I think the FTSE 100 could hit its next big milestone of 8,000 points in 2023. Despite the energy crisis ravaging the UK right now, the Footsie seems to be hitting higher levels after every mini crash. Just in September, the UK’s premium index has rallied nearly 5% and I think this is a strong sign that the march to 8,000 is already under way. I’m looking at two FTSE 100 shares for my growth portfolio and I think I’ve found potential winners. 

A rare tech gem in the FTSE 100

One company that has caught my eye recently is Sage Group (LSE:SGE). The software firm is an established global player with a robust business model and strong cash flow. It’s the third-largest business software provider in the world, used by over 6m people/businesses worldwide.

The company offers its products on a subscription basis and has an impressive 99% renewal rate since 2019. Sage saw its annual recurring revenue grow by 7.7% in the financial year (FY) 2021. 

Using this cash, the company has been developing its cloud storage business, which is projected to be a $40bn industry by 2030. This venture brought in £997m last year, which contributed to the 5% annual revenue growth. 

However, Sage Group primarily works with small and medium-sized businesses in the US, Europe and Asia. While its business management software sees strong renewal rates, a recession could change this. Rising bills will force businesses to cut extra costs, including software services.

But I’m still bullish on the firm given its cash-rich business model and strong global presence. Despite economic concerns, Sage’s financials make it a market leader. The tech firm is also reinvesting and expanding which is why it’s on my watchlist of top FTSE 100 shares. 

Tested product, new market

Historically, businesses with an established business model and brand strategy have found it easier to expand into global markets. McDonald’s Corp’s highly successful model is the best example.

Burgers were largely unknown in Asian countries like India and Korea. But McDonald’s is now a major force in these countries. Thanks to targeted products and marketing, the fast-food chain has established thriving businesses in very diverse culinary markets. Airtel Africa (LSE:AAF) is doing the same thing with mobile connections. 

Using the business model perfected by its parent company Bharti Airtel in India, the telecoms firm has become a premium service in Africa. The company quickly identified one key product that could put it above the competition. 

By deploying Airtel Money, a mobile-to-mobile fund transfer service, Airtel Africa tapped into one of the world’s largest digital payment networks. This attractive, low-cost model has caused Airtel Africa shares to jump over 300% since the pandemic.

The biggest threat it faces is 5G expansion and growing competition. Africa is fast becoming a target for global business superpowers. Given the earnings potential for telecom firms in the region, Airtel Africa could be undercut by giants like Verizon when bidding for 5G bands in the future. 

However, the company has been careful in securing some key territories that put it in a strong position going forward. I’m watching this FTSE 100 share very closely and could be tempted to make an investment in the coming months. 

The post Race to 8,000: 2 FTSE 100 shares I’d buy before the next bull run appeared first on The Twelfth Magpie.

More reading

• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!
• How have Sage shares become a dividend machine? 5 reasons why!
• 2 beaten-down stocks I’m tempted to buy for my ISA today

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Airtel Africa Plc and Sage Group. 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.

In November, he dropped consumer goods giant Reckitt (LSE: RKT), formerly Reckitt Benckiser Group, from his flagship investment fund Fundsmith Equity. In February, he ejected quality assurance provider Intertek Group (LSE: ITRK), which I wrote about recently and said looked pricey but still a long-term buy for me.

Last month, it was the turn of Sage Group (LSE: SGE) to feel Mr Smith’s boot. He’s a supremely successful stock picker and it makes me wonder whether I should rule out buying these top British stocks for my own portfolio.

Would I sell these FTSE 100 stocks?

I have a personal interest, because Reckitt has long been one of my favourite FTSE 100 stocks. It promotes a broad portfolio of popular everyday brands such as Air Wick, Harpic, Dettol and Nurofen, that shoppers buy in bad times as well as good. I considered it a top British stock, even though it is relatively expensive. Today, it trades at 21 times earnings.

The Reckitt share price shot up in the early days of the pandemic, as people spent more on cleaning products, but then doubts set in. After November’s vaccine breakthroughs, investors decided other British stocks would reap greater rewards.

