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This 9%-yielding stock dived in Q1! I think it’s a beautiful dip buy

Royston Wild — Sun, 31 Mar 2019 12:00:26 +0000

Royal Mail (LSE: RMG) has continued to be mauled by the bears in the first quarter. Its share price — which had already taken an absolute hammering in 2018 — has fallen by an additional 13% since the start of the year.

I’m not going to say the market isn’t entitled to be concerned about the terminal decline of the letters market and the likely prolonged impact of Brexit this year (and probably beyond). What’s more, Royal Mail’s underperforming cost-cutting programmes to offset revenue troubles now and in the future isn’t exactly something to inspire confidence.

A bulked-up boardroom

But I’m much more upbeat than the broader market about the courier. More short-term trading trouble may well be on the cards, but the broom that’s swept through the boardroom gives me belief that things may be about to improve.

Chief executive Rico Back, who took the reins last summer, was one of the founding members of Royal Mail subsidiary General Logistics Systems (then German Parcels) in 1989, and the architect of the division’s rise over the past 30 years, a record that saw him get the top job last June.

But this isn’t the only impressive appointment in recent times. It was announced earlier this month that former British Airways veteran and current deputy chairman Keith Williams will occupy the top step of that particular ladder when current chair Les Owen vacates in May.

I’ve long lauded the brilliant progress that General Logistics Systems is making across Europe and so Back’s elevation to the FTSE 250 firm’s hot seat fills me with plenty of optimism.

The long-term revenues at Royal Mail were already compelling because of the impact of e-commerce on parcel volumes, as well as organic and inorganic expansion in Europe and, more recently in North America, provides other reasons to be bullish.

Now the tough economic picture in Britain means that the company’s bottom line may get worse before it gets better, and this could be reflected in additional share price weakness in the months ahead. That said, with Royal Mail carrying a dirt-cheap forward P/E ratio of 9.4 times and a gigantic 9.5% dividend yield, I reckon the stock is still worthy of serious consideration today.

A bonus buy!

Before you go, I’d like to draw your attention to Sanne Group (LSE: SNN), another first-quarter FTSE 250 sinker that’s a top buy today.

The business, which offers fund and corporate administration services, is down 10% in the year to date. But that’s not in reaction to profits pressures like Royal Mail, but because of news in January that chief executive Dean Godwin is to part ways with the company.

The departure of such an influential figure in Sanne’s growth story isn’t ideal, clearly. But, as my colleague Alan Oscroft pointed out, Godwin won’t be passing the reins to a complete novice. And in the meantime, sales continue to explode across the US and Europe and are picking up in Asia too.

Right now, Sanne sports a forward P/E ratio of 17.9 times which, while on paper, is decent value in my opinion, given the rate at which revenues are surging (up 26% in 2018), for example. I reckon this firm’s also a splendid dip buy right now.

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Royston Wild 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.

The deadline is here! 2 brilliant growth stocks for your ISA

Royston Wild — Wed, 04 Apr 2018 15:45:09 +0000

Latest trading details from Entertainment One Limited (LSE: ETO) on Wednesday may not have set the world on fire and the stock was last 2% lower from the prior close. But this is no reflection on the strength of the release.

In fact, the Peppa Pig producer’s latest statement provided plenty to get excited about, and has reinforced my view that it is a great last-minute growth stock for you to stash in your ISA.

Cartoon colossus

In a trading update spanning the 12 months to March 2018, Entertainment One declared: “The strong performance over the first six months of the financial year has continued into the second half,” meaning that revenues at its Family division are predicted to have risen 50% year-on-year in the full fiscal period.

Once again the FTSE 250 firm’s pig franchise grabbed the plaudits, a title which “continues to perform well in mature markets such as the UK and Australia, with significant demand for licensed products in China driving further growth in the period.” But foreign expansion here is not the only cause for optimism as its other major Family title, PJ Masks, is also growing in popularity across the globe.

Elsewhere, Entertainment One commented that its Television arm “had another good year.” It also noted that its Film division, which is in the midst of a significant transformation, enjoyed a better performance during the second half of the year.

