The firm provides trading platforms, expertise and other services for global banks, asset managers, companies and others, and today’s interim results suggest ongoing growth potential. Revenue from continuing operations lifted 7% on a constant currency basis compared to a year ago and operating profit excluding one-off items held steady with a minor 1% decrease. However, underlying earnings per share came in 13% lower and the directors declared a much-reduced interim dividend of 3.5p per share, which compares to last year’s payment of 11.5p.

A progressive dividend policy

Looking forward from this lower dividend level, NEX has plans to deliver a progressive dividend policy, which it says will be set between 40% and 50% of post-tax trading profit. Growth opportunities and cost savings look set to keep earnings rising from here with the directors announcing that they’ve identified the potential for £40m in annual cost savings over the next three years. City analysts following the firm expect earnings to come in 11% higher for the full year to March 2018 and 34% up to March 2019.

Chief executive Michael Spencer reckons the firm has seen a “transitional and transformational year.” He expects NEX to achieve compound annual revenue growth of 7% to 10% and operating margins of more than 40% for its NEX Optimisation and NEX Markets divisions by the 2019/20 full trading year.

A question of valuations

Meanwhile, today’s share price of around 586p throws up a forward price-to-earnings (P/E) ratio a little under 17 for the year to March 2019 and the forward dividend yield runs just over 2.8%. Those anticipated forward earnings should cover the payment more than twice.

I reckon the valuation looks reasonable and the firm could make a more comfortable hold than IQE (LSE: IQE), for example.

IQE’s successful placing of new shares raised £95m on 10 November at a price of 140p per share. I reckon that’s quite an achievement for a company that was trading at just 30p per share a year before that and it underlines the potential for growth that investors see in the firm’s business of manufacturing advanced wafer services for the semiconductor industry.

Ramping up capital investment

The directors want the extra money to ramp up capital expenditure aimed at scaling the business for “multiple high growth mass-market opportunities.”  The story has captured the imagination of many, and if we do end up seeing IQE’s products in mass-market smartphones and the like, we could witness profits multiplying many times down the road.

However, with the share price standing around 173p, the forward P/E rating for 2018 runs at 41, which seems high considering that City analysts predict growth in earnings of just 27% that year. It’s true that earnings could explode if mass-market adoption of IQE products happens, leaving the analysts scurrying to catch up. But equally, delays or disappointments could materialise to knock the share price down again. I think you need nerves of steel to hold IQE today, so I’d be more inclined to consider Nex Group as a potential investment.

The post Why I’d buy this hot growth stock over IQE plc appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

A return to normalised conditions?

I think it’s a fair bet the company has its finger on the pulse of the world’s financial markets and in a sector outlook statement today the firm said: “Despite ongoing low volatility and a flat yield curve, financial markets have started the long and slow journey to more normalised conditions.”  The directors cited further interest rate rises in the US and early signs of improved economic conditions in Europe as evidence to support their assessment.

If that view is correct, what does that mean for investing? I think it’s a reasonable mind model to assume that after such a deep plunge into last decade’s financial crisis the crawl out of the pit will be long, slow and possibly painful. So we could have much further to travel despite big gains on the stock market after one of the most hated and mistrusted bull runs in a generation.

Trading well

Nex is certainly firing on all cylinders. Revenue is up 10% on a constant currency basis for the firm’s first quarter of the trading year compared to a year ago, suggesting that perky-looking City analysts’ estimates could be on the money. Projections are for earnings per share (EPS) to shoot up 31% for the year to March 2018 and 18% the year after that.

At today’s 644p share price, you can pick up stock on a forward price-to-earning (P/E) ratio of 19 for the year to March 2019 and the forward dividend yield sits just under 2.7%. That’s a full-looking valuation but justified if the firm’s growth stays on track. 

Shooting the lights out

Music to the ears of shareholders in any company sounds like this: “The Board is confident that profit before tax for the full year will be ahead of current market expectations.”

That’s what the eponymous chief executive of international specialist professional recruitment firm Robert Walters (LSE: RWA) said in a trading statement released today. The firm saw net fee income lift 18% for the first six months of the trading year and Mr Walters put the firm’s performance down to its international footprint and the breadth of recruitment solutions it provides.

Around 72% of net fee income originates abroad and in its assessment of growth in all international regions, the firm uses an encouraging dictionary of superlatives such as ‘excellent’. Meanwhile, City analysts following the firm expect EPS to lift 3% during 2017 and 13% in 2018.

A bumpy ride up?

The shares jumped up nicely this morning on today’s news and sit around 445p, which throws up a forward P/E ratio of just under 14 for 2018 and the forward dividend yield sits just over 2.3%. That valuation looks undemanding, but expect a bumpy ride if you take the plunge and buy shares now because the firm’s inherent cyclicality will likely keep the stock responsive to macroeconomic news and investor perception. We’ll get a fuller picture with the interim results due out on 26 July. 