Reckitt is down 9% over the last year, and 7% over five years. It looks like Terry Smith has had enough. The forecast yield of 2.7%, covered 1.7 times by earnings, was not enough to tempt him to stay. Yet I would still consider Reckitt for my own portfolio, as a defensive stock delivering long-term growth and income. It recently posted a 4% rise in Q1 sales, while digital revenues jumped an impressive 24%. As it invests £2bn in developing new products, it remains a top British stock and would merit a place in my own portfolio, whatever Terry Smith thinks of it. If I’d already bought, I wouldn’t sell today.

Sage offers integrated accounting, payroll and payments solutions to businesses around the world. Four years ago, Goldman Sachs rated it a top British stock, as it migrated to a subscription-based model, which offered more cross-selling opportunities, and enjoyed high customer renewal rates.

Subsequent performance has been disappointing. The Sage share price is up just 5% over five years. It hasn’t even benefited from the recent stock market rally. Again, it looks like Mr Smith has had enough, but what about me?

I still rate these top British stocks

Last month’s first-half results showed underlying operating profit falling 11% to £191m, as profit margins shrank from 23.2% to 20.2%. This was primarily down to increased spending on marketing and product development, to promote its new cloud operation. Management said margins should improve, as this investment drives growth.

Personally, I like to see a company investing in its future, even if it takes a short-term hit. I also like the fact that Sage has been paying down debt, from £238m to £96m in the last year. It still looks like a top British stock to me. I would consider buying it for my portfolio, even if Mr Smith doesn’t have space in his.

The post Terry Smith has sold these 2 top British stocks. Here’s what I’d do now appeared first on The Twelfth Magpie.

More reading

• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• Start buying shares with just £20 a week? Here’s how even that could help someone build wealth
• Here’s how putting £800 a month into a Stocks and Shares ISA from age 27 could fund a £2m retirement!
• Relying on the State Pension for retirement? Here’s why it might not be enough
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. 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.

Pharmaceuticals

Hikma Pharmaceuticals (LSE: HIK) develops manufactures and markets branded, generic and in-license pharmaceutical products. The share price has been volatile over the past few years but the dividend is around 90% higher than it was five years ago.

Chief executive Siggi Olafsson was appointed at the beginning of 2018 and said in last month’s full-year results report that during the year revenue and profits were “significantly ahead” of the directors’ expectations, which I find encouraging. New blood at the top of a company is also something I see as a positive because it can usher in renewed management vigour and determination.

Around 62% of revenue came from the US, 32% from the Middle East and North Africa with the rest from around the world. So, the American market is important to the company. The injectables business delivered 40% of overall revenue with 33% coming from generics, 26% from branded products and the rest from other lines. The outlook is positive.

Broadcasting

ITV (LSE: ITV) is an integrated producer and broadcaster, which creates, owns and distributes content for multiple platforms. The firm operates a commercial family of channels in the UK delivering content through television broadcasting and on multiple platforms, such as the ITV Hub, pay platforms and via direct content deals. There’s also a studios segment producing content covering travel, drama, entertainment and factual formats.

The share price has been weak since the end of 2015 and the valuation looks compelling, including a high dividend yield. The dividend has risen around 130% over the past five years.

Meanwhile, in February’s full-year results report, chief executive Carolyn McCall warned that advertising income would likely be under pressure through 2019 because of “economic and political headwinds.”

However, the firm is repositioning the ITV brand, developing its data and digital capabilities, increasing its ability to offer addressable advertising and expanding its direct-to-consumer activities.  Such initiatives could see the firm through any further difficulties. I think the stock is tempting.

Business software

The Sage Group (LSE: SGE) provides integrated accounting, payroll and payments solutions to all types of companies and organisations. Over the past five years, the share price has risen around 75% and the dividend by about 46%. In an update in January, chief executive Steve Hare said 2019 started well, which he puts down to the firm’s “renewed focus” on high-quality subscription and recurring revenue.

During the trading year to September 2018, 54% of overall revenue came from Europe, 31% from North America and the rest from other regions. I’ve always liked the company because its products seem to be everywhere and used by businesses large and small. I think that once a firm adopts the Sage solution, switching costs and inconvenience are high, so many tend to stick with the firm, leading to generally stable inflows of cash for it.

