which it then returns to shareholders. Over the past five years, Assura’s dividend yield has grown by around 50% as its property portfolio has nearly tripled in value.

Today, shares in the healthcare REIT support a dividend yield of 4.3%, and analysts believe the payout will increase by 4% by 2021, giving a yield of 4.5%. Book value per share (the total value of the company’s property assets minus borrowing) was 53.4p at the end of its last reported financial year. On this basis, the stock is currently trading above book value, but once again, I think it’s worth paying a premium to get your hands on shares in this one-of-a-kind business. 

The post £2,000 to invest? I’d buy these 2 dividend shares for my ISA 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.

If you want to inject fast-paced growth stocks into your portfolio, they have been delivering it in style. I’d only buy one of them, though.

Space heads

IWG (LSE: IWG), formerly called Regus, provides serviced offices, virtual offices, meeting rooms, and videoconferencing to clients. It’s a leader in what it calls the “workspace revolution” and helps more than 2.5m people and their businesses worldwide.

This morning it published its first-quarter trading statement, headlined “strong growth trend continues”, with group revenue up 10.6% to £658.3m at constant currency over the last year. First-quarter revenues were particularly strong, up 15.1% at constant currency.

Selling Japanese

IWG added 55 new locations to its global network, a net growth capital investment of £43.3m, taking the total to 3,311. This was largely due to growth in the Americas, Asia-Pacific, France, Germany and Spain, while revenues declined slightly in the UK, due to the annualised impact of network rationalisation.

The £3bn group’s net debt is £534.1m after net growth investment of £43.3m, although that will shrink after it receives £320m from a recent Japan divestment.

IWG is looking to expand by signing strategic partnerships, and says it has a good future pipeline. Today’s results were in line with expectations, but the stock has clicked up just 0.12%. Perhaps markets were hoping for more, to justify its recent share price surge.

Growth hopes

Given recent growth, I wasn’t surprised to see the stock trading at a pricey 29.1 times earnings. However, this is forecast to fall to just 18.1% this year as earnings have continued to grow strongly, and 16.3% in 2020. By then the yield should be 3%. So you are getting rising income as well as growth.

IWG has been volatile in the past, issuing a profit warning in 2017, which it blamed on weakness in London and natural disasters in overseas markets. Despite that, it still looks like a big potential growth story, as it has a massive potential market to aim at.

Bumpy ride

Fellow FTSE 250 member Inmarsat (LSE: ISAT) describes itself as “the world’s only provider of satellite connectivity to the whole aircraft”, offering both in-flight connectivity for passengers and advanced operational safety systems in the cockpit.

Its share price is certainly flying, although again, after a hugely turbulent spell. The former stock market darling ended 2015 at 1,140p, only to crash as low as 340p, as earnings slid and profits halved. As if that wasn’t enough, net debt climbed from $1.9bn to $2.18bn over the same period.

Over and out

Today, Inmarsat reported a tiny uptick in first-quarter group revenues, up 0.4% to £346.9m, although growth was stronger in its Government and Aviation segments. CEO Rupert Pearce praised a strong underlying performance and positive momentum. However, EBITDA fell 12.9% to $152.4m.

These figures don’t excite and the share price growth has been driven by a $3.4bn takeover bid from Canadian private equity company Triton Bidco. This is due to complete in Q4 subject to shareholder and regulatory approval, and despite market noise about competing bids, I wouldn’t buy it now. I’d take a good close look at IWG, though.

The post These 2 FTSE 250 stocks are smashing the market but I’d only buy one of them 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?

Harvey Jones 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.

However, the retailer is due to deliver rapid dividend growth over the next few years, and this could make it an appealing income share over the medium term. Could it therefore be worth buying alongside a company which reported positive news on Tuesday, and that is also expected to deliver a rapidly-rising dividend?

Improving performance

The company in question is co-work and workspace specialist IWG (LSE: IWG). It released a third quarter trading update which showed that its open centre revenue growth was 13.2%, while mature revenue growth was 3.9%. Its mature occupancy improved by 70 basis points to 74.3%, while it has seen improved franchising momentum through 115 committed locations to date, alongside a strong pipeline.

The company’s performance in markets such as the US, EMEA, and Asia Pacific has been strong. While the UK has been relatively disappointing, the company remains optimistic about its long-term growth potential.

Looking ahead, IWG is forecast to post a rise in earnings of 25% in the next financial year. This could help to boost its dividend growth rate, with its shareholder payout set to increase by around 10% per annum in the next two financial years. This puts the stock on a forward yield of 2.7%. With dividends due to be covered 2.2 times by profit next year, further increases in shareholder payouts could be ahead.

