Boring can be good in the stock market, but we all need a bit of excitement. So today I’m going to look at Tesco and at a much smaller retailer that I think could be a long-term winner.

Big and well run

The efforts being made by Sainsbury’s and Asda to merge their operations tell you something about the advantage of being big in groceries.

However, Tesco is already roughly the same size as its two rivals combined. This means that chief executive Dave Lewis doesn’t need to worry about trying to push through complex merger deals, despite regulatory opposition.

Mr Lewis has been able to focus on two areas — operational excellence and finding other routes to growth. In my view he’s accomplished both of these feats. He’s made improvements to the group’s business practices to treat suppliers more fairly, and improved the performance of its supermarkets.

Alongside this, Mr Lewis has acquired fast-growing food wholesaler Booker, which has given the group a sizeable share of the convenience store and restaurant foodservice markets.

Financial turnaround

Tesco’s financial results reflect Mr Lewis’s changes. After falling to a low of £54m in 2016, group sales are expected to have reached nearly £61bn in the year ended 24 February. Profits have bounced back too. Analysts expect the firm’s adjusted earnings per share to have risen by 17% to 14p per share last year.

At the time of writing, Tesco shares trade on 14 times 2019/20 forecast earnings, with an expected yield of 3.1%.

I wouldn’t describe this as the bargain of the year. But I do think the shares remain a decent buy for investors wanting a reliable long-term income.

Wine goes online

Shares in wine merchant Majestic Wine (LSE: WINE) were down by 12% at the time of writing. The shares have now fallen by about 40% in six months as tough trading on the high street has dented the group’s profits.

Today’s fall was triggered by news that the dividend may be cut to fund extra investment in the group’s online business, Naked Wines. This former start-up buys wine directly from winemakers to sell to customers.

Chief executive Rowan Gormley — who founded Naked — has decided to scale back the group’s high street retail business and focus on online growth. The numbers suggest to me that Mr Gormley is probably right to make this decision.

During the six months to 1 October, Naked sales rose by 14% to £75.7m, while retail sales only rose by 1.9% to £122.9m. At this rate, it won’t be long until Naked is the group’s biggest business.

Naked Wines is already Majestic’s most profitable business, with half-year adjusted operating margin of 4.2%, compared to 2.7% for the retail business.

Buy, sell or hold?

The group will be rebranded as Naked Wines and profitable stores will be migrated to trade under the Naked brand.

Are the shares a buy? Perhaps. Given consumers’ growing preference for authentic products with a good story behind them, I think Naked Wines could be a long-term winner. Although earnings visibility is limited, I think the shares could be a long-term buy at under 250p.

The post Is the Tesco share price the bargain of the year? appeared first on The Twelfth Magpie.

More reading

• Here’s what a surging Tesco share price has done to £10,000 invested 5 years ago
• Are Tesco shares losing their momentum?
• Tesco’s share price drops 2% on Q1 trading miss. What’s gone wrong?
• As Tesco shares dip on Q1 results, is this a brilliant time to buy?
• How much might £19,999 in a Cash ISA be worth in 2036?

Roland Head 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.

Nothing to wine about

Today offers some respite for vino supplier Majestic, with sales and profits up for the crucial Christmas period.

Its trading statement reports group Christmas sales growth of 6.8% and gross profit growth of 8.2%, alongside the mandatory complaint about today’s “challenging UK retail market.” The update, which covers the 10-week period ending 31 December, also reported trading margins rose 0.4%, led by strong performance in Naked Wines, where sales grew 15.9%.

Not quite Majestic

This is good news given that the £181m group generates 30% of total annual sales during the key Christmas trading period. But there was one concern. While overall sales rose 1.5%, gross margins were down 1.2 percentage points on a year ago, which management blamed on “a very price promotional market.”

Group CEO Rowan Gormley reckons Majestic is well-positioned to survive the “revolution in retail,” although the stock is up just 0.4% on today’s results. Encouragingly, the group is expanding overseas with some success, with sales up 21% in the US and 14.8% in Australia. It’s now strengthening its focus on the US, “accelerating investment to capture the attractive growth opportunity.”

Retail revival

Majestic was punished after warning in November that sales growth would be flat this year, but the future now looks brighter, with City analysts predicting earnings growth of 39% in the year to 31 March 2020, and 38% after that. You can buy it at 15.7 times earnings, with a forecast yield of 2.7%. It depends how challenging you think the retail market is going to be.