However, the appeal of Sage hasn’t gone unnoticed and the valuation looks full. But I think the business is a quality outfit and deserves its rating.

The post 3 FTSE 100 shares I’d snap up for my Stocks and Shares ISA appeared first on The Twelfth Magpie.

More reading

• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• £500 gets 617 shares in one of the top FTSE income stocks to buy!
• Here’s how to invest £3,600 in UK shares to target a 7% dividend yield
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!
• How have Sage shares become a dividend machine? 5 reasons why!

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals, ITV, and Sage Group. 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.

Sticky income

The best buy-and-forget stocks are those companies that have a sticky business model and durable competitive advantage, or to put it another way, companies that have established themselves as the best operator in their sector and are difficult for customers to leave.

Accounting software provider Sage (LSE: SGE) ticks both of these boxes. Not only is this company one of the leading accounting software providers in the UK, but it is also tough to switch away from the business as doing so means transferring all historical accounting data, which as any business manager will know, is extremely time-consuming and more often than not, is not worth the effort.

However, it hasn’t been plain sailing for Sage over the past 10 years. Traditionally, the business relied on selling software to customers with a CD, but over the past decade, the world has transitioned away from CDs and DVDs towards cloud computing and streaming.

Sage was caught out by the shift and was relatively late in producing its cloud offering. Luckily, the company has now caught up.

Since 2014, revenues have jumped by 37%, and net profit has nearly doubled. Analysts are expecting more of the same over the next two years. By 2020 they expect the business’s net income will hit £364m, up from £300m in 2017, on revenues of £2.1bn. And because it is so complicated and time-consuming to move away from Sage’s software offering, I reckon the company’s earnings will continue to grow at a steady rate for the foreseeable future, which is exactly what I want to see in a buy-and-hold-forever stock.

As well as its impressive rate of growth, shares in the company also support s dividend yield of 2.4%.

Overvalued

Sage is, in my opinion, one of the most attractive software stocks you can buy right now. Unfortunately, I can’t say the same for Tracsis (LSE: TRCS).

Tracsis provides software services for the rail, traffic data and broader transport industries and it has achieved some impressive growth over the past five years.

Sales and earnings have roughly doubled since 2014 with net profit hitting £7.3m last year, from £3.3m in 2014. City analysts are expecting the company to report earnings per share growth of 55% this year to 26.8p, which puts the stock on a forward P/E of 23.3. I think this is relatively expensive compared to the firm’s growth (it trades at a PEG ratio of 2.8) and other figures tell me this business isn’t as attractive as Sage.

For example, the company isn’t as profitable. It reported an operating profit margin of 21.5% last year, compared to Sage’s 23%. At the same time, the group’s return on equity was just 19% last year, compared to Sage’s 24%.

These profitability metrics tell me Tracsis should trade at a discount to its larger peer, but the stock is trading at a slight premium, and that’s why I think Sage is the better buy.

The post Another FTSE 100 stock I’d buy and hold forever appeared first on The Twelfth Magpie.

More reading

• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!
• How have Sage shares become a dividend machine? 5 reasons why!
• 2 beaten-down stocks I’m tempted to buy for my ISA today
• Down 33%, is there a once-in-a-decade chance to buy this quality FTSE 100 stock?

Rupert Hargreaves owns no share mentioned. he Motley Fool UK has recommended Hargreaves Lansdown. 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.

Companies like Associated British Foods (LSE: ABF), the sugar-to-retail business best known for its Primark chain of clothing stores.

Five-year lows

ABF has churned out a consistent record of earnings growth over the past decade, increasing earnings per share (EPS) by an average of 9% per annum. Its diversification has helped contribute to this record. 

For example, at the beginning of September ABF reported that better than expected performance at Primark, which accounts for 54% of group profit, will help the company meet full-year growth expectations, despite a slowdown at its sugar division. 

