Property listing website Rightmove (LSE: RMV) is a good example of this.

I’ll explain why Rightmove is so special in a moment, but first I want to consider another technology stock that’s delivering impressive growth.

A big opportunity

An increasing amount of language translation work is performed by computers, rather than human translators. One of the companies at the forefront of this market is UK firm SDL (LSE: SDL), which has a market cap of around £450m.

The company’s services include the automated translation of large volumes of documents and software localisation. After a difficult period, revenue from continuing operations rose by 2.8% to £143.1m during the first half, but pre-tax profit climbed 30% to £7.8m.

When profits rise more quickly than revenue, it means profit margins are growing. In this case, SDL’s accounts show that the group’s underlying operating margin rose from 6% to 8.4% during the first half.

This isn’t especially high, but the group does appear to be highly cash generative. Free cash flow was £10.5m during the half year, and SDL reached the end of June with a net cash balance of £22.5m.

Should you buy or hold?

I can see long-term growth potential for SDL’s business. But I think it’s fair to say that some of this is already priced into the stock.

The shares are up by 2% to 516p at the time of writing. Broker earnings forecasts put the stock on a forecast price/earnings ratio of 22.7 for 2018, with a prospective yield of 1.3%. Earnings are expected to rise by 17% in 2019, giving a forecast P/E ratio of 19.4.

In my view this is a fair valuation. I’d hold the stock now, and top up during any market wobbles.

An exceptional business

SDL isn’t cheap enough to tempt me today. But I might consider making an exception for Rightmove.

This business is the dominant player in this sector, with a company-estimated 74% market share. It logged 830m visits totalling 6.5bn minutes during the first six months of this year.

This means that it’s almost essential for estate agents to list their properties on Rightmove. In turn, this means that the company can charge agencies much more than smaller rivals Zoopla and Onthemarket.com, even though their services are basically the same.

This has made Rightmove one of the most profitable businesses in the UK, with a 73% operating margin in 2017.

What could go wrong?

One risk for investors is that the company will lose market share to a cheaper rival. This seems unlikely to me because of house hunters’ strong preference for the Rightmove website.

A more pressing concern may be that growth will stall because housing sales are slowing. Rightmove’s half-year results show that it signed up just 23 new customers during the first half, out of a total of 20,450.

Buy on weakness?

Rightmove stock has fallen by 10% from June’s all-time high. The shares now trade with a forecast P/E of 27 and an expected yield of 1.3%.

That’s not cheap, but this company’s high market share and exceptional profit margins suggest to me that it could continue to beat the market.

The post 2 dividend growth stocks that should keep beating the FTSE 100 appeared first on The Twelfth Magpie.

More reading

• This FTSE 250 stock could storm back into the FTSE 100 with an 80% rise, 1 broker says

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

With that in mind, here is one mid-cap stock which could be worth selling on valuation grounds. A smaller company operating in the same sector appears to have a stronger growth outlook and lower valuation. Therefore, it seems to offer a brighter investment future on a relative basis.

Time to sell?

The FTSE 250 stock which could be worth selling right now is engineering, design and information management software solutions provider Aveva (LSE: AVV). The company has delivered mixed performance in the last five years when it comes to profit growth, with its bottom line falling in two years to generate an annualised growth rate of just 1% during the period.

The company recently merged with Schneider Electric’s industrial software division, and this could lead to improving performance over the medium term. However, its forecast earnings growth rate over the next two years is not especially impressive. It is due to post a rise in net profit of 3% in the current year, followed by further growth of 9% next year. This is below the index average and suggests that the stock may lack a clear catalyst to push its share price higher.

In addition, Aveva has a high valuation at the present time. It trades on a price-to-earnings (P/E) ratio of around 50, which suggests that it lacks a margin of safety. As such, and with a dividend yield of 1.6% which may not rise rapidly due to its modest earnings outlook, the company appears to lack investment potential.

Time to buy?

In contrast, the outlook for sector peer SDL (LSE: SDL) appears to be significantly more positive. On Thursday it reported that trading in its first quarter had been in line with management expectations, and that it has now signed the vast majority of the licence deals that had slipped from the 2017 financial year. This was expected and may help to boost investor sentiment in the near term.

With SDL forecast to post a rise in its bottom line of 16% in the current year and 13% next year, it has an upbeat growth outlook. It trades on a price-to-earnings growth (PEG) ratio of 1.3, which suggests that it has significant upside potential.

In terms of SDL’s track record of growth, it has been somewhat mixed. In the last five years it has recorded losses in two years, which suggests that it is a relatively volatile entity that could be risky when compared to its sector peers. However, with it seeming to trade well below its intrinsic value, it could offer high return potential. As such, for less risk-averse investors it could be worth buying right now.

The post One FTSE 250 share I’d sell to buy this growth stock appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens 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.

Bargain hunt

SDL (LSE: MCS) is a stock that share pickers have been flocking away from recently (its share price has dropped almost 20% during the past 12 months). This represents a possible bargain-hunting opportunity, in my opinion.

The Berkshire company — which provides language translation software and services — saw its share price come under huge pressure during the latter half of 2016 following not one, but two profit warnings.

A fresh set of financials on Tuesday has failed to put some snap back into SDL’s market value, proving that the market still needs some convincing. The share was down a further 2% on the day after advising that group revenue slipped fractionally in 2017 to £287.7m, a result that pushed adjusted pre-tax profit 19% lower to £22m.

