Paysafe Group (LSE: PAYS), which assists businesses and consumers connect and transact seamlessly through its payment processing capabilities, recording a combined transactional volume of $48bn in 2016, is one such company that has recently received a recent takeover offer.

Shares in Paysafe surged in late July, as it received a conditional, all-cash takeover offer from private equity groups Blackstone and CVC Capital Partners at 590p per share. And on Friday, the board “unanimously” recommended the bid by the private equity consortium, stating that an agreement had been reached on the terms of the offer. The deal values Paysafe at £2.9bn, representing a near 60% increase on the company’s market capitalisation at the beginning of 2017.

Looking at the half-yearly report released this morning, it’s not hard to see why the private equity groups wanted to get their hands on it. Revenue for the half-year increased 11% to $538.7m and adjusted EBITDA rose 17% to $169.2m. Meanwhile, adjusted fully diluted earnings per share surged an impressive 25% to 25 cents.

However, in my opinion, it is a shame that Paysafe will be taken private. Fast-growing technology companies can generate amazing long-term returns for shareholders, but with the firm being taken private, it means one less opportunity in the sector for private investors to profit from.

Is this stock a takeover candidate?

Another area that could potentially see consolidation is the defence sector, and one stock that has been touted as a potential takeover target in the past is Ultra Electronics Holdings (LSE: ULE).

The £1.6bn market cap company develops technologies for the defence, aerospace, security, cyber, transport and energy markets, generating around 85% of its revenues from defence and security. With US President Trump planning to spend significantly on defence this year, Ultra Electronics looks well-placed to capitalise.

The company released a fairly lacklustre set of half-year results yesterday that saw revenue down 0.1% to £366.4m and underlying earnings per share up just 0.3% to 58.3p. However, it did say that 2017 will be more heavily weighted to the second half than normal.

The share price has pulled back as a result, and has now declined almost 10% since the beginning of the month. At the current price of 1,953p, the stock now trades on a forward-looking P/E ratio of 14.3, which looks reasonable value for a niche player that is forecast to generate a 5% rise in revenue this year. A forecast dividend yield of 2.5%, covered 2.7 times, also looks attractive.

Given that global political tension is unlikely to dissipate any time soon, in my view the defence sector could offer some attractive returns in coming years, and Ultra Electronics looks to offer potential from both a capital growth and dividend investing perspective.

The post Paysafe plc just accepted a takeover offer. Is this stock next? 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 Ultra Electronics. 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.

Safe bet?

With growth like that we would expect the stock to be rather expensive, especially given the current heady technology stock valuations. In that respect, a P/E of 22.2 times earnings looks almost cheap. Paysafe’s big breakthrough came in 2016, when pre-tax profits soared from $11.81m to $167.99m, while earnings per share (EPS) rose a rarely seen 1,350%.

In that context, forecast EPS growth of ‘just’ 70% in 2017 looks tame, and 11% in 2018 positively under-achieving. Please do not buy this stock expecting it to turn into another 10, sorry, 11-bagger. Paysafe is now anticipating low double-digit organic growth revenue for full-year 2017, with management reporting that the company is performing as expected so far.

On the money

The Isle of Man-based firm, formerly known as Optimal Payments, also continues to de-lever even after returning £22.4m of capital to shareholders in the form of a share buyback during the first three months of the year. This cash generative business has worked hard to pay down its debts.

Investors who bear the scars of investing in troubled mobile payments player Monitise, destroyed by Apple Pay, will not need reminding that it is a precarious area. Paysafe is diversifying from its niche of servicing the gambling industry, and with a market cap of £2.48bn this is no vulnerable start-up. The future still looks promising, but it isn’t for those who like to play safe.

Steep ascent

After all that excitement, growth at Ascential Group (LSE: ASCL) looks rather humdrum by comparison. It is up a mere 71% since first listing on the London Stock Exchange around 18 months ago, and 34% over 12 months. This global business-to-business media company now has a market cap of £1.37bn, and declared its maiden interim dividend of 1.5p per share last August.

Formerly the publisher known as Emap, Ascential is looking to accelerate its growth spurt by selling off 13 of its ‘heritage’ brands, to focus on those with higher growth potential. They have been shifted into a separate operating entity with its own business strategy while buyers are sought out.

Old trade

These are all familiar names from my days in the business press, including reputable names such as Health Service Journal, Drapers, Nursing Times, Construction News, New Civil Engineer and Architects’ Journal, so I am sad to see them hived off as low growth businesses. On the other hand, I applaud Ascential’s ruthlessness in prioritising faster growing sectors.