City analysts are expecting EPS growth of 8.3% for 2018, giving a forward P/E of 17.4. This multiple is right at the top of what I would consider appropriate for a business like ABF, although it is significantly below the five-year average, which sits at around 25. What’s more, the company has a tremendous record of dividend growth. Over the past five years, the payout has increased at a steady 8% per annum and is covered three times by EPS, giving a wide margin of safety. 

With this being the case, even though the stock only yields 1.9%, I believe ABF is a great income play.

I am optimistic about the outlook for Croda (LSE: CRDA) for a similar reason. While the stock might not support the highest dividend yield on the market, the payout is well covered by EPS and the firm has a robust balance sheet. 

Analysts expect Croda to distribute a payout of 88p per share for 2018, implying a dividend yield of 1.9% is on offer. Dividend cover of 2.2 tells me that there is plenty of room for dividend growth here as well. Over the past five years, the payout has grown at an average rate of 6% per annum, and as Croda’s EPS continue to expand, I believe this trend will continue.

The one thing that I’m wary about here, however, is valuation. The stock trades at a forward P/E of 24.5. Would this stop me buying? It is high but I think it is justifiable because, as a speciality chemicals business, the company has a substantial competitive advantage that is unlikely to be disrupted any time soon. I am happy to rate the stock as a ‘buy’ at this level for that reason.

Sticky income

The final company that has attracted my attention is Sage (LSE: SGE).

What I like about this accounting software provider is that revenues are relatively sticky. Companies and sole traders don’t tend to switch accounting software often, giving Sage a predictable, recurring income stream. 

Based on current City growth estimates, shares in this business are trading at a forward (2019) P/E of just 15.7, which is high, but it’s a multiple I am prepared to pay given the sticky nature of sales. The multiple is also below the five-year average of around 20.

On top of the steady earning streams, the firm also has a record of steady dividend increases for investors. The payout is up 70% over the past five years and at the current level is covered twice by EPS, leaving plenty of room for further growth. After recent declines the dividend yield has spiked to 3%, the highest level for the stock in several years.

The post 3 FTSE 100 dividend stocks I’d buy and hold forever after the market slump appeared first on The Twelfth Magpie.

More reading

• 3 stocks I’m looking to buy in July
• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• 2 FTSE 100 value stocks experts think could soar in 2026!
• Has this FTSE 100 growth stock become too cheap to ignore?
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Associated British Foods and Sage Group. 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.

As Santander is a big dividend payer (the shares currently yield a market-beating 5.5%), I think it is only fair to judge the company’s performance on its total return, which includes dividends paid. On this basis, the stock is down 18% over the past 12 months.

Slowing growth 

It’s quite clear why investors have turned their back on the company. At the beginning of 2018, analysts were expecting a near 10% increase in earnings per share (EPS) for 2018. However, as the year has progressed, growth estimates have been revised steadily lower. Now, the City is forecasting growth of just 2.9%.

As my Foolish colleague, Roland Head noted last week, one explanation as to why analysts have soured on the business over the past 12 months is higher US interest rates. I believe the group’s struggling UK business is another contributing factor. According to the company, earnings at its UK arm fell by 16% in the first half of 2018 as costs rose and revenues declined. 

Still, I’m generally bullish on Santander’s prospects because of its international diversification. Just under half of the group’s profits come from South America, with the rest coming from the UK, US and Europe. Even though earnings may be volatile in the short term, over the long term, I believe this should help Santander continue to stand out from UK-focused peers.

Today, you can buy shares in the international banking giant for just 8.2 times forward earnings, which looks cheap to me, even though analysts are not projecting much in the way of growth for 2018. 

Having said all of the above, however, I’m not buying Santander today because I believe FTSE 100 dividend champion Sage (LSE: SGE) might offer more value. 

The accounting software provider’s reputation has been left in tatters after two profit warnings this year and the sacking of its CEO. These issues have taken their toll on the company’s share price. After jumping to a high of 821p — a level not seen since the dotcom bubble — shares in Sage have since cratered to 582p, a decline of 29%. 

Sticky income 

Shares in Sage look interesting to me, not because they are particularly cheap, but because of the sticky nature of the company’s business model. 

