However, such companies can offer high reward potential. As such, they can be worth buying in some cases. With that in mind, here are two companies that have experienced difficult periods, but which could generate high returns.

Stronger outlook

One company that has experienced a difficult period is Merlin Entertainments (LSE: MERL). The company reported full-year results on Thursday which showed that its performance has been disrupted by extreme weather conditions and a spate of terror attacks. They caused challenges for the trading performance of the business – especially during the summer season,

Despite tough trading conditions, the company was able to report growth in visitor numbers of 3.5% to push them to record levels. It also recorded revenue growth of 11.6%, which was driven by growth in like-for-like revenue, new business development and favourable foreign exchange movements.

EBITDA (earnings before interest, tax, depreciation and amortisation) was up 9.5% versus the previous year. And with strategic progress being made in terms of increasing the number of hotel rooms and attractions, the year was a relatively successful one for the business.

Looking ahead, Merlin is expected to report a rise in its bottom line of 4% in the current year, followed by further growth of 10% next year. Despite such a strong rate of growth, it trades on a price-to-earnings growth (PEG) ratio of just 1.4. This suggests that it could deliver upbeat share price performance in the long run.

Recovery potential

Also offering potential for improved performance in future is Burberry (LSE: BRBY). The company is currently undergoing a period of significant change as it seeks to improve its financial performance. Profitability is expected to fall by 3% this year, but the stock is due to return to bottom line growth in the next financial year.

As part of its new strategy, the company is seeking to sell more goods at a higher price point. And today it announced a new creative chief, Riccardo Tisci (ex-Givenchy), who is highly regarded and has worked with CEO Marco Gobbetti before. 

Burberry’s focus on the luxury segment means a period of heavy investment in its store estate, as well as some store closures. This is set to put additional strain on its free cash flow over the medium term, but could create a business which is able to generate improving sales and margins in the long run.

Clearly, Burberry is a strong brand with a loyal customer base. By focusing on what is essentially its core customers and core products, the company could deliver improving performance. With cost cuts also being delivered at the present time, the stock’s valuation could gain a boost over the coming years.

The post One bargain stock and one growth opportunity I would buy today appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Burberry. 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.

This news isn’t exactly unexpected, particularly as Merlin did hint at purchasing SeaWorld’s African-inspired Busch Gardens theme park when announcing its interim results back in August. Nevertheless, a deal now seems particularly opportunistic given that the Florida-based marine park operator’s shares have lost a quarter of their value so far this year and hit an all-time low of just over $11 a couple of months ago. To give some perspective, the stock changed hands for nearly $40 a shot four years ago before accusations were made about the way in which the company treated the whales in its parks and attendance figures began to dwindle.

This seems an understandable move by Merlin, especially as it’s already the world’s largest aquarium operator. Even if a deal doesn’t materialise, I still think there are a number of reasons for investors to consider adding the £4.7bn cap to their portfolios. 

While its elephant-like nature means its share price won’t exactly gallop anytime soon, an expected 16% rise in earnings per share in the next financial year leaves it trading at 19 times forecast earnings. That’s not screamingly cheap but nor is it ludicrously expensive for a business with an ambitious international growth strategy. Indeed, so geographically diversified are the company’s assets, I believe it could be a good stock to hold as we approach our EU departure. Factor-in consistently high operating margins and decent free cash flow and there are surely far worse picks in the market’s top tier.  

Strike it rich

Those with more risk appetite might wish to take a closer look at £276m cap Hollywood Bowl (LSE: BOWL). Shares rose in early trading this morning after an encouraging year-end trading update from the Hemel Hempstead-based firm.

Since coming to the market last September, the UK’s largest ten-pin bowling operator said that it had met its goals of expanding its sites, refurbishing those already in its possession and rebranding those taken over from peer Bowlplex. This has led to “strong financial and operational performance” which is now expected to be “marginally ahead” of previous expectations. Revenue growth of 10% was seen in H2 compared to the same period in 2016, with like-for-like growth for the whole year now predicted to come in at 3.5%.

It gets even better for holders of the stock. Building on hints made in its half-year trading update and thanks to its cash generative nature, the company reiterated its intention to return cash to investors in the form of a special dividend at some point in the future. More news on this is expected when full-year results are confirmed in December. 

At a time when many growth stocks are starting to look frothy, it’s pleasing to note that shares in Hollywood Bowl still look reasonably priced, trading as they are at 17 times earnings. Assuming analyst earnings projections for the next financial year are hit, this falls to just 15 times earnings for 2018/19.

While it would be a mistake to forget that its business model can be easily replicated, Hollywood Bowl remains a promising growth play.

The post This FTSE 100 giant isn’t the only stock expected to deliver blockbuster growth appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. 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 still a number of stocks which could offer profitable investment opportunities. These two shares could help to propel you towards a £1m portfolio by retirement.

Strong results

Reporting on Friday was visitor attraction operator, Merlin Entertainments (LSE: MERL). The company’s first half results saw a rise in revenue of 9.6% at constant currency, with visitor numbers 6.2% higher than in the same period of the prior year. Like-for-like (LFL) sales were 3.7% up on last year, with the company benefitting from a strong contribution from new accommodation and attractions. There was particularly high growth from Legoland, where its parks revenue increased by 20.8% at constant currency.

Merlin is also making good progress towards its 2020 strategic milestones, with five new Midway attractions opening in the period. It has also opened 381 new accommodation rooms to date across four of its theme parks, while Legoland Japan opened ahead of schedule and on budget.

Looking ahead, Merlin is expected to post a rise in its bottom line of 15% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of just 1.3, which suggests it offers value for money. The company has significant geographical diversity, which could help to protect it from the risks of Brexit. It may also continue to benefit from a weak pound, while its strategy looks set to deliver high growth in future years.

Growth potential

Also offering an upbeat outlook for the long term is Whitbread (LSE: WTB). The Costa and Premier Inn owner has become a dominant player in the UK leisure sector. It has a high degree of customer loyalty which should help to protect it against a potential economic downturn over the next couple of years.

Alongside this, the company has significant international growth potential. It is slowly expanding the number of Premier Inn locations, while its move into China with Costa could be a positive catalyst on its earnings. The country is becoming more consumer-focused and there is expected to be a high-single-digit growth rate in demand for consumer goods, such as coffee, over the long run. Accessing this growth opportunity could be a shrewd move for Whitbread.

With it trading on a price-to-earnings (P/E) ratio of 15.8, it is not cheap compared to other travel and leisure sector stocks. However, given its mix of defensive characteristics due to its high degree of customer loyalty in the UK, and its growth potential in international markets such as China, it could be a stock which helps to propel your portfolio towards seven-figure status.

The post 2 growth stocks that could help you make over £1 million by retirement appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Whitbread. 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.