Revised strategy

Tesco also has strong dividend growth prospects. After paying 3p per share in dividends in the last financial year, that figure is due to increase to 5.4p in the current year, followed by 7.5p next year. This puts the company on a forward dividend yield of 3.5%, which is only 0.5% lower than the FTSE 100’s dividend yield.

With dividends due to be covered 2.2 times by profit, there seems to be further scope for increases in shareholder payouts over the long run. The retailer has put in place what appears to be a sound growth strategy that has focused on improving the performance of its core operations through reducing costs, improving customer service, and offering better-quality products.

The company’s strategy appears to be working well, with earnings due to rise by 19% this year, and by a further 20% next year. That’s despite risks in the wider UK retail sector, with consumer confidence expected to remain weak in the near term as the Brexit process continues.

However, with a rising dividend, a price-to-earnings growth (PEG) ratio of 0.8, and what appears to be a sound strategy, the Tesco share price could offer an improving income return that helps retirees to overcome what is a modest State Pension.

The post How I think Tesco could boost your retirement income as the State Pension age rises appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Tesco. The Motley Fool UK has recommended Tesco. 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.

Of course, IWG is not the only stock which has recorded a disappointing share price performance of late. RBS (LSE: RBS) is down by 15% since the end of May 2018. Both companies, though, could beat the FTSE 100 over the medium term.

Growth potential

Alongside news that it has terminated discussions with potential suitors, IWG also released a positive set of interim results. They show a rise in revenue of 7.4%, with it reaching £1,204m. While operating profit moved 29% lower to £60m, this was partly due to the major investment that the business is making in growth opportunities and marketing spend. It expects to meet forecasts for the current year, with the stock due to record a rise in earnings of 13%. And with further growth of 21% due next year, the business appears to be moving in the right direction.

Of course, there has been continued weakness in the UK. This contributed to its falling operating profit, and is rather unsurprising given the lack of confidence among businesses ahead of Brexit. Further underperformance within the UK could be ahead, although in the long run the prospects for the wider group appear to be impressive.

Since IWG trades on a price-to-earnings growth (PEG) ratio of around 0.9, it seems to offer good value for money. Although likely to be volatile, it has the potential to beat the FTSE 100 in the long run.

Improving outlook

Also having the capacity to deliver a successful share price turnaround is RBS. Its recent update showed that its underlying performance is improving, and the bank remains on track to deliver a rise in earnings of around 9% next year. This could stimulate investor sentiment and lead to a higher share price – especially with the stock having a PEG ratio of 1.2 at the present time.

Of course, the big news regarding RBS in recent weeks has been its decision to recommence dividends after a decade of no payments to shareholders. This has been expected for some time, but what the stock market may not be pricing-in is the company’s ability to hike dividends at a fast pace over the next few years.

For example, in the 2019 financial year the stock is due to pay out 15.4p in dividends per share versus 8p in 2018. This puts it on a forward yield of 6.2%. With dividends set to be covered 1.9 times by profit next year, they appear to be sustainable and highly attractive. As such, now could be the right time to buy the stock.

The post Why the IWG and RBS share prices look set to storm back against the FTSE 100 appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Royal Bank of Scotland Group. 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 takeover talk still fresh in the minds of holders, where next for the mid-cap’s share price?

Record performance

Thanks to a combination of strong organic growth and the full-year impact of acquisitions, revenue rose just under 20% from £2.03bn to £2.43m in the 12 months to the end of April — more than the £2.3bn analysts were expecting.

BCA achieved “increased volumes across all divisions” over the reporting period, including a 6.5% rise in the UK where the company shifted more than one million vehicles. International Vehicle Remarketing sales rose 4.3% to 362,000 and WeBuyAnyCar delivered its sixth consecutive year of double-digit volume with 219,000 sales (up 12.9%). All this helped the company achieve a 17.6% rise (to £159.5m) in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) and reduce net debt by 26.4% to £191.6m.

Having already rejected a £1.6bn bid (equivalent to 200p per share), today’s record results have clearly come at the right time for BCA and will help to justify the company seeking an improved offer from private equity firm Apax. Whether this materialises before the 8 July deadline, however, is questionable. 

The fact that BCA has managed to turn things around following concerns over falling demand for new and used vehicles in the UK (causing the shares to sink to as low as 150p back in March) could mean that Apax no longer sees value in the deal. Should this be the case, a spate of profit-taking might kick in as traders see limited upside. Given BCA’s already punchy valuation before today, there’s some logic in that. 

It’s a hard one to call. Since it would be against the Foolish philosophy of buying great companies and holding for years rather than days, I certainly wouldn’t recommend picking up the stock as a short-term punt.

Another bid target

Of course, BCA isn’t the only company attracting attention right now. That said, the situation at serviced office provider IWG (LSE: IWG) feels more complicated. 