Pig out

Even though Peppa Pig may be the golden goose for Entertainment One, to stretch the animal metaphors, it is by no means the only cause for celebration.

The media giant has a wide selection of titles that are helping to drive the top line across the business, and while its Film division still requires no little work I am confident that the future remains extremely bright.

City analysts share my positive take and they are forecasting that Entertainment One will follow predicted earnings growth of 5% in the year ended March 2018 with much healthier readings of 14% and 15% in fiscal 2019 and 2020 respectively.

Its bright profits prospects aren’t reflected, however, by a mega cheap forward P/E ratio of 11.5 times. And I reckon this makes it a great selection for value hunters right now.

Another growth great

Another FTSE 250 share in great shape to deliver sustained earnings expansion is Sanne Group (LSE: SNN).

The business, which provides fund and corporate administration services, declared last month that group sales boomed 77% last year to £113.2m, a result that vindicated its aggressive approach towards acquisition activity. And thanks to the increasingly-complex and ever-evolving regulatory backdrop, Sanne’s services are likely to remain in high demand.

Illustrating this strong outlook City brokers are unsurprisingly expecting Sanne’s decent earnings record to keep rolling. The bottom line will rise 6% in 2018, current estimates suggest, and the rate of improvement will improve in double-digits (15%) next year as well.

A prospective P/E multiple of 26.9 times may make Sanne expensive on paper. But I believe the rate at which the business is growing revenues makes it worthy of a premium rating.

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Royston Wild 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.

2 FTSE 250 growth stocks I’d buy for my ISA

Edward Sheldon, CFA — Thu, 22 Mar 2018 10:40:24 +0000

An allocation to FTSE 250 stocks within an ISA is a good idea, in my opinion, as the index is home to a number of companies that are growing quickly, and generating big gains for investors.

With that in mind, here’s a look at two growth stocks within the index that I like the look of right now.

JD Sports Fashion

The UK high street may be on life support, yet one retailer that still has considerable potential, in my view, is JD Sports Fashion (LSE: JD). I believe the £3.4bn market-cap is a great way to get exposure to some of the world’s largest sports brands such as Nike and Adidas, and also capitalise on the athleisure wear trend that has surged in popularity across the world in recent years.

In a January trading update, JD announced that it had maintained its positive performance from the first half of the year, and that it was pleased with the continuing momentum of its international business. The company also advised that pre-tax profit for the year will hit the £300m mark, up from previous estimates of £270m-£295m.

After a strong share price run between early 2015 and May 2017, they pulled back last year and, at the current price, I believe they offer value. With City analysts expecting earnings of 23.5p per share for the year ending 28 January 2019, the forward-looking P/E ratio of the stock is a very reasonable 13.7. JD Sports Fashion has considerable ISA potential, in my opinion.

Sanne Group

The next stock I’m profiling, Sanne Group (LSE: SNN), is less well known. But don’t let that put you off – the company has been a fantastic performer for investors over the last three years, and appears to have plenty of potential for further gains.

Sanne provides outsourced administration, reporting and fiduciary services to asset managers, financial institutions, family offices and corporates. This is perhaps not the most exciting business model in the world, yet the company is benefiting from strong demand for its services as a result of increased regulation requirements, cross-border investment and the growing expectation for independent oversight.

Through both acquisitions and organic growth, Sanne has enjoyed powerful growth since coming to the market in April 2015. And this morning’s full-year results for FY2017 look excellent.

Indeed, for the year ending 31 December, group revenue increased 77% to £113.2m, including organic growth of 14%, and underlying profit before tax surged 79% to £38.1m. Underlying diluted EPS climbed from 16.9p to 23.7p and the full-year dividend was hiked over 30% to 12.6p.

Chairman Rupert Robson was upbeat on the outlook for the company, commenting: “Looking forward we are building on our success as a high growth sustainable business whilst investing in our infrastructure. Against this background, the outlook for 2018 continues to look promising.”

Like many stocks across the market, Sanne shares have pulled back this year, falling from 800p in early January to 675p today. As such, with the forward P/E ratio having fallen to 26, I believe the shares are now worth a closer look.