FTSE 100 fashion and home products retailer Next knows all about challenging times, but is in full-throttle recovery mode right now, its stock leaping 20% in the past week. As Kevin Godbold explains, this was due to a surprisingly good trading update for the all-important Christmas period, with sales climbing 1.5% on last year.

Online growth

This made up for a disappointing November with a 15.2% rise in online sales offsetting a 9.2% fall on the high street. There’s an interesting equation here. In the past, many retailers found that rapid online sales growth failed to compensate for falling high-street growth, because the increase came from a low base, while the fall came from a higher one. As online sales steadily grow, the balance is beginning to reverse, especially at Next, which now generates 70% of its profits online.

Would its online offering the so popular if it closed its stores and no longer had a public presence? I suspect not. Bricks & mortar stores may be a burden it must continue to carry.

Despite the recent surge, Next still trades at just 10 times earnings and offers a forecast yield of 3.4%, with dividend cover of 2.7. Earnings are forecast to rise 4%, 3%, and 3% over each of the next three years, which offers further encouragement. Next is showing the potential rewards from getting greedy when others are fearful.

The post Why I’d buy this red hot FTSE 100 stock and a small-cap growth play today appeared first on The Twelfth Magpie.

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harveyj 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.

Simply Majestic

These are tough times for every retailer, whether £20bn FTSE 100-listed grocery giant Tesco (LSE: TSCO) or £238m vino specialist Majestic Wine (LSE: WINE). Majestic is down almost 13% as its half-year results showed a reported loss before tax of £200,000, against a profit of £3.1m last time.

Group CEO Rowan Gormley put it bluntly: “We’re doing well in a tough market.” He said Majestic set out a plan in April and is delivering on it. “That plan was to accelerate growth by investing in new customers and, so far, the plan is on track.” 

Lack of sparkle

Today’s figures showed group revenue up 5.4%, boosted by its previously announced investment plan, while underlying growth at its Naked Wines operation accelerated from 11.6% to 14% year-on-year. However, this is costing money with new customer investment in Naked up £3m to £7.9m. As Gormley put it: “We’ve been investing more, and as a result profits are down.”

He said the group is on track to meet its £500m full-year sales target while warning the market is tough. Anticipated growth this year now looks likely to be “flat at best”, hence the share price rout.

Wine and dine

I like Gormley’s straight talk. “We were planning for tough times and we’re investing through tough times because we know that’s the route to a more profitable future,” he said. I also like that its business is now almost 45% online and more than 20% international, but I can’t raise a glass to its pricey forecast valuation of 24.5 times earnings, which has been a worry for some time.

Majestic is down 35% over five years but Tesco is down a heftier 41%, despite CEO Dave Lewis’s impressive overhaul, including the £4bn purchase of wholesaler Booker Group, which already appears to be bearing fruit. Like all the big supermarkets, it is under huge pressure from German discounters, and there is little sign of that easing in any way, as Aldi and Lidl now have a 13.1% share of the market between them.

Tesco to go

Tesco is still more than twice their size at 27.5%, according to Kantar Worldpanel, although is continuing its slow slide since it dipped below 30% in January 2012. Tesco has done well to hold on to what it’s got, but investors have not reaped the benefit. I am wary of a business with group operating margins of just 2.94%, although it recently declared itself on track to achieve its ambition of 3.5%-4% by 2019/20.

Earnings per share growth forecasts look promising, at 17% and 20% over the next two years, while its valuation is a reasonable 14.5 times forward earnings. The dividend is in recovery and investors now get a forward yield of 2.5%, covered 2.7 times, giving scope for future progression. Analysts are predicting a 3.6% yield by 2020. 

However, my colleague Royston Wild expects that Tesco’s share price will keep sliding and I also think there are better options for your pension.

The post Could the Tesco share price help you retire early despite the rising State Pension age? appeared first on The Twelfth Magpie.

More reading

• Here’s what a surging Tesco share price has done to £10,000 invested 5 years ago
• Are Tesco shares losing their momentum?
• Tesco’s share price drops 2% on Q1 trading miss. What’s gone wrong?
• As Tesco shares dip on Q1 results, is this a brilliant time to buy?
• How much might £19,999 in a Cash ISA be worth in 2036?

harveyj has no position in any of the shares mentioned. 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.

With this in mind, today I’ve turned my attention today to Watford-based business Majestic Wine (LSE: WINE) whose stock has climbed roughly 50% in value in a little under a year. Can its owners be confident of toasting further gains?