Having used several different versions of accounting software, I know how difficult it can be to switch providers. Users generally avoid changing because of the work involved. This is Sage’s most attractive quality as an investment. Revenues from its cloud accounting software give it a steady, regular, predictable cash flow

With this stream of income, it’s no surprise the company has earned itself a reputation as one of the FTSE 100’s most reliable income stocks. Over the past six years, the payout has risen approximately 60%, and analysts are expecting growth to average 7% per annum for the next two years. 

The payout is covered twice by EPS, so there’s plenty of headroom for dividend growth despite the firm’s profit problems. Granted, the stock isn’t cheap, changing hands at 16.3 times forward earnings, but this is below the IT sector average of 20.2 and is, in my opinion, a suitable price worth paying to get your hands on Sage’s sticky income stream.

The post Why I’d ignore the Santander share price and buy this FTSE 100 dividend stock instead appeared first on The Twelfth Magpie.

More reading

• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!
• How have Sage shares become a dividend machine? 5 reasons why!
• 2 beaten-down stocks I’m tempted to buy for my ISA today
• Down 33%, is there a once-in-a-decade chance to buy this quality FTSE 100 stock?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Sage Group. 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 always buying opportunities available. That’s especially the case following a major fall in the wider stock market. With that in mind, here are two stocks that could offer impressive returns in the long run.

Improving outlook

Reporting on Tuesday was cross-border payment services company Earthport (LSE: EPO). The company’s half-year results showed that revenue grew by 8% compared to the prior period. Its transactions and payment volume continued to be robust, with payment volume increasing by 12%. Average revenue per transaction was up by 9% to £2.87, with this largely being caused by the discontinuation of the low-value e-commerce business.

The company enters the second half of the year with a record pipeline. This could put it in a strong position to deliver further growth, with there being particular opportunity within the banking and e-commerce sectors. The business is still aiming to become cash flow break-even by the end of the next financial year. This could have a positive impact on its share price performance and may show investors that it has the capacity to deliver strong returns.

Clearly, Earthport is a relatively small and unprofitable business which comes with a significant amount of risk. However, with its shares falling by 60% in the last year, it could offer good value for money at the present time. For less risk-averse investors, the stock could be worth a closer look for the long term.

Consistent growth

Offering a lower-risk opportunity for the long term within the software and computer services industry is Sage Group (LSE: SGE). The company has an excellent track record of delivering earnings growth, with its bottom line having risen in each of the last five years. Further growth is expected during the next two years, with the company’s bottom line forecast to rise by 11% in the current year, followed by 10% next year.

Despite such a solid growth profile, the company trades on a price-to-earnings growth (PEG) ratio of just 1.8. At a time when the FTSE 100 has generated strong growth over a sustained period, this suggests that the company offers a wide margin of safety that could lead to share price rises over the coming years.

With Sage Group expected to yield around 3% next year, it could offer income investing potential. Dividend payments are due to be covered twice by profit next year, which suggests that there could be further scope for increases in payouts to shareholders over the medium term. As such, the income potential and capital growth prospects of the stock appear to be highly enticing even in a volatile period for the wider stock market.

The post 2 growth stocks on offer at deep-value prices appeared first on The Twelfth Magpie.

More reading

• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!
• How have Sage shares become a dividend machine? 5 reasons why!
• 2 beaten-down stocks I’m tempted to buy for my ISA today
• Down 33%, is there a once-in-a-decade chance to buy this quality FTSE 100 stock?

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. 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.

Although both stocks could still be a decent buy at current levels, I believe that the smart thing to do might be to add these to your portfolio during periods of weakness.

Profits up 32%

Fintech stock Gresham Technologies (LSE: GHT) produces software used by banks and financial businesses to help maintain the integrity of their data. Areas of operation include regulatory compliance, risk management and financial controls.

Shares in this £150m group surged 7% higher this morning, after it said 2017 sales are expected to have risen by 24% to £21.3m. Earnings before interest, tax, depreciation and amortisation (EBITDA) are expected to be 32% higher, at £5m.

Both figures are in line with market expectations, but I believe the significance of today’s news is that EBITDA is rising faster than revenue. This implies that the group’s profit margins are continuing to rise. If this continues, profit growth could accelerate.