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Edward Sheldon owns shares in JD Sports Fashion. 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.

2 dividend darlings you can pick up for next to nothing

Royston Wild — Tue, 24 Oct 2017 15:15:54 +0000

I have long been a fan of big yielder Bloomsbury Publishing (LSE: BMY) and, thanks to a bubbly trading statement Tuesday, my faith in the books behemoth has received an extra shot in the arm.

The Harry Potter publisher announced that total revenues rose 15% during March-August to £72.1m, a result that powered pre-tax profit to £1.7m from £100,000 a year earlier.

Bloomsbury had the brilliant wizard to thank again for its sterling six-month performance. Sales across its Consumer division boomed 20% to £44.7m, due to an “outstanding” improvement in Children’s Trade revenues (up 33% in the first half).

The London business advised that J.K. Rowling’s books “continue to sell strongly”, in particular its Harry Potter box set and the ‘House Editions’ of Harry Potter and the Philosopher’s Stone.

And a blockbuster slate for the second half promises to keep revenues tearing higher. Planned titles include illustrated versions of Harry Potter and the Prisoner of Azkaban and Fantastic Beasts and Where to Find Them.

Dividend magic

Hogwarts’ finest is clearly the gift that keeps on giving. But Bloomsbury’s decision to diversify into the digital business-to-business market last year opens up a world of additional revenue opportunities.

The company’s ‘Bloomsbury 2020’ strategy, launched last year, zeroes in on providing academic and professional digital resources for academic libraries, a segment which the company has valued at some $5bn. Sales growth from these digital resources rose 10% in March-August, to £2.2m.

Bloomsbury’s bright first-half performance encouraged it to hike the interim dividend 5% to 1.15p per share, helped by a significant improvement in cash generation (net cash soared 85% year-on-year to £16.9m).

And despite predictions of a 3% earnings fall in the year to February 2018, City analysts expect the publishing star to hike the full year dividend to 7p per share, from 6.7p in fiscal 2017. A further healthy uptick to 7.4p (helped by an anticipated 7% bottom-line improvement) is also predicted for next year.

As a result, Bloomsbury throws out tantalising yields of 4.3% and 4.5%, respectively. These, combined with a very attractive forward P/E ratio of 13.3 times, should make the company worthy of serious attention from value chasers.

Payouts pound higher

Those on the hunt for chunky dividend growth also need take a look at Sanne Group (LSE: SNN).

With earnings expected to continue sprinting higher (growth of 40% and 17% is chalked in for 2017 and 2018, respectively), the asset and corporate administration specialist is predicted by City brokers to lift last year’s 9.6p per share to 12.6p this year, and again to 14.9p in the following period.

Subsequent yields of 1.6% and 1.9% may not exactly get pulses racing, but the potential for sustained and sizeable dividend hikes certainly should. Sanne witnessed “good growth” among its core business lines in the first half, “driven by strong momentum from new business opportunities delivered in the latter part of 2016,” it said in August.

And the Jersey-based firm remains busy on the M&A front to keep driving earnings and dividends skywards, snapping up Luxembourg Investment Solutions and Compliance Partners just last month.

Sanne deals on a forward PEG ratio of 0.8 which, allied with the company’s ultra-progressive dividend policy, makes it too good to overlook right now, in my opinion.

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These 2 under-the-radar stocks have just hiked their dividends more than 10%

Harvey Jones — Sat, 09 Sep 2017 06:55:53 +0000

Dividends are not enough on their own, you also need dividend growth. Companies that regularly hike their payouts offer shareholders a rising income stream, while magnifying the compounding effect for those who reinvest their dividends for growth.

Relx, take it easy

The following two FTSE 250 firms have recently increased their dividends by well over 10%, which doesn’t just give investors a higher rate of income, but also suggests that both are in rude health. Yet they may easily have slipped under your investment radar.