“Making headway”

Today’s results certainly made for pleasant reading. Majestic reported a 2.3% rise in revenue to £476.1m over the 52 weeks to 2 April, supported by an 11.3% increase in underlying sales at its independent wine-making business Naked Wines. Despite performance at the company’s retail arm being somewhat less stellar — the 1.9% growth in sales “offset by foreign exchange pressures on margin” — the company reported a pre-tax profit of £8.3m compared to the £1.5m loss sustained in 2016/17.  

The good news didn’t stop there. Free cash flow jumped from £6.2m to £24.9m, allowing the company to approve a total dividend of 7.2p per share. This represented a 41.1% improvement on the previous financial year for a trailing yield of 1.6%. A serious reduction in net debt (from £25.7m to £8.4m) was also pleasing to see. 

Having reflected that the company was “making headway despite headwinds,” CEO Rowan Gormley cautioned that trading in the UK was likely to “remain tough, possibly even tougher than last year.” Nevertheless, the £320m-cap is still expected to hit full-year expectations, particularly as 20% of business occurs in the USA and Australia and 45% of total sales are generated online.

After a flat start, Majestic Wine’s shares moved higher, suggesting there could be more upside to come. Given its already frothy forecast P/E of 27 however, it’s probably not a stock I’d chase.

A cheaper option

Of course, there are other options out there. One example is Dublin-based drinks manufacturer and distributor C&C (LSE: CCR).

Shares in the mid-cap (which produces Bulmers and Magners) have been fairly volatile over the last year, falling from a high of around €3.30 to as low as €2.60 before recovering strongly at the beginning of April, coinciding with its purchase of distributor Matthew Clark Bibendum as Conviviality fell into administration.

Despite being in line with analyst predictions, May’s full-year results showed a near-5% fall in net revenue in the 12 months to the end of February compared to the previous financial year as the company faced a “challenging” trading environment (and weather disruption) in the UK and Ireland. Adjusted earnings before interest, tax, depreciation and amortisation also fell 6.3% to a little over €100m. On a more positive note, free cash flow rose from €58.3m to €70.8m with the company also reporting that its pension scheme has returned to a surplus of €1m compared to the €17.8m deficit in the previous year.

Changing hands at 11 times forecast earnings for the 2018/19 financial year, C&C’s stock should have appeal for value hunters. Based on its current price, a well-covered dividend of 4.8% is also expected — far more than you’ll get from Majestic Wines. With the Matthew Clark Bibendum acquisition likely to do the company no harm at all and recent trading looking solid, I’d be tempted to think that C&C might represent a better investment at the current time.

The post Is this high-flying small cap stock still worth the price? appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
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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.

And according to a strategy update issued by the firm today, the opportunity to attract new clients is even bigger than the company previously projected. 

Investing for the future

Today’s strategy update notes that “the opportunity to invest in new customer acquisition is materially bigger than previously thought” and, as a result, the company is planning to ramp up its investment in marketing. It intends to invest an additional £12m in growth, as well as its £12m per annum existing investment. Apparently, each pound invested has a lifetime payback in excess of £4, meaning that each year £48m of future value is banked at the current level of investment. 

Unfortunately, even though the higher capital spending is expected to pay off over the long term, it will reduce near-term earnings.

Management believes expenditure will dent earnings in the 2017 financial year to the tune of £3m before “annual generation of future value from £48m to £80m-plus a year.” In my opinion, this trade-off is highly attractive. Majestic is investing for the future, which if management figures are to be believed, should result in tremendous returns for its shareholders over the next three to five years. 

What’s more, investors will be paid to wait for the turnaround. The shares currently support a dividend yield of 1.5%, and the distribution is expected to grow 13% in 2018 and 20% in 2019. 

As the investment in future growth filters through to the bottom line, I believe dividend growth will only accelerate. That’s why I’m considering this dividend-growth stock after today’s news. 

Market-beating income

Another dividend-growth stock that has recently attracted my attention is Headlam (LSE: HEAD). 

Headlam markets and supplies floor covering products, a business that it has fine-tuned over the years. Since 2012, earnings per share have grown at a compound annual rate of 10%, allowing management to adopt a similar rate of dividend growth. 

Over the next two years, City analysts expect this trend to continue. The shares currently support a dividend yield of just under 6%, and the payout is expected to grow between 8% and 5% over this period.