Yesterday’s update on trading wasn’t well received by the market with shares falling almost 3% as the company announced that operating profit would be between £15m-£20m lower than that previously forecast.  

In addition to stating that its UK business wasn’t performing as well as expected, IWG revealed that plans to grow its network to satisfy increasing demand would now cost in the region of £30m more than the £200m originally forecast thanks to management’s desire to increase the number of locations from 230 to 275.

With four prospective buyers (Terra Firma, TDR Capital, Starwood Capital and Prime Opportunities) eyeing up the company, the timing of this news wasn’t great. While having multiple suitors will give some reassurance to those already holding stock in the £3bn cap, the fall in profit guidance might lead it to be sold for less than previously hoped.

Clearly, a lot depends on just how patient a buyer is willing to be in order to reap the “good returns” IWG’s management think are possible following the planned investment. With world markets looking increasingly jittery over recent weeks, however, a deal may not look as appealing as it once did. 

The post What next for these top FTSE 250 takeover targets? 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 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.

However, there are other stocks that could offer both of those attributes. Reporting on Tuesday was a company that offers high growth prospects alongside its enticing income appeal.

Growth potential

The company in question is flexible workspace specialist IWG (LSE: IWG). It experienced a difficult 2017, with its revenue increasing by just 1.9%. Operating profit was 15% lower, although there was an improvement in its overall performance in the latter part of the year. Sales activity increased in the fourth quarter of the year and this momentum could continue into the current period.

In fact, the company is forecast to post a rise in its bottom line of 27% this time, followed by further growth of 18% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.7, which suggests that it could offer excellent value for money. That’s especially the case since the global flexible workspace industry appears to have a positive future. With the company having operational scale and a global network, it could have a competitive advantage over its peers.

Although IWG has a dividend yield of 2.5%, its payouts are covered 2.7 times by profit. This suggests that there could be scope for a rapid rise in dividends over the medium term. As such, while perhaps riskier than some dividend stocks, it could prove to be a highly rewarding company to own in the long run.

Income prospects

Of course, it is difficult to beat Standard Life Aberdeen’s dividend yield of 6.2%. It is more than twice the rate of inflation, and looks set to become increasingly attractive. Dividends per share are due to rise by over 10% in the next financial year, and this puts the stock on a yield of around 7%. Since shareholder payouts are covered 1.3 times by profit, they seem to be highly sustainable at their current level. They could rise in line with profit growth and keep the company’s financial position relatively stable.

Looking ahead, the prospects for the firm appear to be positive. Although global stock markets have experienced a difficult period in recent months, investor appetite towards risk still seems to be relatively high. Therefore, the stock is due to report a 6% rise in earnings next year. This rate of growth could realistically continue over the medium term.

With a price-to-earnings (P/E) ratio of around 11, there seems to be good value for money on offer. This means that alongside a high income return, Standard Life Aberdeen could also deliver capital growth in the coming years.

The post Standard Life Aberdeen plc isn’t the only bargain dividend growth stock I’d buy today appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Standard Life Aberdeen. The Motley Fool UK has recommended Standard Life Aberdeen. 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.

30% fall

The market has been punishing profit warnings quite harshly recently, and IWG didn’t escape lightly. Its shares fell over 30% in the blink of an eye as a result of the warning. Since then, they have continued to trend lower and can now be bought for below 200p. At that price, do the shares offer good value, or is the stock one to steer clear of?

Analysts now expect it to generate earnings of 12.9p for 2017. A dividend payment of 5.4p per share is anticipated. At the current share price, the stock trades on a forward P/E ratio of 15.4 with a prospective dividend yield of 2.7. In my view, those metrics look relatively appealing for a company that has almost doubled its top line over the last five years, and increased its dividend 10 years in a row. The company has stated that it remains “very positive” about the opportunity for the workspace as a service (WaaS) market and its leading position within it.

Having said that, the thing about profit warnings, is that they’re not always a one-off. While the idea that they always ‘come in threes’ may be a bit of a myth, studies from Stockopedia and Ernst & Young have shown that there’s a 30%-40% chance of a company reporting a further profit warning after the first. With that in mind, I’d be reluctant to invest right now, until we see evidence that IWG has its momentum back.

Surging ahead

One FTSE 250 company that does appear to have significant momentum at present is Diploma (LSE: DPLM). It’s shares have surged 11% today on the back of its full-year results released this morning.

Diploma specialises in providing technical products and services for a variety of applications, including consumables and instrumentation to the healthcare sector, and seals, gaskets and cylinders for heavy mobile machinery and industrial equipment. The company has been a strong performer over the last five years, with revenues rising 66%, and today’s full-year FY2017 results demonstrate further momentum, beating analysts’ expectations.

