However in the same period, Sainsbury’s (LSE: SBRY) has been able to significantly outperform the wider index. It has gained 33%, with investors seemingly becoming more interested in the stock due in part to its proposed combination with Asda.

Looking ahead, further outperformance could be ahead, with the retailer appearing to offer investment potential alongside a smaller company that reported a positive update on Monday.

Improving position

The supermarket sector has experienced a period of major change in recent years. Shopping habits have evolved, with online and convenience stores becoming more popular at the same time as out-of-town supermarket sites see footfall decline. Alongside this, consumers have become increasingly price-conscious, with pressure on real household incomes contributing to a fall in consumer confidence.

As a result, consolidation within the industry is not a major surprise. However, the tie-up between Asda and Sainsbury’s could lead to a competitive advantage for the combined entity. It may be able to enjoy lower costs, with synergies from the deal expected to be at least £500m. A lower cost base may also provide margin support at a time when major supermarkets continue to invest in price, and this could have a positive impact on the company’s future profitability.

With Sainsbury’s trading on a price-to-earnings growth (PEG) ratio of 2, it may appear to now be fully valued after its recent gains. However, with its profit growth potential over the medium term having the potential to improve significantly as a result of the deal, it would not be surprising if the stock market continued to upgrade its valuation.

Growth potential

Also offering the potential to beat the FTSE 100 is niche specialist services provider Premier Technical Services (LSE: PTSG). It released an upbeat trading statement on Monday which showed that sales growth and strong levels of orders have been recorded in the year to date. Organic growth remains positive, with contract renewal rates still high, while the acquisitions completed last year are contributing to overall growth.

Looking ahead, Premier Technical Services is forecast to post a rise in its bottom line of 13% in the current year, followed by further growth of 11% next year. This puts it on a PEG ratio of 1.5, which suggests it offers a wide margin of safety.

The company appears to be in a strong position to deliver further acquisitions. Alongside the potential for repeat business and winning new customers, this could mean that share price growth is ahead. After rising by 31% in the last year, the stock could move to a higher price level over the medium term.

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Peter Stephens owns shares of Sainsbury (J). 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.

Premier Technical Services (LSE: PTSG) is a small company that’s grown rapidly over the past few years, and it looks as if the firm is only just getting started

The company is the UK’s leading provider of façade access and fall arrest equipment services as well as high-level cleaning and training solutions. The group operates in niche markets which require a high level of skill and specialised equipment. Rising demand for the company’s services, as well as its leading position in the market, means that over the past three years, earnings per share have doubled and analysts are expecting further growth of 14% this year. 

Rapid earnings growth 

For 2014, Premier reported sales of £18m. For 2017, City analysts are projecting sales of £47m rising to £59m next year. Off the back of this growth, the company’s earnings per share are set to hit 9.3p for 2018, up from 3.8p for 2014. 

Considering the specialised nature of its business, it looks as if this growth can continue for the long term. As well as organic growth, management is hunting out bolt-on acquisitions to boost overall performance. These additions are helping to improve not only the top line, but also the bottom line as operational efficiencies help widen margins. 

The firm acquired peer BEST early in July 2017 to enhance Premier’s number one market position in the lightning protection market following the buyout of Nimbus Lightning Protection in January 2017. 

Unfortunately, shares in the equipment provider aren’t cheap. They trade at a forward P/E of 19.2, but this multiple seems appropriate considering its past growth and opportunity to consolidate further, build on its existing client base and improve margins. 

Proven management and company 

Proactis (LSE: PHD) is another company that flies under the radar of most investors but has enormous potential. The company offers spending and procurement solutions to help organisations better control expenditure on all goods and services. 

Since 2013, demand for these offerings has exploded. Pre-tax profit should come in at £5.3m for the fiscal year ended 31 July 2017, up from just £300,000 for fiscal 2013. Analysts are expecting earnings per share growth of 17% off the back of this performance. 