Don’t get carried away

Of course, it pays to consider the valuation of Gresham stock as well as its growth potential.

The London-based group’s main growth engine is its Clareti software business, where revenue rose by 48% last year. But this isn’t new information. Much of this growth potential is already priced into the shares.

One risk is that City analysts’ 2018 forecasts are surprisingly modest. Sales are expected to be broadly flat, while earnings per share are expected to rise by just 6%. Today’s update didn’t include any change to profit guidance for next year.

Today’s increase has left this stock trading on a 2017 forecast P/E of 33, falling to a P/E of 31 for 2018. In my view, the upside and downside risks are fairly evenly balanced, even if growth remains strong.

Gresham looks like a good business to me, but I’d prefer to wait for a cheaper buying opportunity.

FTSE 100 safety + growth?

How about a financial software stock that combines the stability of a FTSE 100 listing with internet-fuelled growth potential?

Management at Sage Group (LSE: SGE) would like you to believe that their accounting software fits the ticket perfectly. But the size of this business means that achieving strong earnings growth could be more challenging than at a smaller firm.

Sage shares have doubled in just over three years. Over the same period, the group’s reported after-tax profits have risen by around 60%. So the stock has got more expensive, because the price has risen faster than earnings.

But in fairness to the group’s management, if Sage hits forecasts for a full-year profit of £360m in 2017/18, this £8.7bn group will have doubled its profits in four years. That’s a fairly impressive achievement for a company of this size, in my view.

It’s for this reason that I’m attracted to Sage. The group’s operating margin of 20% and strong cash generation mean that management has been able to maintain dividend growth of 8% per year in recent years.

The stock is a little too pricey for me, on 24 times 2018 forecast earnings. But I am tempted and would certainly consider buying on any dips.

The post This FTSE 100 double-bagger isn’t the only stock I’d buy on the dips appeared first on The Twelfth Magpie.

More reading

• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!
• How have Sage shares become a dividend machine? 5 reasons why!
• 2 beaten-down stocks I’m tempted to buy for my ISA today
• Down 33%, is there a once-in-a-decade chance to buy this quality FTSE 100 stock?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. 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.

Many tech stocks across the world have performed very well over the last year. While the popular FAANG stocks (Facebook, Amazon.Com, Apple, Netflix and Google) in the US have received plenty of attention, under-the-radar tech stocks listed in the UK have also rewarded their shareholders handsomely. Here’s a look at two such stocks making their investors wealthy.

The Sage Group

FTSE 100-listed Sage (LSE: SGE) provides integrated accounting, payroll and payments solutions to businesses of all shapes and sizes around the world. The stock has been an excellent performer in the recent past. This year, the share price is up 20%. Over a three-year investment horizon, the stock has almost doubled.

The group released final FY2017 results this morning, and stated that its transformation programme, which began in June 2015, is now complete. The payroll specialist recorded organic revenue growth of 6.6% for the year, and enjoyed a 10.3% rise in organic operating profit. It stated that 78% of its revenue now comes from recurring sources. Adjusted earnings per share for the year rose 7.4% to 33.1p, significantly beating analysts’ estimates of 29.8p. The dividend was lifted by a healthy 9% to 15.4p per share.

Do the shares still offer value after such a strong run? At the current share price of 784p, Sage trades on a trailing P/E ratio of 23.7. The dividend yield is just under 2%. While those metrics perhaps look a little expensive, I feel that the company has momentum at present. Indeed, Chief Executive Stephen Kelly today commented: “We now have the leadership, organisational alignment, brand and comprehensive suite of cloud solutions, to accelerate momentum in our markets.” Analysts expect further revenue and earnings growth in coming years and the upwards trend of the chart looks promising. As a result, I believe there could be further gains to come from Sage.

Quixant

Turning to the small-cap area of the market, £283m market cap Quixant (LSE: QXT) has been another wealth-generating machine for tech investors over the last few years. The group designs and manufactures advanced hardware and software solutions for the global gaming industry. The stock is only up 21% this year, but since listing on the AIM market in 2013 at a price of 46p, investors have been rewarded with a spectacular return of over 800%. Can Quixant continue to make its shareholders wealthy? I believe so.