Ascential posted EPS growth of a whopping 285% in 2016 but that is forecast to fall to 11% this year, then climb slightly to 13% in 2018. Profit growth is also likely to slow, rising only slightly from £98.29m this year to £102.69m next. One consolation is that you will get a 2% yield by then, if forecasts are correct. Its current valuation of 84 times earnings look pricey, but that is forecast to drop to just 20 times. Ascential still tempts, but again, I fear you may have missed the real action.

The post Are these two FTSE 250 growth stocks getting too pricey? 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.

Both stocks remain potential buys in my view, but do the possible rewards outweigh the risks?

Payment winner

Payment processing company Paysafe Group (LSE: PAYS) saw revenue rise by 63% to $1,000.3m last year. The firm’s adjusted pre-tax profit rose by 96% to $213m. These figures were boosted by shifting exchange rates, but even without this tailwind Paysafe’s revenue would have risen by 21%.

Formerly known as Optimal Payments, the company rebranded after its bold $1.2bn acquisition of US rival Skrill in 2015. I have to admit that I’ve been unsure about the durability of this firm’s earnings in the past. Online gambling accounts for almost half of revenue, creating regulatory risks that are hard to measure.

Paysafe’s 2016 results suggest I may have missed an opportunity. The figures show strong organic profit growth that’s backed by free cash flow. Excluding acquisitions, Paysafe’s free cash flow was $208m in 2016, slightly more than the group’s $194m operating profit. Some of this surplus cash was used to reduce net debt, which fell from $431m to $279m last year.

The company is also taking steps to reassure investors concerned about corporate governance risks. Since joining the FTSE 250 last year, Paysafe has appointed a new auditor — Deloitte — and added two additional non-executive directors to its board.

It expects to achieve “low double-digit organic revenue growth” in 2017, with an adjusted EBITDA margin of at least 30%. This puts the stock on a forecast P/E of 10.6, which looks about right to me, given the lack of a dividend. I’d hold.

A valuable service

One of the biggest costs facing anyone operating an online business is customer acquisition. This is especially a problem in sectors such as online gambling, where churn rates can be high.

AIM-listed XLMedia (LSE: XLM) has built a very profitable business by generating leads and finding new customers for online brands. Revenue rose by 16% to $103.6m last year, while pre-tax profit rose by 28% to $31m, giving a pre-tax profit margin of 30%.

The group’s impressive profit margins are partly a result of its payment terms with major online casino operators. Rather than being paid a one-off sign-up fee for each new customer, XLMedia is often paid a percentage of the lifetime revenue from each player’s activity.

Online gambling is still its largest vertical and accounted for 70% of revenue last year. But this figure is down from 83% in 2014. The group is diversifying. For example, it recently acquired a credit card price comparison business in Canada.

I’d hesitate to pay too much for the shares. But the firm’s profits are backed by strong cash generation. XLMedia paid dividends totalling 7.6069 cents per share last year, giving a trailing yield of 5.6%. The group has no debt and net cash of $33m.

Its shares currently trade on a 2017 forecast P/E of 10.7, with a prospective yield of 5%. I’d remain a buyer at current levels.

The post These controversial growth stocks could be a smart buy after latest figures appeared first on The Twelfth Magpie.

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• 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 shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The bullish tone of this morning’s update was probably also a response to December’s short-selling attack, which wiped 16% off Paysafe’s share price in one day.

Doubts about potential

Paysafe’s only response to the allegations made in December was that the information in the report, issued by an organisation called Spotlight Research, was either “factually inaccurate” or had “been previously disclosed”.

The group’s share price has since recovered, and is now trading about 5% above the level reached before December’s bear attack. One reason for this is that the group announced a £100m share buyback in the wake of the attack.

In today’s update, Paysafe said that the buyback programme would not compromise the group’s ability to pursue “bold M&A opportunities”. Payment processing is a business that responds well to increased scale. I wouldn’t be surprised to see Paysafe make another major acquisition, following last year’s deal to buy US peer Skrill.

Despite this optimistic tone, Paysafe’s share price hasn’t responded to today’s news. This suggests to me that investors may still have some doubts about the longer-term durability and growth potential of the group’s profits.

The outlook for 2017

Paysafe’s statement today included a summary of guidance for 2017. Management expects “low double-digit organic revenue growth” this year. The group’s adjusted EBITDA profit margins is expected to be flat or higher.

This guidance broadly corresponds to the latest consensus forecasts for the group, which indicate that revenue of about $1.1bn and earnings of $0.46 per share are expected in 2017. These figures put Paysafe on a 2017 forecast P/E of 10.4, which seems undemanding.

Despite this, I’m not tempted to invest. This company has never paid a dividend, and I’m not sure I really understand the business well enough to take a view on its future. I believe there are better options elsewhere.