And even though shares in Proactis currently look expensive as they trade at a forward P/E of 20.9, considering the growth potential, this is a premium worth paying. For the financial year ending 31 July 2018, analysts are expecting earnings per share growth of 38%, giving a PEG ratio of 0.4. However, I wouldn’t be surprised if the company surpassed these forecasts as management recently completed the “transformational” acquisition of Perfect Commerce LLC, which is already generating additional revenue for the group and has offered opportunities for significant synergies. Overall, the combined groups are targeting £5m of synergies, a significant figure considering the pre-tax profit of £5.3m expected for the year just ended. 

As Proactis reaps the benefits of this deal and looks for other acquisitions, I believe the company can grow significantly, producing attractive returns for investors in the process. 

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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.

But those seeking brilliant bottom-line expansion also need to check out Premier Technical Services (LSE: PTSG)  today, in my opinion.

The niche services provider stormed to fresh record peaks late last week, although first-half results released today have prompted some bouts of profit-booking. Premier Technical Services was last dealing 4% lower from Friday’s close.

The Castleford company noted that it had “previously announced that it was performing well in the first half,” and that “this performance has continued.” It commented that it “has noticed an increase in compliance awareness among our 17,000 customers and we have experienced continuing sales growth and strong levels of orders in the year to date.”

Premier Technical Services has ground out new contract wins across all its disciplines, it advised, including a number of multi-discipline framework agreements with new and existing customers. Contract renewal rates remain high, the company added, which are underpinning its organic growth plans.

In other news, it noted that its acquisition of lightning protection and steeplejack play BEST last month “has started well and is progressing to plan,” while the purchase of Nimbus Lightning Protection at the start of the year is performing in line with expectations.

And the specialist services giant announced that trading during the the first few weeks of the second half has transpired as expected.

Hot numbers

There is much to be excited about over at Premier Technical Services, in my opinion, with recent acquisitions providing plenty of new sales opportunities and organic revenues also rattling higher. The firm saw underlying organic sales detonate 20% in 2016.

City analysts agree that the West Yorkshire business is in terrific shape, with the number crunchers currently predicting healthy earnings growth of 77% and 6% in 2017 and 2018 respectively.

While it deals on a pretty vanilla forward P/E ratio of 16.6 times, a sub-1 PEG rating of 0.2 suggests the stock is actually brilliantly priced relative to its growth prospects. I reckon the services star is worthy of serious consideration at current prices.  

Fashion favourite

Boohoo is also anticipated to throw out exceptional earnings expansion in the near term and beyond. A 33% advance is chalked in by the City’s army of analysts for the year concluding February 2018, and an extra 24% rise is forecast for next year.

While a subsequent prospective P/E ratio of 86.2 times is massively expensive on paper, I believe such an elevated rating is fully deserved as the online retailer continues to make serious waves all over the world.

Boohoo saw revenues more than double during March-May, at £120.1m, it advised in June, while like-for-like revenues shot 78% higher in the period. With sales surging across all its divisions and territories, the company lifted its full-year revenues growth target to 60% from 50% previously.

And the top line is likely to keep impressing as investment in its digital platform, product ranges and warehousing facilities pays off.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended boohoo.com. 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.

Premier Technical Services

Premier Technical Services (LSE:PTSG) has been a high flyer over the last two years with shares in the facilities management specialist jumping from around 58p to 115p, a gain of nearly 100%.

The company focuses on the high margin niche area of facade access and fall arrest equipment services, operating through four key divisions: access & safety, electrical services, high level cleaning and training solutions. Founded in 2007, the group services over 150,000 buildings across the UK in a wide range of industries.

Through a combination of acquisitions and organic growth, revenue has surged higher over the last five years, climbing from £9m in FY2011 to £39m last year. Net profit has increased from £0.5m to £2.3m in this time. City analysts forecast revenue to climb 16% to £45.6m this year, and earnings per share of 8.25p, placing the company on a forward looking P/E ratio of just 13.9.