The post 2 top growth shares to consider right now appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

I would regard this as nothing more than signs of light profit-taking following ULS’s heady ascent of recent months. The stock has gained 94% in value over the last year and topped out at 129p per share earlier in June.

The Oxfordshire company provides online technology for the UK conveyancing and financial intermediary markets. It advised that revenues increased 8% in the 12 months to March 2017, to £22.3m, while gross margins advanced 9% to £9.5m. The result powered underlying pre-tax profit 15% higher to £4.4m.

And chief executive Ben Thompson suggested that there is more to come, commenting that “we approach the new financial year in the knowledge that we are successfully increasing our conveyancing market share.”

He added: “Our current trading and instruction levels are buoyant and we intend to continue outperforming the market through further enhancing our technology and services that we provide to our business partners and their customers.” 

Home comforts

ULS’s ability to perform in a shrinking market is nothing short of outstanding, the business increasing organic sales by 4% even as market volumes receded by 13%. And acquisitions like that of Conveyancing Alliance Holdings last December should keep the bottom line on an upward trajectory.

The City shares my positive outlook, and expects earnings at ULS to detonate 40% in fiscal 2018. And another 8% rise is chalked in for the following year.

The tech giant may not appear to provide decent value at first glance, ULS sporting a forward P/E ratio of 19.7 times, perching above the widely-regarded threshold of 15 times or below. But in fact a sub-1 prospective PEG multiple of 0.5 suggests the business is actually brilliantly priced relative to its growth prospects.

And I reckon this should add to fresh share price strength in the weeks and months ahead.

Trading titan

Nex Group (LSE: NXG) is another London-quoted stock with very sunny earnings prospects, with expectations of improving trade volumes (boosted by the benefits brought by rising regulatory pressures) underpinning current analyst forecasts.

The broker advised this month that European repo volumes surged 34% year-on-year in May, to €226.9bn. Meanwhile, US Treasury and US Repo volumes improved 9% and 2% respectively, to $170bn and $216.5bn, while volumes at its currency operations shot 12% higher to $81.3bn.

City brokers are also pretty optimistic over Nex’s earnings picture in the near term and beyond. A 33% advance is predicted for the year ending March 2018. And an extra 17% rise is expected in fiscal 2019.

Like ULS, the London firm may not appear great value from a conventional standpoint, its prospective P/E ratio ringing in at a lofty 20.9 times. However, a forward PEG reading of 0.6 times tells a different story.

I also reckon Nex has what it takes to beat recent record highs, the stock having hit a peak of 672p per share just last month.

The post 2 top growth stocks I’d buy right now appeared first on The Twelfth Magpie.

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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.

Saint and sinner

St Modwen Properties (LSE: SMP) styles itself as the UK’s leading regeneration specialist, with a 30-year track record in commercial and residential developments. The company has a market cap of £793m, a current portfolio value of £1.75bn and more than 100 projects underway. It aims to build business parks and town centres on former industrial estates and disused brownfield sites, with projects including the £1bn Longbridge scheme, and the £450m Bay Campus Swansea University revamp, which it now plans to sell.

Its share price has seen plenty of volatility, it currently trades 8% lower than it did three years ago, yet is up 116% over five years. Like many developers, St Modwen has recovered well since Brexit, and now stands 20% higher than six months ago. It recently hiked its dividend 4.3%, lifting it from 5.75p to 6p a share, and now trades on a forecast yield of 1.8%, nicely covered four times.

Resilience

On Wednesday, chief executive Mark Allen announced that St Modwen is to accelerate its commercial development activity and grow its residential and housebuilding business, building on a positive start to the year. He said the firm’s portfolio and wider business has shown “resilience in the face of broader market uncertainties,” and after Thursday’s election shock, that claim is about to be put to the test.

The current valuation of 14.8 times earnings looks reasonable enough, but the forward valuation is higher, at 18.8 times, thanks to a projected 25% drop in earnings per share (EPS) in the year to 30 November 2017. Growth of 3% is expected after that. However, St Modwen’s 35.9% operating margins and price-to-book (P/B) ratio of just 0.8 offer cause for comfort. Its halo may have slipped lately, but it can still shine.

Who’s Nex?

Nex Group (LSE: NXG), formerly ICAP, provides trading platforms, tools and expertise for global banks, asset managers, hedge funds and corporates. Its share price has been trading positively, up 26% over the past 12 months, as the company has boosted revenues and profits, while simultaneously warning that activity has been subdued.

In May, the financial broker posted a healthy 18% rise in full-year revenues from £460m to £543m, with statutory pre-tax profit spiralling from £27m to £120m. It also sold ICAP Global Broking to TP ICAP for £1.3bn, which chief executive Michael Spencer claimed delivered exceptional value to NEX shareholders. However, he also warned of a tough market environment, with trading down due to low market volatility.