Not only does the stock support a market-beating dividend yield, but it also has a cash-rich, debt-free balance sheet, which should encourage further dividend expansion. 

And as well as its dividend potential, shares in Headlam currently appear undervalued, as investors remain cautious around the outlook for the UK retail industry. The stock currently trades at a forward P/E of 10.1, a valuation that, in my view, more than reflects current retail industry uncertainty and could lead to a substantial re-rating if the firm performs better than expected.

The post Why I’m considering this dividend-growth stock after today’s news 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?
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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.

Latest numbers from the British Insurance Brokers’ Association (BIBA) last week showed that car insurance premiums leapt 10.7% year-on-year excluding the impact of the Insurance Premium Tax during the final quarter of 2017.

The momentum in premium growth is clearly picking up and this was apparent in eSure’s latest set of financials. The company advised earlier in March that gross written premiums leapt 25% in 2017, to £820m, a result that caused pre-tax profit to explode 36% from the previous year, to £98.6m.

But rising premiums are not the whole story as eSure is also drawing more and more business from its competitors. Indeed, the number of in-force policies at the business climbed 9% last year to 2.37m. And the company has eyes on hitting the magic 3m marker by the start of the next decade.

Those 6%+ yields

While the competitive landscape is expected to see earnings expansion at eSure slow from the double-digit percentage improvement posted last year, a 9% anticipated rise forecast for 2018 is nothing to be scoffed at. And this positive forecast is expected to support abundant dividends too.

Last year’s 13.5p per share reward is expected to rise to 14.2p this year, resulting in a monster 6.4% yield. And the good news continues — on the back of an 11% earnings rise in 2019, the insurer is predicted to raise the dividend again to 15.4p, a number that yields an outstanding 6.9%.

ESure has seen its share price drop 27% from the peaks above 300p per share punched last July, and I see this as a prime buying opportunity. The company now changes hands on a forward P/E ratio of 10.6 times, a bargain in most cases and particularly for a firm that is growing in stature in a positive marketplace.

Take a sip

Another FTSE 250 income share worthy of close attention today is Majestic Wine (LSE: WINE).

The yields may fall some way short of those over at eSure, but those seeking robust dividend growth for the years ahead may want to take a look. In the year to March 2018 the shareholder reward is expected to rise to 5.5p per share from 3.6p per share a year earlier, supported by a fractional earnings improvement and yielding 1.2%.

Additional payout expansion is predicted in fiscal 2019 too. With profits expected to advance 19% Majestic is anticipated to raise the dividend to 6.7p, moving the yield to 1.5%.

The wine retailer doesn’t pack the same sort of value as eSure. In fact, a prospective P/E ratio of 20.9 times looks a tad toppy on paper. But this shouldn’t deter investment in my opinion — rather, this premium can be considered a small price to pay given the progress of Majestic’s transformation plan that is helping it to thrive in a tough British marketplace.

When you also factor-in the brilliant global revenues potential of Naked Wines — divisional sales in the US rose almost 10% alone in the first fiscal half, illustrating the vast growth potential here — Majestic is a great selection for those seeking robust earnings and dividend growth in the years ahead.

The post Can you afford to miss this FTSE 250 6% yielder? appeared first on The Twelfth Magpie.

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• 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. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Stock, which produces spirits and liquors sold across Central and Eastern Europe, said overall trading since half-year results were announced in August, and therefore for the full-year ended 31 December, was slightly ahead of expectations.

The small-cap said that in Poland and the Czech Republic — which provide more than three-quarters of group sales — both volumes and values continue to rise, the company quoting researcher Nielsen’s data of November.

Risky business

The solid market conditions the firm speaks of are being celebrated by the market right now, and this has fuelled its 70% share performance improvement since the beginning of August.

And in theory the prospect of strong economic growth in the emerging economies of far-flung Europe should keep driving drinks demand, and with it Stock Spirits’ earnings, higher in the years to come.

But I remain less than convinced by this argument as key markets like vodka remain in a state of structural decline as modern drinkers opt for alternative tipples. And Stock’s position in its key territories also remains under pressure from intense competition.

So while the business has engaged in massive cost-cutting programmes and diversification into new product areas to combat these problems, the risk to it posting strong and sustained profits growth remains high.

City analysts are predicting that the business will follow an anticipated 19% earnings improvement in 2017 with an 8% rise in the current year. However, current forecasts leave the company dealing on a forward P/E ratio of 18.2 times. And this is too high in my opinion given the amount of hard work it still faces to keep sales on an upward trajectory.

