Powerful growth  

A glance at Fevertree’s financials reveals an excellent set of numbers. Between 2014 and 2016, sales climbed from £35m to £102m, with net profit surging from £1.3m to £27.5m. That’s some powerful growth. Looking at forecasts for FY2017 and FY2018, analysts expect the party to continue. Revenue and net profit of £168.5m and £45.3m are anticipated for the year just completed, followed by sales of £199.1m and a net profit of £49.2m this year. Fevertree’s growth looks compelling.

Other metrics stand out as attractive too. For example, the group’s operating margin is strong, at 35%, and return on equity is excellent at approximately 43%. Debt is low, with just £6.1m of borrowing on the balance sheet.

Fevertree has consistently revised trading expectations upwards, and is bullish on the outlook for the future. What’s not to like?

Priced for perfection 

Well, the issue that concerns me is the stock’s valuation. With analysts expecting earnings of 42.6p for FY2018, the forward-looking P/E ratio is a high 55. That valuation prices the stock for perfection, and doesn’t leave much room for error.

The PE to growth (PEG) ratio reinforces my view that the stock is expensive. With analysts expecting earnings growth of around 8.7% this year, the PEG ratio is currently a high 6.9. Generally, a ratio of under one is considered strong value.

I also have a few concerns about the company’s competitive advantage. Is the brand truly strong enough to withstand competition from new entrants to the market? What about competition from established players? I’ve noticed that rival Schweppes has had a branding overhaul recently – it’s clearly trying to fight back.

Given these concerns, Fevertree is not a ‘buy’ for me at the current price. I’ll keep the stock on my watchlist for now.

Cheaper growth

One growth stock that does look attractively valued, in my view, is Mattioli Woods (LSE: MTW). The company is a leading provider of wealth management and pension solutions.

This is another small-cap stock that is growing at an impressive pace. For example, over the last three years, revenue has surged 72%, while net profit has climbed 50%. Half-year results released today, demonstrate further momentum.

Indeed, for the six-month period to the end of November, revenue jumped 17% to £28.4m, while adjusted EPS rose 15% to 19.2p. In a signal of confidence from management, the interim dividend was hiked 17% to 5.5p per share. Chief Executive Ian Mattioli was upbeat about the firm’s future, stating: “The outlook for this year remains in line with our expectations and I believe we are very well positioned to meet the ambitious longer-term goals we have set.”

Trading on a forward P/E of 20.6, with a prospective dividend yield of 2%, I believe shares in Mattioli Woods could be worth a closer look.

The post One hot growth stock I’d buy over Fevertree Drinks plc appeared first on The Twelfth Magpie.

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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.

The company, which provides wealth management and employee benefit services, announced that revenues shot 17.4% higher in the 12 months to May, to £50.5m, while organic revenues increased 11.6%. As a consequence adjusted EBITDA rose 17.2% to £10.9m.

Lauding the results, chief executive Ian Mattioli said: “Sustained demand for advice and the continued development of our investment and asset management proposition have driven strong new business flows, which together with acquisitions completed in the current and prior financial year increased total client assets under management, administration and advice by 17.5% to £7.77bn.”

And Mattioli Woods continues to invest heavily to keep new business rolling in. It boosted the number of advisors on its books to 115 at year-end from 104 a year earlier, and expanded its geographical handprint by moving to new offices in London and Glasgow last year and opening a new base in Manchester.

Meanwhile, the financial giant advised that “acquisitions remain a core part of our growth strategy,” and noted that “the five businesses acquired during the previous financial year have integrated well and all have contributed positively to the group’s trading results since acquisition.”

On the right track

Mattioli Woods has been doling out double-digit earnings increases in recent times and, although City analysts expect growth to dial back a bit in the near term, a predicted 7% advance for the year to May 2018 is still not too shoddy.

And the number crunchers expect profits at the Leicester firm to rev up again from next year onwards — an 11% improvement is pencilled in for fiscal 2019.

Many investors may be put off by the forward P/E ratio of 23.4 times, a figure that sails above the broadly-regarded value benchmark of 15 times. But I reckon the company worthy of such a premium, given its dedication to pursuing acquisitions.

Besides, I reckon the probability of further meaty dividend growth also makes the AIM stock a tantalising proposition right now. Mattioli Woods is expected to raise last year’s 14.1p per share payout to 15.3 in the current year, and again to 16.8p in 2019.

As a consequence, investors can tap into handy yields of 1.7% and 1.9% for this year and next.

Soap star

PZ Cussons (LSE: PZC) is another stock I expect to deliver brilliant shareholder returns thanks to the formidable brand power of products like Imperial Leather soap and shower gel and Morning Fresh washing up liquid, not to mention its vast exposure to lucrative emerging markets.

Trading troubles in regions like Nigeria hav seen earnings disappoint more recently, although Cussons is expected to bounce back in the years to May 2018 and 2019 — rises of 6% are predicted by City analysts for both years.