It appears to have strong momentum right now. Last year, revenue rose 116% and earnings per share jumped 47%. This year, City analysts expect top-line growth of 18% and an earnings rise of 20%. Half-year results released in September were excellent, with management stating: “The demand for our gaming platforms and monitors remains strong and we are confident in achieving market expectations for the full year.”

The stock currently trades on a P/E ratio of 28, which is clearly high, yet in my opinion, not outrageously high. That level of valuation suggests to me that investors acknowledge the exciting growth story, yet have not got carried away. For long-term investors, I believe there could be further gains to come. Broker Finncap recently lifted its price target to 500p.

The post The Sage Group plc isn’t the only top-performing growth stock making investors wealthy… appeared first on The Twelfth Magpie.

More reading

• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!
• How have Sage shares become a dividend machine? 5 reasons why!
• 2 beaten-down stocks I’m tempted to buy for my ISA today
• Down 33%, is there a once-in-a-decade chance to buy this quality FTSE 100 stock?

Edward Sheldon has no position in any shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Amazon, Apple, Facebook, and Netflix. The Motley Fool UK has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool UK has recommended Sage Group. 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.

Finding its way

Compass Group (LSE: CPG) has seen its share price rise by an astonishing 331.8% over the last decade, according to figures from online platform AJ Bell, against 12.8% for the FTSE 100 as a whole. Its total return with dividends re-invested is even more amazing at 479.1% against 64% for the FTSE. That is thanks to its progressive dividend policy, which has seen the dividend increased every year for the past decade, at an impressive annual compound rate of 11.4%. Compass Group really has a sense of direction.

The food services company has had a good 12 months as well, its share price rising 18% in that time. It has benefitted from its global diversification which sees 90% of company earnings generated outside of the UK, giving it a real boost from the post-referendum collapse in sterling. However, with the pound now climbing, that process could go into reverse.

Food, glorious food services

This massive business, with a market cap of £25bn, looks like an attractive safe haven to me, the problem is that plenty of other investors think so too, which has driven up the valuation to a heady 25 times earnings, while strong share price growth has driven the yield down to 2.11%. However, policy is progressive on this front, with the last full year seeing a 7.8% increase in the dividend payout from 29.4p to 31.7p.

The world’s largest contract caterer, which operates in around 60 countries, still has positive growth prospects with earnings per share (EPS) expected to rise 19% in the year to 30 September, and another 7% in the subsequent 12 months. It isn’t cheap, but there is a tasty reason for that.

Sage words

Business management software specialist The Sage Group (LSE: SGE) has also given the rest of the FTSE 100 a hard time over the last decade. Its share price grew 156.4% over that time, or 245.5% with dividends reinvested, thanks to its impressive annual compound dividend growth rate of 7.3%.

Share price growth has disappointed lately, hampered by management warnings that 2017 would start slowly, although growth is expected to accelerate throughout the year and into 2018. Today’s share price of 654p is well below its 52-week high of 761p.

Software, hard profits

Yet I feel the dip in sentiment has been overdone, given that group organic revenue increased by 5.1% for the first three months of the year. Organic recurring revenue grew an even healthier 9.6%, driven by software subscription growth of 31%, taking the total number of contracts to 1.1m.

The dip in the share price looks like a buying opportunity to me, with City forecasters calculating that EPS will rise 17% in the year to 30 September, and another 9% after that. Its forecast valuation of 20.4 times earnings is on the high side, but that is what you have to pay for a proven track record like this one. This may be an opportunity worth taking.

The post These 2 unsung heroes have blown the FTSE 100 away appeared first on The Twelfth Magpie.

More reading

• 1 FTSE 100 name for growth investors while everyone else is looking at AI stocks
• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• How could ‘Prime Minister’ Andy Burnham boost these FTSE 100 and FTSE 250 shares?
• This ‘boring’ FTSE 100 stock’s forecast to grow 3x faster than Rolls-Royce shares!
• 2 beaten-down FTSE 100 bargains I’m tipping to rebound!

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Sage Group. 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.