Cheap + a high yield

One financial stock that I have invested in over the last year is insurance group Aviva (LSE: AV).

This may seem a conservative choice, but the group’s operating profit rose by 13% to £1,325m during the first half of last year, while cash generation rose by 51.9% to £752m.

Consensus forecasts for Aviva’s 2016 and 2017 earnings have also risen over the last three months. This suggests to me that market sentiment towards the firm is finally starting to recover after the shares’ Brexit slump.

Although the shares have risen strongly in recent months, I think Aviva still offers significant upside potential. The shares currently trade on a 2017 forecast P/E of 9.0, and offer a prospective yield of 5.3%.

In my view that’s an attractive package from a company that has delivered a steady turnaround over the last few years. I’ve no intention of selling my shares, and would be happy to buy more at current levels.

The post With profits set to hit $300m, is Paysafe Group plc oversold? appeared first on The Twelfth Magpie.

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Roland Head owns shares of Aviva. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Paying off

Shares in Paysafe Group (LSE: PAYS) have taken off during Wednesday’s session, the stock up 9% from the prior close thanks to a positive half-time update.

The payment services play saw sales more than double during January-June, to $486.7m, while adjusted pre-tax profit cantered to $101.4m from $37.3m 12 months earlier. And cash generation was also impressive in the period, with cash and equivalents hitting $160.2m as of June from $117.9m six months earlier.

And Paysafe commented that “[the] positive momentum in the business has continued during July 2016,” adding that “as a result of the exceptional half, the Group announces a further revenue upgrade.”

Paysafe now expects revenues to clock in at $970m-$990m, up from a previous estimate of $960m.

Last year’s €1.1bn acquisition of money transfer specialist Skrill is cause for particular cheer. Integration has come in well ahead of schedule, and the unit helped power revenues at Paysafe’s Digital Wallet division 195% higher during the first half, to $146.7m. And Paysafe expects synergies from the purchase to exceed the $40m target originally expected by the close of the year.

I believe that Paysafe remains an exceptionally-priced stock regardless of recent strength. Indeed, explosive earnings growth is predicted for 2016, resulting in a P/E multiple of 15 times, bang on the historical blue chip average.

I reckon this is a bargain given Paysafe’s growing momentum in a fast-growing sector.

Bouncing back

Security specialist G4S (LSE: GFS) has emerged as the big winner during midweek trading, the share recently dealing 15% higher following the release of bubbly half-year numbers.

G4S saw revenue tick 5.1% higher between January and June, to £3.1bn, a result that propelled pre-tax profit 12% to £149m. This prompted the company to maintain the interim dividend at 3.59p per share.

G4S printed £1.4bn worth of new contracts during the period, and chief executive Ashley Almanza struck a bullish tone looking ahead, commenting that “over the  medium term we expect demand for our services to grow by around 4-6% per annum.”

And the company also struck a positive note concerning its extensive restructuring drive, saying: “Our strategy is delivering tangible results with growing revenues, improving profitability and strong cash generation.”

G4S has been rocked by a series of scandals in recent years. But its transformation strategy is clearly bearing fruit, while its heavy international bias is also delivering terrific results — revenues from emerging markets leapt 9.7% during the first half, for example.

While the company still has plenty of work in front of it, many glass-half-full investors will be drawn in by a forward P/E rating of 14 times. And a dividend yield of 4.1% also merits serious attention.

The post These 2 FTSE stocks are making the news! Should you buy? appeared first on The Twelfth Magpie.

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• 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 shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Property powerhouse

Shares in Zoopla Property Group (LSE: ZPLA) have galloped 9% higher in midweek business to reach fresh record highs above 300p.

The company saw revenues surge 130% between October and March, to £96.4m, it announced today, a result that propelled pre-tax profit 53% higher to £28.1m. Zoopla now expects full-year profits “to be at the top end of market expectations” of £56m-£71m, it added.

Zoopla’s stock price has gained close to 50% during the past three months alone. And at face value, price-to-earnings (P/E) ratings of 27.1 times and 22.7 times for the years to September 2016 and 2017, respectively, may suggest the share may struggle to gain further traction.

However, Price/Earnings to Growth (PEG) ratings around the bargain benchmark of 1 through to the close of 2017 suggest that Zoopla remains cheap relative to its earnings prospects.

The City expects the property play to chalk up earnings growth of 31% in 2016 and 21% in 2017. And with house-buyer demand set to keep climbing, I believe Zoopla is one of the hottest growth selections out there.

Safe as houses

Investor appetite for Paysafe Group (LSE: PAYS) has also taken off in midweek trade following more perky financial news, with the stock last seen 7% higher on the day. 