Indeed, for the year ended 30 September, revenue rose 18% to £452m (vs £443m expected), and profit before tax surged 24%. Adjusted earnings per share increased 10% to 49.8p (vs 48.3p expected) and the company lifted its dividend by a healthy 15% to 23p per share. Chief Executive Bruce Thompson commented: “With a proven business model, broad geographic spread of businesses, robust balance sheet and consistently strong free cash flow, the Board is confident that further progress will be made in the next financial year.“

While the stock trades on a punchy P/E ratio of 23.8 after today’s rise, given its strong momentum, and the fact it has broken out to new highs, I wouldn’t rule out further gains going forward.

The post One growth stock I’d buy over IWG plc 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?

Edward Sheldon 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.

Of course, it’s not the only cheap stock at the present time. Reporting on Thursday was another company which could also offer a wide margin of safety.

Encouraging performance

The company in question is UK merchant banking group Close Brothers (LSE: CBG). It has made an encouraging start to its financial year, with all three of its divisions showing strong profitability. For example in its Banking division, loan book growth was 1.4%, driven by Property and Premium Finance. Meanwhile, there has been no major change in credit performance or trading conditions.

The company’s Winterflood division has benefitted from continued retail investor trading activity. The Asset Management division was boosted by further strong net inflows as well as positive market movements. Managed assets increased by 6.5%, with total client assets rising by 4.5% versus the end of the 2017 financial year.

With Close Brothers trading on a price-to-earnings (P/E) ratio of just 10.3, it seems to offer a wide margin of safety at the present time. This suggests that while earnings growth may be somewhat lacking in the near term, it could be subject to an upward re-rating over the long run. As such, now could be the perfect time to buy it.

Diverse appeal

Similarly, IWG also appears to have a discount valuation compared to many mid- and large-cap shares. It is forecast to record a rise in its bottom line of 23% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of 0.5, which indicates that its shares could move higher after their 20% fall since the start of the year.

The company’s strong profit growth may also provide it with scope to raise dividends at a rapid rate. For example, it may only have a current dividend yield of 2.8%, but shareholder payouts are expected to be covered 2.4 times by profit this year. This should provide the company with scope to raise them over the medium term without jeopardising the financial health of the business. This mix of capital growth and dividend appeal means that the company could be of interest to a wide range of investors.

Therefore, while many shares may seem overvalued at the present time, IWG and Close Brothers appear to have considerable investment potential. Both stocks are cheap and this could enable them to offer index-beating returns over the long run.

The post Why IWG plc is set to be a millionaire-maker stock 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.

Could this beaten-down FTSE 250 firm now be a bargain buy? Or is there a better bet in the shape of a high-flying company, whose board said in a trading update today: “We look forward to another exciting year of growth.”

Brighter 2018?

IWG’s profit warning arose because “anticipated sales improvement in the third quarter from the increase in sales activity was weaker than expected.” As a result, the board revised its expectations for group operating profit for 2017 to a range of £160m to £170m, which compares with £186m delivered in 2016.

Nevertheless, the board said it remains “very positive” about the growth opportunities for the serviced office sector and the company’s leading position in it. Indeed, it intends to continue to invest in growing its national networks and development capabilities, although, in the short term, this will lead to additional overhead costs and new centre losses due to the timing of openings.

Turning to IWG’s valuation, the consensus earnings forecast of City analysts for 2017 is 12.9p a share. This represents a 14% fall on 2016’s 15p and gives a price-to-earnings (P/E) ratio of 16. Not particularly cheap, but City analysts are expecting a brighter 2018. The consensus forecast is for a 22% rebound to 15.8p, bringing the P/E down to a more appealing 12.6 and making it a buyable recovery stock in my eyes.

Forecast beater

What of the high-flying stock I mentioned earlier? The company in question is Blue Prism (LSE: PRSM), whose shares have soared 1,515% to 1,260p since floating on AIM at 78p in March 2016.

The company provides software that, in its own words, “enables the automation of manual, rules-based, administrative processes to create a more agile, cost-effective and accurate back office.” Today’s update shows that strong demand for its software is continuing apace. The board said it “now expects revenue for the current financial year to be above the upper end of the current analyst range.”

Ahead of today, the consensus was for £21.75m revenue, with £22m at the upper end of the range. This is a company where profit remains over the distant horizon and so, as when I last looked at it in June, I value it on a revenue multiple. My rule of thumb is that a multiple above 10 is overvalued.

Blue Prism’s market cap is £790m at the current share price, so I’d be looking for revenue of £79m at the very least before considering investing. Unfortunately, even looking ahead to 2018 and allowing for an upgrade to the current upper forecast of £37.5m, the company has to remain on my list of stocks to be avoided on the basis of a too-rich valuation.

The post Last chance to buy IWG plc under £2? appeared first on The Twelfth Magpie.

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G A Chester 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.