Information service provider Relx (LSE: REL), formerly known as Reed Elsevier, has been a bundle of energy lately, its share price up 14% in the last year, and 178% over five years. In July, it posted a 14% rise in half-year revenues to £3.72bn, with adjusted pre-tax profit up 16% at £1.07bn. Better still, the board lifted its dividend by a thumping 14% to 11.70p per share.

Analyse that!

Relx has worked hard to offset the slide in revenues from traditional print publishing by developing sophisticated information-based analytics tools for a range of professional and business customers, boosting returns and driving more predictable revenue streams.

It has also rewarded shareholders with £500m worth of share buybacks in the first half of the year, and plans to deploy a further £200m in the second half. Its dividend is hardly the biggest on the FTSE 250, with a forecast yield of 2.3%, but it is handsomely covered 2.1 times, and as we have seen, management is highly progressive. Last year it increased the payout 21%.

Dividend delight

Earnings per share growth is forecast to be a steady 12% in 2017, and 7% in 2018. By then, the yield is forecast to hit 2.6%. My only concern is that Relx is a little expensive, trading at a forecast 20.9 times earnings, although this also suggests that shareholders know a good thing when they see one. Maybe one to buy on a market dip?

Sanne Group (LSE: SNN) also promises even more dividend fun. The stock only floated in 2015 so its track record is short, but impressive. The share price is up 64% over the past 12 months, and 175% over two years. Since launch the share price has leapt from 200p to Friday’s 781p. The dividend has been growing at a breakneck pace as well.

Sanne decision

Sanne provides outsourced administration, reporting and fiduciary services to financial institutions and corporates around the world, and reported a dizzying 525% revenue growth in March. It then generously hiked its full-year from 7p to 9.6p, a rise of more than 37%. On Thursday, it posted a 104% rise in revenues to £56.3m with underlying operating profit up 109% to £21.5m. The board lifted the interim half-year dividend by an almost-as-generous 31% to 4.2p.

Sanne now has a forecast yield of 1.8% and although you can get fatter income streams elsewhere, you will find few growing as fast as this one. With EPS forecast to rise a whopping 36% in 2017 and 14% the year after, there is potential for further growth. Yes its forecast valuation of 31.7 times earnings is heady, but a strong pipeline and successful acquisitions make it easy to justify.

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Harvey Jones 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.

Two under-the-radar growth stocks I’d buy today

Edward Sheldon, CFA — Thu, 07 Sep 2017 08:35:27 +0000

To make money in the stock market, you don’t need to buy the latest ‘hot’ stocks that every investor is talking about. There’s plenty of money to be made buying companies that the majority of investors haven’t even heard about. With that in mind, here’s a look at two under-the-radar stocks that I believe look interesting right now.

Sanne Group

Sanne Group (LSE: SNN) provides outsourced administration, reporting and fiduciary services to asset managers, financial institutions, family offices and corporates. The company has over 1,000 clients across the Americas, EMEA and Asia Pacific and administers funds in excess of £160bn. The stock floated in April 2015 at 200p, and has surged to over 750p in less than two-and-a-half years.

The company is benefitting from strong demand for its services, as a result of increased regulation and cross-border investment, combined with the “growing expectation for independent oversight.” Through both acquisitions and organic growth, Sanne Group has enjoyed significant growth over the last three years, with its top line rising from £26m in FY2013 to £63.8m last year. Underlying earnings per share jumped from 13.9p to 17.4p last year, an increase of 25%.

The outsourcing specialist released interim results this morning, and the numbers look impressive. Revenue surged a formidable 104% to £56.3m, of which 15.3% was organic growth, and underlying profit before tax rose 105% to £20.9m. Underlying diluted earnings per share increased 60% to 13p, and the company lifted its interim dividend by 31% to 4.2p. Furthermore, management advised that as a result of a lower expected effective tax rate, full-year underlying earnings are expected to be marginally ahead of previous expectations.

The shares have pulled back a little this morning, which is probably not a bad thing after a near 70% rise in the last 12 months. I don’t think the current valuation of 31 times FY2017 consensus earnings estimates is unjustified, given the company’s growth history.

NCC Group

Another stock that could be worth a look right now, for risk-tolerant investors, is cyber security expert NCC Group (LSE: NCC).