Going for broke

Nex doesn’t look so cheap trading at 27.97 times earnings. However, it does trade on a low forecast price-to-earnings growth (PEG) ratio of just 0.7, which suggests it is undervalued. The dividend looks tempting with a yield of 5.9%, but watch out, that is forecast to fall to 2.1%.

Anticipated EPS growth of 31% in the year to 31 March 2018, followed by 19% the year after, do inject an element of excitement. I am also impressed by plans to increase operating margins to at least 40% in 2017/18, a large increase from 27.8% today. It could be an exciting play if market volatility returns. As it may. 

The post Two troubled FTSE 250 dividend stars: should you buy them? appeared first on The Twelfth Magpie.

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Harvey Jones 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.

Impressive performance

Reporting on Monday was financial technology company Nex Group (LSE: NXG). It reported an increase in revenue from continuing operations of 18%, which was a rise of 8% at constant currency. Trading operating profit from continuing operations was 4% higher, which is an increase of 12% when the impact from hedging is excluded. This performance was recorded in a tough environment, but with the company’s focus on expanding its product suite to a wider client base proving successful.

Following the sale of the ICAP Global Broking division for £1.3bn, Nex Group is focused on investing for the future. The annual cost savings identified of approximately £25m by 2019/20 will now be offset by incremental investment for growth. This is expected to help boost the company’s bottom line by as much as 30% in the current year, and by a further 14% next year.

Over the medium term, Nex Group is focused on improving operating margins to at least 40%, which could have a further positive impact on its financial performance. Since the company trades on a price-to-earnings growth (PEG) ratio of just 1.2, now seems to be the perfect time to buy it. Indeed, investors do not yet seem to have fully priced-in its growth potential.

Transformation

Also offering share price growth potential is electricity generation business Drax Group (LSE: DRX). It has adopted a new strategy which is set to dramatically improve the financial performance of the business. It is seeking to create a more diversified earnings base which could produce higher-quality returns in the long run. In order to achieve this, it has engaged in M&A activity at a time when the biomass transformation project which commenced in 2012 has been completed.

Looking ahead, Drax is forecast to record a rise in its bottom line of 120% in the current year, followed by further growth of 43% next year. Despite such a high potential growth rate, its shares trade on a PEG ratio of only 0.5. This suggests that after a number of years of major declines in its profitability, the market is pricing-in a wide margin of safety.

While understandable, given the four years of double-digit earnings declines from 2013-2016 inclusive, this could provide new investors in Drax with an opportunity to generate index-beating returns in the long run. As such, the company could be a surprisingly strong growth stock.

The post 2 FTSE 250 growth stocks trading on low ratings 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?
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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.

Improving performance

Reporting on Tuesday was specialist Emerging Markets asset manager, Ashmore (LSE: ASHM). It has made progress in the third quarter, with assets under management increasing by $3.7bn during the period. This was aided by positive investment performance of $2.3bn and net inflows of $1.4bn. Net inflows were primarily driven by an increase in the level of gross subscriptions, through new mandates and incremental allocations from existing clients, as well as a reduction in redemptions.

Looking ahead, Ashmore’s strong investment performance in areas such as Emerging Markets could help to improve its financial outlook. The company is forecast to record a 14% rise in its bottom line in the current year. This puts its shares on a price-to-earnings growth (PEG) ratio of just 1.2, which indicates that they offer good value for money even while the FTSE 100 is close to a record high.

In terms of its dividend outlook, Ashmore’s 4.8% dividend yield is above the FTSE 100’s yield of around 3.7%. Since its dividends are covered 1.3 times by profit, they appear to be sustainable and could rise at a similar pace to profit growth in the long run. Certainly, asset management companies tend to be relatively cyclical. However, with clear growth potential, Emerging Markets could be a strong sector in future years. Therefore, now seems to be the right time to invest in the company for the long run.

Dividend growth potential

While technology-based service company Nex Group (LSE: NXG) has a dividend yield of just 2.7%, its outlook as an income stock is relatively positive. A key reason for this is the company’s growth potential, with its bottom line due to rise by 6% in the current year, and by a further 14% next year.

Beyond that, more growth is on the cards as the company has a relatively strong position in its areas of operation. Therefore, its competitive advantage may prove to be relatively high in the long run.

Over the course of the next two years, Nex Group is expected to record a rise in its dividend payout of over 20%. This puts it on a forward dividend yield of 3.2% and since dividends are expected to be covered 1.9 times by profit next year, there seems to be scope for further rapid rises in shareholder payouts beyond the 2019 financial year.

With Nex Group trading on a PEG ratio of 1.2, now seems to be an opportune time to buy it. The company appears to have a potent mix of growth, value and income potential for the long run.

The post Two cheap dividend stocks I’d buy in May appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• 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?

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.