Going for growth

Infrastructure and support services company Stobart Group (LSE: STOB) has just published its interim results for the six months ended 31 August, and rewarded investors with a big juicy dividend. The FTSE 250 firm upped its dividend from 3p to 4.5p per quarter, a rise of 50%, as it increased its underlying EBITDA to £131.8m. However, today’s profits are mostly made up of £123.9m from the partial disposal of its stake in Eddie Stobart Logistics (ESL), which generated £112m in net cash. The company’s revenue almost doubled to £124.6m in the period, compared to £65.3m a year earlier.

CEO Warwick Brady said the group continues to work towards its clear targets for its three growth divisions – Energy, Aviation and Rail & Civil Engineering, and is also “driving growth in cash generation and returns to our shareholders”. 

Losing power

Stobart Aviation saw good progress, with passenger numbers at London Southend Airport up 25% year-on-year to 610,492. However, Stobart Energy experienced delays in the commissioning of new third party biomass power stations which have impacted short-term volumes by 33%, although EBITDA per tonne is ahead of target and long-term volume unaffected.

Stobart Rail & Civil Engineering is on track to deliver target EBITDA on rail and non-rail civil engineering projects, against a reduction in external revenue. Stobart Infrastructure and Stobart Investments benefitted from the partial disposal of the investment in ESL, in which the group retains a 12.5% stake.

Shine on

The stock currently yields a healthy 5%, forecast to hit an even more tempting 6.5%. That is pretty impressive, especially when you take into account its rampant share price growth, soaring 193% in the last three years.

City forecasters predict a 74% drop in earnings per share in the year to 28 February 2018, but never fear, they are pencilling in a whopping 276% growth in 2019. However, there is a price to pay for its turbo-charged prospects, with the stock valued at a hefty 34 times earnings.

High energy

Kingspan Group (LSE: KGP) has also had a strong year, its share price up an impressive 50% from 24p to 36p in the last 12 months. The firm, which provides insulation products for roofs, wall and floors, posted a solid first half, with revenue up 19% to €1.75bn, and trading profit up 6% to €177.8m. Revenues have been rising particularly strongly, up 20% from €1.47bn to €1.75m year-on-year.

Kingspan’s growth is being drive by increasing demand for greater energy efficiency, the robust European recovery and surprisingly resilient UK despite Brexit. Its strong balance sheet allows it to invest in the business and drive growth with €14m earmarked for acquisitions. It recently entered the lucrative South American market.

The group has posted five consecutive years of double-digit earnings per-share growth, including a spectacular 77% in 2015, and another 35% last year. City forecasters reckon this will slow, to 8% in both 2017 and 2018, but its prospects still look bright to me.

The post These 2 hot growth stocks could turbo-charge your pension 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 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.

The firm, which provides insulation products for roofs, wall and floors, was last 9% higher in end-of-week business and trading at six-week peaks after declaring a stunning rise in half-year sales.

Kingspan saw revenues jump 19% between January and June, to €1.75bn, a result that pushed trading profit 6% higher to €177.8m.

At its core Insulation Boards division, the Irish company saw turnover rev to €1.1bn in the period, up 17% year-on-year. As well as enjoying continuing improvement in Western Europe and solid demand in the UK, Kingspan also noted resilient performances in North America and Eastern Europe, despite tougher trading conditions.

And chief executive Gene Murtagh painted a rosy picture for the rest of 2017, saying: “We expect end market activity to be broadly positive for the remainder of the year and at current exchange rates to deliver a full-year result at least in line with consensus. Whilst margins contracted somewhat, we anticipate further recovery of input increases in the second half.”

He added that “our balance sheet is strong and ready to support our development agenda as the opportunities unfold.” Kingspan noted that its bolt-on buys contributed 10% to sales growth, and 6% to trading profit growth, in the first half.

On the rise

City analysts certainly expect earnings to continue marching northwards, and have pencilled in advances of 5% and 7% for 2017 and 2018 respectively.

And it is easy to see why as environmental considerations drive healthy demand for Kingspan’s insulation products steadily higher, and the company’s ambitious acquisition plan sees it enter exciting new territories. Indeed, the Kingscourt company’s appetite for bolt-on buys has seen it enter the lucrative South American marketplace recently.

While current projections leave the insulation play dealing on a forward P/E ratio of 19.7 times, I consider this to be fair value given its ambitious growth strategy and proven record of earnings generation.

Barrels of risk

I am not as enthused by the investment case over at UK Oil & Gas (LSE: UKOG), however.

The London company, which invests in fossil fuel assets in southern England, has seen its share price explode in recent weeks following a spate of positive operational releases.

In the latest update last week it advised that a sidetrack for its Broadford Bridge-1 exploration well in the Weald basin had been successfully drilled. UK Oil & Gas had also secured all necessary permission to conduct the work, it added, meaning that a comprehensive multiple zone extended flow test could now be run.

The business is clearly making terrific headway right now, and could continue to do so, meaning that its stock value may keep on shooting skywards. But the unpredictable nature of oil and gas exploration means that the firm’s stock value could of course easily retreat as sharply as it has ballooned, meaning that it is a poor choice for those intolerant of high degrees of risk.

And in my view, when you also factor in the possibility that crude oil prices could remain weak for a very long time, I’m afraid I for one won’t be tempted to plough my money in right now.

The post One hot growth stock I’d always buy over UK Oil & Gas Investments plc appeared first on The Twelfth Magpie.

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• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• 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?

Royston Wild 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.