Shares in NCC Group enjoyed a strong rise between 2013 and 2016, as the company made a series of acquisitions that boosted its top line. However, in late 2016, it became apparent the cybercrime specialist had grown too quickly, and back-to-back profit warnings saw the stock plummet from above 350p, down to around 110p.

NCC is operating in a fast-growing industry, as cybercrime is one of the single biggest threats to businesses, governments and individuals in today’s world. So the vital question is – can the company turn things around? I’m inclined to think they can.

City analysts forecast net profit of £20.7m for FY2018, a significant rebound from the £56.6 net loss recorded in FY2017, and earnings per share are expected to come in at 7.3p, up from 6.7p last year.

In July, management said: “When we have successfully managed our way through this transitional period, improved our organisation and how we go to market, we see significant upside opportunities and material value creation. The Board is confident that the Group can deliver sustainable earnings growth and enhanced shareholder value once it has more robust foundations in place.”

The investment case is clearly not risk-free, however for risk-tolerant investors with a long-term investment horizon, I believe there could be an opportunity here.

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Edward Sheldon owns shares in NCC Group. The Motley Fool UK owns shares of NCC. 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.

2 great growth stocks that could make you rich

Royston Wild — Tue, 18 Jul 2017 11:24:59 +0000

Scapa Group (LSE: SCPA) was recently 2% lower on the day and moving further away from recent record peaks after an unexcited market reception to latest trading details.

The tape-maker advised on Tuesday that “trading performance for the first quarter is in line with the Board’s expectations, with both Healthcare and Industrial performing as anticipated.

“Scapa is well positioned to make further progress this year and the Board remains confident about the Group’s outlook,” it added.

While reassuring, it is clearly no surprise to see the market fail to react significantly to this information, Scapa retreating further from June’s all-time highs above 515p per share. Still, I see it as merely a matter of time before the Manchester business reaches new summits.

Sticky business

Scapa has a long record of earnings growth behind it, and the Square Mile expects the adhesives giant to make further progress this year and next — bottom-line rises of 10% and 9% are forecast for the periods ending March 2018 and 2019 respectively.

A subsequent forward P/E rating of 28.2 times may sail north of the widely-considered value watermark of 15 times or under. But I reckon this is fair value given Scapa’s ample revenues opportunities.

The company saw sales gallop 13.3% higher in fiscal 2017, to £279.6m, it advised in May, the company benefitting from solid organic growth as well as significant FX tailwinds. Consequently, trading profit stepped to £29.2m, up 37.1% year-on-year.

And investors should take confidence from the the terrific progress of Scapa’s long-running self-help programme. Group trading profit margins moved into double-digit territory for the first time last year, marching to 10.4% from 8.6% in the prior period thanks to improvements at the Industrial division. And sales at the firm’s Healthcare arm breached the £100m barrier for the first time, rising 16.5% from 2016’s levels, to £108.7m.

I reckon there is still plenty of upside left in Scapa’s growth story.

Financial favourite

Sanne Group (LSE: SNN) is another London-listed stock forecast to deliver stonking earnings expansion in the near term and beyond.

For 2017, a 34% bottom-line rise is anticipated, continuing the firm’s record of mighty double-digit rises. And an extra 16% bounce is expected in 2018.

And these projections make Sanne decent value for money, in my opinion. While a prospective P/E ratio of 27.8 times may look expensive, a sub-1 PEG multiple of 0.8 suggests that the FTSE 250 play is actually attractively priced relative to its growth profile.

The financial giant, which provides asset and corporate administration services, saw group revenues stomp 40% higher in 2016 (to £63.8m) thanks to strength across all of its core divisions.

And Sanne has been extremely busy on the M&A front over the past year to extend its reach in both established and emerging nations to keep revenues on an upward tilt. Indeed, the business has made five deals since the start of 2016 in North America, Mauritius, South Africa, Ireland and the Netherlands.

With regulation of the financial sector becoming tighter across the globe, I believe Sanne is well placed to keep growing sales at a blistering pace.

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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.