Take a sip

I would instead be far happier pouring my investment cash into Majestic Wine (LSE: WINE), even if the broader retail environment in the UK is likely to remain challenging for some time yet.

The wine-seller also updated the market on Tuesday, advising in a cheery festive report that underlying sales leapt 4.1% in the 10 weeks to January 1. AIM-quoted Majestic generates almost a third of its annual sales at Christmas so today’s update clearly bodes well for full-year numbers.

Investors should beware that its hard work to get drinkers flocking back through its doors is not expected to light a fire under earnings just yet. Instead, a 1% bottom-line reversal for the 12 months to March 2018 is currently anticipated by City brokers, a situation which would represent a fourth successive annual dip if realised.

But I am confident the measures it has undertaken to improve its retail operations should create healthy profits growth further down the line. And I am not alone, the Square Mile anticipating it to finally fire back with a 19% earnings improvement in fiscal 2019.

Despite its elevated forward P/E ratio of 26 times, I believe the huge sums it has invested to bolster its international footprint, not to mention improve the customer experience in its UK market, should lay the groundwork for healthy growth in sales ahead, and thus Majestic Wine is deserving of such a fruity premium.

The post 1 turnaround stock I’d buy in 2018 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. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As the company heads into the busiest period of the year, further growth seems likely. Today I’ll look at the numbers behind this turnaround and explain why I think further gains are likely.

I’ll also look at a second company whose track record suggests to me that it remains a growth buy.

A vintage year

Majestic’s half-year figures showed good progress in several areas. The group’s adjusted operating margin rose to 3.4%, the highest since 2015.

One important reason for this is that the Naked Wines business — which funds independent winemakers and sells their wine to its members — has turned profitable.

According to today’s report, Naked’s sales rose by 15% to £67.8m, taking the group from an adjusted operating loss of £2.8m to a profit of £4.7m. Chief executive Rowan Gormley says that he sees this business — which operates online and is increasingly popular in the USA — as one of the group’s biggest growth opportunities.

Stronger UK performance

The profitability of Majestic’s core retail business also improved, with an adjusted operating margin of 3.8%, compared to 2.9% for the same period last year. This side of the business has benefitted from investment over the last year, including store refits, a new website and improved stock availability.

Looking behind the scenes at the group’s accounts, free cash flow turned positive during the half year and net debt has remained stable, at about £25m. Both figures reassure me that the group’s business model appears to be generating sustainable profits.

Majestic shares now trade on a forecast P/E of 23, with a prospective yield of 1.5%. Although this isn’t cheap, earnings per share are expected to climb by nearly 20% next year. I think the stock could continue to outperform the market and remains a buy.

Up 20% in one week

Dart Group (LSE: DTG) is probably best known for its holiday business Jet2. The group’s shares have risen by 514% over the last five years, as Dart has repeatedly outperformed expectations.

Last week’s half-year results showed sales up by 34% to £1,664m, while operating profit climbed 22% to £204.9m. Although the group’s half-year operating profit margin fell from 13.5% to 12.3%, management now expects full-year profits to be “materially” ahead of expectations.

Dart is preparing to launch expanded services for the summer 2018 season. The group has also invested in a number of new aircraft and facilities. I expect these changes to put the group in a good position to deliver growth, in a market that’s seen several rival budget airlines — such as Monarch — fail this year.

Still a buy?

Dart shares have climbed 20% since these figures were published, but the stock still looks quite reasonably priced on around 16 times 2018/19 forecast earnings.

I continue to rate the stock as a buy, but it might be worth waiting a little to see if the share price pulls back further from its recent highs of 700p+.

The post 2 easy stock picks that could make you a millionaire 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 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 digital marketing expert advised that revenues surged 13% during January-June, to £141m, a result that pushed adjusted EBITDA 59% higher to £9.2m.

More specifically, Matomy Media said that it enjoyed exceptional sales growth across its two core divisions. At Mobfox, programmatic mobile in-app revenues surged 104% to $25m, while at its Team Internet domain monetisation unit, the top line bulged 69% to $51.7m.

Today’s results highlight the rationale behind the restructuring measures Matomy Media announced back in May. The Israeli business announced plans to double down on its core operations and to exit non-critical areas like legacy web display, social, search, and virtual currency media channels to cut costs, create a more flexible operating model and improve cash generation.