Management is upbeat about the future, recently stating: “The board is confident that the business is in a strong position to continue to grow both organically and through carefully selected acquisitions, which seek to achieve sector dominance in our chosen areas of operation.“

While this all sounds great, the one thing to watch here is the company’s operating cash flow, which over the last two years, has been negative. A drill-down into the financials reveals that accounts receivable hav risen from £1.6m in FY2014 to £6.1m last year, which is not ideal. Indeed, an increase in accounts receivable is often viewed as an accounting red flag as it indicates that cash is not coming through the door. This is clearly something to keep a close eye on and for this reason, I won’t be looking to buy the stock just yet.

Emis Group

One company that does look quite interesting in my opinion, is Emis Group (LSE: EMIS).

Emis specialises in healthcare software, running IT systems for GPs, hospitals and pharmacies and assisting medical practices by digitising patient records. With the NHS constantly looking to drive down costs and improve efficiency, demand for its products should remain robust in my view.

While revenue has jumped from £73m five years ago to £159m last year, growth has slowed recently, and as a result, it appears that some investors have jumped off the bandwagon. The shares have pulled back around 20% over the last 18 months.

Has that created an investment opportunity? 

Emis released a trading statement for the six months ended 30 June this morning. While details were brief, management said revenue was “slightly ahead of the comparative period as the group continued to benefit from growing recurring revenue, strong market shares and good momentum in its order books and pipelines.” New CEO Andy Thorburn commented that he believes that Emis can “continue to generate good levels of growth in the years ahead, despite the challenging funding environment in the NHS.”

City analysts forecast net profit to surge over 60% this year and have pencilled-in a dividend payout of 25p per share, and with that in mind, on a forward looking P/E ratio of 19, I reckon Emis Group could be worth a closer look for those with a long-term mindset.  

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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.

Improving performance

The AGM statement released by niche specialist services provider Premier Technical Services Group (LSE: PTSG) shows that it continues to make progress with its current strategy. It has recorded continuing sales growth and strong levels of orders since the start of the year. They are in line with expectations, while working capital utilisation and profit levels are likewise as per previous guidance. Furthermore, contract wins have been secured across all disciplines, with the company’s contract renewal rate continuing to be high.

The acquisition of Nimbus Lightning Protection in January could act as a positive catalyst on the company’s future performance. It has been successfully integrated into the company, with it contributing sales and profit to the business. More acquisitions could be ahead as the company seeks to achieve sector dominance, although its organic growth rate remains impressive.

Looking ahead, Premier Technical Services is expected to record a rise in its bottom line of 7% in the current year. Given that its shares trade on a price-to-earnings (P/E) ratio of 15.4, it appears to offer fair value for money at the present time. Its growth rate could improve in future if more acquisitions are made, while its dividend is covered 5.1 times by profit. This suggests a higher level of shareholder payout could be achievable in order to boost the company’s yield of 1.4%. As such, now could be the right time to buy it for the long term.

Strong track record

Also offering upbeat total return potential is timber and panel products distributor James Latham (LSE: LTHM). It has recorded three consecutive years of double-digit earnings growth, with its bottom line rising at an annualised rate of over 23% during the period.

Despite this, it trades on a P/E ratio of just 15.9, which suggests that it could offer upside potential. That’s even after a 32% share price rise during the last year. Investor sentiment appears to be relatively strong, although there could be scope for further improvements should the company continue to deliver on its current strategy and post rising profitability in future.

Even though James Latham currently yields just 1.7%, it could become a more attractive income stock in future. Its dividends are covered 3.8 times by profit, which suggests shareholder payouts could increase at a faster rate than profit over the long run without compromising the financial health of the business. Therefore, against a backdrop of rapidly-rising share prices, James Latham appears to offer a mix of growth, value and income potential for the long term.

The post Is this growth stock a bargain after today’s results? 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?
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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.