2 hidden growth stocks I’d buy right now

Ian Pierce — Sun, 11 Jun 2017 07:30:35 +0000

Considering the relatively obscure market it occupies and the fact that it’s only been a public company for two years, it’s little surprise that alternative asset fund administrator Sanne Group (LSE: SNN) has quietly flown under the radar of many retail investors despite repeatedly posting huge increases in sales and profits.

The first reason to take a closer look at Sanne is that the market for its services is booming and growing at a very rapid clip. Alternative asset managers such as hedge funds, private equity groups and private debt investors are facing increasingly strict regulatory oversight across the globe.

As these asset managers investments’ spill over into other territories they have found outsourcing back and middle office administration tasks a cost effective and valuable service. Indeed, the popularity of the company’s services are clear in its results for 2016, when revenue leapt 40% year-on-year to £63.8m.

Organic growth was responsible for a little over half of this increase, but I’m even more interested in the acquisitions that accounted for the remainder. This is because the market for alternative asset fund administration is highly fragmented, which gives Sanne, as a well-capitalised and large player, significant room for continued market share growth through acquisitions.

And while many small caps can boast rapid growth but have a difficult time turning this growth into sustainable profits, Sanne has had no such problem. Last year pre-tax profits rose from £2.4m to £15m and underlying operating profit margins were a very healthy 35.5%. High levels of cash conversion also boosted its year-end net cash balance to £46.1m, providing firepower for future acquisitions.

However, all these positives have led investors to pile into the company’s shares, which now trade at a lofty 28 times forward earnings. But this is in line with the company’s historical valuations and with a sustainable business model and high market growth I reckon it’s worth taking a closer look at Sanne.

Saving the environment is big business

Another relatively recent entrant to the LSE benefitting from increased regulation is LED light manufacturer Luceco (LSE: LUCE). The company estimates the global market for LED lighting products will grow at a CAGR of 16.8% in the years to 2019 due to consumers and companies alike seeking to cut down on their electricity bills and conserve energy.

And Luceco is growing above the market at large thanks in part to owning its own manufacturing site in China, which keeps costs low and quality levels high. The other facet of the company’s success has been expanding into markets outside the UK with sales teams and distribution networks across Europe.

In 2016 these assets boosted sales 29.8% to £133.8m while a full 200 basis point improvement in operating margins more than doubled adjusted pre-tax profits to £12.3m. Increased cash flow also brought the firm’s net debt down to 1.4x times EBITDA and allowed for a maiden dividend of 0.3p.

Analysts are forecasting double-digit earnings growth in each of the next two years and these targets appear eminently achievable as the company invests in new sales networks and rolls out a wider range of products. With a healthy balance sheet, plenty of growth and huge dividend potential Luceco is at the top of my watch list, despite its shares trading at 22 times forward earnings.

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Ian Pierce 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.

2 fast-growing FTSE 350 stocks I’d buy before it’s too late

Peter Stephens — Thu, 13 Apr 2017 12:27:54 +0000

While the outlook for the global economy is relatively uncertain, a number of FTSE 350 stocks seem to have bright futures. Certainly, their share prices could come under pressure in the near term and their forecasts may be downgraded somewhat. However, with wide margins of safety on offer, their potential rewards appear to be high. Here are two prime examples of stocks which could be worth a closer look.

Improving performance

Recruitment specialist Hays (LSE: HAS) reported a rise in net fees on Thursday of 10% for the first quarter of the calendar year. This was despite a rather disappointing performance in the UK, where net fees declined by 4% versus the same period of the previous year. This was largely the result of a 13% decline in public sector net fees, where operating conditions are showing little sign of mounting a sustained recovery.

This negative performance was offset by strong growth in the Continental Europe & Rest of World division, where Hays recorded a rise in net fees of 18%. This was backed-up by growth in net fees of 12% in Asia Pacific, where Australia continued to offer upbeat performance. Partly as a result of this, the company now expects full year operating profit to be at the top of the current range of market estimates.