Spinning around

Matomy Media slumped into the red last year, the company clocking up losses of 13 US cents per share. But City analysts believe a sustained revival is just around the corner.

In 2017 the media play is expected to report earnings of 14.1 cents, and the bottom line is expected to improve by 41% next year to 19.9 cents. And current projections make it brilliant value — it sports a forward P/E rating of 9.1 times, below the well-regarded bargain watermark of 10 times.

In my opinion, this value leaves plenty of upside on the back of Matomy Media’s ambitious transformation programme and vast exposure to the US. The business sources two-thirds of revenues Stateside, and sales should continue to boom as ad spending steadily increases across the Pond.

Toast terrific returns

Majestic Wine (LSE: WINE) is another stock the number crunchers expect to move back into the black sooner rather than later.

The AIM-quoted business has seen its bottom line steadily contract in recent years as sales have struggled and heavy investment costs have weighed. And the City does not expect the bottom line to move back into the right direction just yet — a 4% earnings drop is forecast for the 12 months ending March 2018.

But the fruits of its transformation strategy are expected to drive earnings skywards from fiscal 2019 onwards. It is now past the most cost-intensive part of its cycle, and sales continue to grow at a terrific rate thanks to recent customer service improvements (at Majestic Retail these have expanded for eight consecutive quarters on a like-for-like basis). And strong demand at Naked Wines in the US and Australia in the period underlines the brilliant revenues opportunities here.

Brokers are predicting an 18% profits bounce next year, and it is not difficult to see Majestic Wine maintaining this momentum as recent heavy investment pays off. In my opinion the wine seller is a great selection right now even in spite of its slightly-toppy prospective P/E multiple of 21.1 times.

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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. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But fear not: today’s 3% dip reflects the broader waves of risk aversion sweeping financial markets rather than the highlighting of trading troubles at the retailer.

Indeed, Majestic Wine’s update underlined the terrific progress of the firm’s recovery strategy. The Watford business announced that sales rose 15.7% during the 12 months to March 2017, to £465.4m, or 11.4% on an underlying basis.

This could not stop Majestic Wine slipping to a pre-tax loss of £1.5m versus fiscal 2016’s £4.7m profit. However, the adverse result connected in large part to the acquisition of Naked Wines in 2015.

Toasting the results, group chief executive Rowan Gormley commented that “we are past the tipping point, both financially and operationally,” noting that the company is now past the riskiest and most cost-intensive part of its recovery strategy.

Starting to fizz

Majestic Wine’s three-year turnaround plan to stop the sales rot by binning the six-bottle minimum purchase and improving  the customer experience is clearly producing the goods.. The business saw adjusted earnings flip 51% higher during the second half of the fiscal year.

Like-for-like sales at Majestic Retail have now grown for the eighth successive quarter, and turnover leapt 5.4% during the year to March 2017, to £258.5m. And revenues growth is really starting to gain traction at its US business — turnover at Naked Wine rose 26.3%, to £142.2m, with demand from its Stateside customers exploding 28%.

On top of this, Majestic Wine’s goal of improving its online proposition is also bearing fruit, with multichannel sales now accounting for 56% of the group total. This is a critical area due to the marked shift in drinkers doing more of their shopping online.

The City does not expect earnings at the retailer to detonate just yet however, and a 4% dive is anticipated for the year to 2018. However, the results of Majestic Wine’s transformation drive are expected to be felt thereafter, starting with an 18% burst higher in fiscal 2019.

I reckon its improving momentum makes it worthy of a slightly-heady forward P/E ratio of 21.8 times.

Read all about it

I also believe WH Smith’s (LSE: SMWH) international expansion drive should lay the groundwork for strong earnings growth in the coming years.

The newsagent advised this week that, at its global Travel division, total sales rose 8% during the 15 weeks to June 10, or 5% on a like-for-like basis. WH Smith remains on track to open 15 UK-based units this year, it said, and will open a further six in Rome next month.

While the business isn’t performing as well on the high street (total and like-for-like sales here sank 4% in the period), I am convinced the retailer’s galloping progress abroad — allied with ongoing restructuring to mend profits at its domestic division — should continue to deliver chunky earnings expansion.

The City agrees, and expects WH Smith to keep its rich earnings record going with rises of 6% and 7% in the years to August 2017 and 2018 respectively.

I am convinced a prospective P/E ratio of 16.9 times is stellar value given the excellent sales progress of its international operations.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended WH Smith. 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.