And the household goods maker is expected to keep dividends growing at a handsome rate too, the 8.28p per share payment of last year projected to advance to 8.9p and 9.4p in 2018 and 2019 respectively. These figures yield 2.6% and 2.7%.

The post 2 top income and growth stocks you must check out today appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of PZ Cussons. 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.

Liontrust Asset Management

£222m market cap Liontrust Asset Management (LSE:LIO)  is an independent fund management business, based in London. The stock has been a top performer over the last five years, rising from around 90p to 440p today, a gain of nearly 400%.
 
Looking at the company’s financials, it’s not hard to see why the share price has surged higher. Revenue has increased from £13.7m in FY2012 to £51.5m for FY2017, and the company has gone from generating a net loss of £0.2m to a net profit of £6.8m in this time. City analysts forecast revenue and net profit of £69.8m and £18.5m respectively for FY2018, meaning that the impressive growth of the last few years looks set to continue.
 
Dividend investors might also be interested to hear that Liontrust paid out dividends of 15p per share last year, equating to a healthy yield of 3.4% at the current share price. The dividend payout has been increased significantly in recent years and analysts expect growth of 20% in FY2018.
 
However, despite the excellent numbers and strong recent momentum in the share price, Liontrust currently trades on a forward looking P/E ratio of just 11.9, which seems very reasonable for a company growing so quickly.
 
Investors should bear in mind that fund managers’ profitability is generally related to the performance of global stock markets. Therefore if markets were to experience a significant pull-back, profitability could suffer. But for now, the company looks to have strong momentum and as they often say in investment circles, ‘the trend is your friend.’

Mattioli Woods

Also demonstrating strong share price momentum in the last five years is £203m market cap Mattioli Woods (LSE:MTW). The wealth management provider has seen its share price rise from around 180p five years ago, to 790p today, a gain of a formidable 340%. 

The company released a trading statement this morning in advance of its full-year numbers due to be announced in September, and the numbers look impressive.
 
The wealth management specialist achieved the significant milestone of annual revenue greater than £50m, exceeding analysts forecasts of £48.5m. While the company didn’t reveal any details about profitability, it stated that its financial position was strong, with net cash of £23m at year-end and that recent acquisitions were performing and integrating well. Organic growth was robust, with 1,200 new wealth management clients and 100 new corporate clients coming on board during the year. Discretionary assets under management rose to £1.6bn at year end.
 
Chief Executive Ian Mattioli said: “I am delighted with the performance of our business for the last financial year and believe we remain well-positioned to secure further profitable growth.”  
 
Does the stock offer value at the current share price? On forecast earnings of 33.6p per share, Mattioli Woods currently trades on a P/E ratio of 23.6, and trailing dividend yield of 1.6%. While not in ‘bargain’ territory, that valuation doesn’t look overly expensive for a smaller company growing strongly.  

The post 2 momentum growth stocks that could help you retire early appeared first on The Twelfth Magpie.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Liontrust Asset Management. 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.

Clearly, though, there are still stocks which could be worth buying. Could now be the right time to buy these two smaller companies?

Uncertain outlook

Reporting on Wednesday was wealth manager WH Ireland (LSE: WHI). The first half of its current financial year has seen progress made with its strategy. Both of its main divisions have reported strong momentum in absolute terms, and also when compared to the same period in the previous year.

Notably, the company’s Corporate and Institutional Broking division has increased its transactional revenue. Its pipeline of new business is at its highest level for several years, which suggests the company’s strategy is performing relatively well. Similarly, the company’s Private Wealth Management division has improved its client proposition, with its assets under management and administration increased to over £3bn.

Looking ahead, WH Ireland faces an uncertain future. The outlook for the UK economy remains difficult to predict, with higher political risk, a volatile currency and rising inflation causing some difficulties for the economy. The potential for a higher interest rate may also hurt economic growth. Therefore, while WH Ireland is making progress with its current strategy, trading conditions may worsen. As such, buying a larger and better-diversified sector peer may be a superior option for investors thinking about their retirement plans.

Fully valued?

Pensions consultancy and administration services provider Mattioli Woods (LSE: MTW) has delivered a relatively robust earnings growth performance in recent years. Its earnings have increased at an annualised rate of almost 10% during the last four years, which shows that the company’s strategy has been working well.

Looking ahead, more growth is forecast. The company is expected to report a rise in its bottom line of 10% in the current financial year, followed by further growth of 9% next year, This could help to keep investor sentiment relatively bullish after a share price gain of 15% in the last year.

However, when it comes to capital growth potential, Mattioli Woods may have somewhat limited appeal. Its shares appear to be fully valued at the present time. For example, they trade on a price-to-earnings growth (PEG) ratio of 2, which suggests they may struggle to perform well on a relative basis over the medium term.

Certainly, the business seems to be performing well. However, with a high valuation the company lacks value appeal. Dividend growth potential could be high, since the company pays out just 42% of profit as a dividend. However, with a dividend yield of just 2%, there may be better options available elsewhere.

The post Can you rely on these 2 small-caps to fund your retirement? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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.