With Hays trading on a price-to-earnings growth (PEG) ratio of 1.8, its shares appear to offer growth at a reasonable price. Its outlook is highly uncertain and Brexit could cause a further deterioration in its UK performance. However, with the potential for a positive currency translation from weaker sterling and a diversified business model, now could be the right time to buy it for the long run.

Growth potential

Also offering high growth potential is alternative asset and corporate administration services specialist Sanne (LSE: SNN). Its most recent annual results showed that the company’s current strategy is positively catalysing its financial performance.

Revenue increased by 40%, while underlying profit before tax was 37% higher. It has a strong pipeline of new business within its core offering. This has been at least partly impacted by recent acquisitions which have improved its geographic diversity and also opened new growth opportunities. They have provided the company with additional scale in new regions such as North America and are expected to contribute to a rising bottom line over the next couple of years.

For example, Sanne is forecast to record a rise in its earnings of 34% this year, followed by further growth of 17% next year. This puts its shares on a PEG ratio of 1.5, which indicates that they offer excellent value for money at the present time. Following the strengthening of its operational structure, the company appears to have a more stable and sustainable growth profile which could translate into a rising share price.

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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.

2 FTSE 250 multibaggers that should have plenty of growth still to come

Alan Oscroft — Wed, 29 Mar 2017 13:21:45 +0000

Are you looking for multibaggers that haven’t yet run out of steam? See what you think of these two.

New growth star

Sanne Group (LSE: SNN) is one of those rare companies whose IPO price turned out to be a terrific bargain. As soon as shares in the asset and administration services firm hit the market on April Fools’ day in 2015, they headed upwards.

By the end of January 2017 they’d trebled in value. At 632.5p as I write they’ve fallen back a little from that peak, but they’re still worth 2.8 times their original price after just 2 years!

Results for 2016 show the reason for investors’ enthusiasm. With revenue up 40% to £63.8m, underlying pre-tax profit climbed by 37% to £22m and underlying earnings per share gained 25% to 17.4p. The full-year dividend was lifted by 37% to 9.6p per share — that’s only a 1.5% yield, but at this early stage it’s a welcome sign.

The big question is, how long will this early rate of growth continue? If we can believe the City forecasters, then there should be another year in 2017 with a similar level of earnings growth. That would slow to a rise of 15% by 2018, putting the shares on a P/E of around 23 — and I’m always wary of the slowdown after an initial spurt from new growth companies, as that can drive early buyers away and keep the share price in check.

But the firm made a couple of key acquisitions during the year, expanding its range of services to include a ‘hedge’ offering, and it’s moving into North America — which chief executive Dean Godwin described as “one of the world’s largest and fastest growing markets“.

I see attractive long-term growth potential here.

Long-term multibagger

I’ve been bullish about the oil services industry since the market started to creep back up again, and today I’m looking at multibagger Hunting (LSE: HTG), which put in what I saw as a real turnaround year in 2016.

With spending by the major oil companies cut back severely, the focus was on debt reduction. Inventory reduction, tax refunds, conservative capital expenditure, and a new share placing all contributed to reducing its net debt figure to just $1.9m by 31 December.

The trick now will be to turn a couple of years of losses back into profit, and analysts are expecting to see positive earnings per share in 2018 once again — and chief executive Dennis Proctor told us that “management anticipate moving back to monthly profitability later in the year“.

Mr Proctor also said that “towards the end of 2016 optimism was seen across the energy market“, pointing to OPEC reductions and improving US activity as indicators.

The institutional investors are turning back towards Hunting shares, with the price having more than doubled since early 2016, to 559p. And that shows Hunting’s strength over the long term. If you’d held in since early 2003 you’d have enjoyed an eight-bagger so far, even after the worst of the oil pice crisis — and that’s down from a 14-bagger peak in April 2012.

Is Hunting back on another multi-year bull run? Well, I don’t see any quick return to $100 and more for a barrel of oil, but I can easily see a sustainable level of around $75 in the medium term — and I reckon that would do Hunting a lot of good.

The post 2 FTSE 250 multibaggers that should have plenty of growth still to come appeared first on The Twelfth Magpie.

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Alan Oscroft 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.