Paysafe advised that “the positive momentum from 2015 has continued throughout the period to date,” with strong trading during January-April prompting it to hike its full-year sales forecasts.

The top line is now expected to clock in at $950m-$970m this year, Paysafe reckons, smashing current consensus around $911m. And adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is predicted to range between $270m and $276m versus market consensus of $260m.

The online payment specialist was already expected to produce earnings of 37 US cents per share in 2016, according to City forecasts, shooting up from 2 cents last year and creating a brilliant P/E rating of 15.2 times.

And predictions of a further 16% bottom-line rise next week pushes the multiple to a mere 12.8 times. Given Paysafe’s stunning momentum, I reckon the firm could prove a canny growth purchase at current prices.

Testing treat

Product tester Intertek Group (LSE: ITRK) has not fared so well on Wednesday, however, and its share price was recently 4% lower from Tuesday’s close.

Intertek saw revenues sprint 12.7% higher during January-April, to £774m, it announced today, with a spate of acquisitions during the past year helping to deliver robust sales growth. And the firm added that “we continue to expect to deliver solid organic growth performance in 2016.” Organic sales rose 2.3% in the first four months of 2016.

Intertek has seen its share price balloon 7% during the past three months, suggesting that today’s price action is nothing more than profit taking.

Predicted earnings rises of 9% in 2016 and 6% in 2017 result in elevated P/E ratings of 21.4 times and 20.1 times respectively, suggesting that Intertek’s stock may struggle to gain traction in the near-term.

Still, I believe the company’s ability to outperform the wider market — helped by its wide diversification across industry segments — makes the business a strong contender for those seeking sustained earnings expansion.

The post Should you buy Zoopla Property Group plc, Paysafe Group plc and Intertek Group plc following today’s news? 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
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• 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 shares mentioned. The Motley Fool UK has recommended Intertek. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Churchill China

Shares in crockery firm Churchill China (LSE: CHH) rose by as much as 13% on Friday morning. Churchill, which makes tableware for restaurants, said that trading during the second half of 2015 had been ahead of expectations.

The firm’s board is now confident that operating performance for last year will be ahead of market forecasts and “well ahead of 2014”.

The latest analyst forecasts for Churchill suggest earnings of 33.6p per share, 9% above 2014 results. Today’s announcement suggests to me that 2015 earnings are now likely to be 15% to 20% ahead of 2014. I’d guess that 35p to 36p per share is more realistic, putting Churchill stock on a forecast P/E of 23 after today’s gains.

That doesn’t seem cheap, but this is a well-run and growing company. Operating margins have risen from 5% in 2010 to 9.5% in 2014 and Churchill has delivered steady dividend growth. Most importantly, the group has proved its ability to thrive in the face of cheap Chinese competition.

In my view the shares remain a strong hold and a reasonable buy.

Paysafe Group

Paysafe Group (LSE: PAYS) gained more than 6% this morning. The group, which was formerly known as Optimal Payments, said that revenue and adjusted earnings for 2015 would be ahead of expectations.

Revenue for the full year is now expected to be around $600m, ahead of current forecasts of $585m. Adjusted earnings before interest, tax, depreciation and amortisation are expected to be $150m, of which $100m was generated during the second half of the year.

Paysafe’s earnings have been boosted by the acquisition of Skrill in 2015. The group’s shares now trade on 16 times 2016 forecast earnings, which doesn’t seem excessive if growth can be maintained.

However, Paysafe took on $548m of long-term debt and scrapped its dividend when it acquired Skrill. In my view, the valuation looks reasonably full. I wouldn’t rush to buy this stock at the moment.

Nichols

Soft drinks producer Nichols (LSE: NICL) said this morning that despite “challenging” UK market conditions it expects to deliver results in line with expectations for 2015.

The group’s performance has been helped by strong export sales, which rose by 1.5%, or £0.4m, to £24.4m. However, exports only account for around 25% of revenue and the group’s UK business saw sales fall by 0.3% to £84.9m.

Nichols is expected to report adjusted earnings of 60p per share this year, putting the stock on a forecast P/E of almost 24. A dividend yield of 1.7% also suggests that the valuation is now quite demanding.

Although earnings per share are expected to rise by 8% in 2016, Nichols’ lacklustre revenue growth concerns me. The group’s operating margin has risen from 17% to 24% since 2009 and the firm reconfirmed its strategy of pursuing “value over volume” in today’s announcement.

However, my view is that quite a lot of growth is already priced into the shares, which have risen by 188% over the last five years. I’d need to do more research into the outlook for sales growth before committing to a buy.

The post Paysafe Group Plc, Churchill China plc And Nichols plc: Today’s Top Growth Buys? 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 shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.