Commenting on the results, chief executive Adolfo Hernandez commented: “2017 was a period of operational heavy-lifting and it is frustrating that, as we drove our transformation, we were not able to perform consistently in financial terms in all areas of the business.”

Repeating earlier warnings, he added: “Our financial results were impacted by weak gross margins in Language Services in the first half and by software deal slippage towards the end of the period,” although Hernandez affirmed that the company was taking plans to remedy these issues.

Risks outweigh rewards?

As I said, I believe current share price weakness may represent a chance for contrarian investors to pick up a great growth stock for next to nothing. SDL is expected to bounce back with a 36% earnings rise in 2018, resulting in a forward P/E ratio of 15.8 times and a corresponding sub-1 PEG reading of 0.4.

And the IT giant is expected to build on this recovery with an additional 12% bottom line improvement next year.

Having said that, while the language translation market offers ample revenue opportunities, SDL still has a long way to go to get its turnaround strategy firing on all cylinders. So while I believe the firm could prove a lucrative bet for long-term investors, the more risk-averse out there may want to give the company a miss today.

On the charge

Those seeking a secret growth share firmly on the rise may want to check out discoverIE Group (LSE: DSCV).

Unlike SDL, investors have been falling over themselves to buy into the Surrey business of late, meaning its share price has ballooned by close to 80% over the past year. Despite this, discoverIE can still be picked up on a forward P/E multiple of just 15 times and a PEG reading of 0.9 for the year to March 2019.

The electronics play is expected by City analysts to keep earnings growing with a 9% improvement in the outgoing period, and a 17% rise is forecast for next year. And I am confident that, with its Design & Manufacturing arm going from strength to strength (organic revenues here leapt 10% during quarter three), that profits should keep on beating an upward path.

The post 2 secret growth stocks that could make you rich appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Uncertain outlook

SDL’s trading performance for the year to 31 December is currently on target when it comes to its sales pipeline. However, the company is reliant on the closure of certain software deals which may not be processed and fully awarded by the end of the financial year. If they are not closed, it will mean that adjusted EBITA (earnings before interest, tax and amortisation) will be below market expectations on a like-for-like basis.

In addition, the company has also experienced a faster than forecast shift from perpetual license sales to Software-as-a-Service (SaaS) sales. This has caused higher costs to be recognised in the current year, with revenues deferred into future years. As well as this, the company plans to increase overall investment in order to capitalise on the growth opportunities which it sees in the market.

Potential turnaround?

Clearly, after a 25% share price fall, the near-term outlook for SDL is highly uncertain. It states in its update that the outlook for its industry remains very positive, and it believes it can move to the forefront of the industry with the right investment. And with it anticipating double digit revenue growth and mid-to-high teens profit margins over the medium-to-long term, it could offer scope for a turnaround in future years. For now, though, it may be best to wait and see how its shares perform over the next few weeks before buying a slice of it.

Improving outlook

Also struggling to deliver share price gains recently has been consumer goods company Reckitt Benckiser (LSE: RB). The company’s stock price is flat over the last year while many of its global consumer goods peers have soared. One reason for this could be the company’s valuation, which has been among the highest in its sector.

Now though, Reckitt Benckiser has a price-to-earnings (P/E) ratio of 20.6. This appears to be a fair price to pay for a company that is forecast to post a rise in its bottom line of 6% in the current year, followed by further growth of 10% next year. Beyond that, its planned restructuring in 2018 could create a more streamlined and efficient company which is better able to deliver further double-digit growth in future years.

With a range of high-quality brands in its product stable and exposure to fast-growing markets across the emerging world, Reckitt Benckiser seems to have the potential to deliver a successful turnaround. As such, now could be the perfect time to buy it.

The post Is SDL plc a turnaround stock worth buying before Christmas? appeared first on The Twelfth Magpie.

More reading

• 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
• 3 beaten-down FTSE 100 shares to consider buying and holding for a decade
• How much would you need in a SIPP to replace a £3,000 monthly salary?

Peter Stephens owns shares in Reckitt Benckiser. The Motley Fool UK has recommended Reckitt Benckiser. 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.

Top 100 global brands

First up is language translation software specialist SDL (LSE: SDL). The Maidenhead-based group is a global innovator in language translation technology, services and content management, working with no fewer than 78 out of the top 100 global brands.

The firm’s shares came under pressure in the summer, after half-year results revealed that higher costs of delivering new initiatives and planned investment resulted in lower profitability compared to the first half of 2016. The share price fell off a cliff, sinking 23% on the day the results were announced.

Short-term issues

Management has already begun implementing plans to remedy what I see as short-term issues, with many of the actions already under way. And there has already been a turnaround of sorts, with the shares climbing 25% from lows of 448.5p at the start of September, driven at least in part by more positive recent news flow.

This includes the announcement that leading airlines from across Europe, Asia and the US have signed agreements for a variety of content management products and translation services from SDL. The business already works with many of the world’s leading airline brands, including six of the top 10 global names, and more than 40 top travel companies.

For me, SDL looks like a good long-term recovery play trading on a forward earnings multiple of 26. This may seem expensive but it drops to 20 for 2018, much lower than many of its high-flying peers.

Plenty of headroom

Meanwhile, another small-cap sensation that I’d like to bring to your immediate attention is Mears Group (LSE: MER), provider of support services to the UK’s Social Housing and Care sectors. In partnership with its housing clients, the Gloucester-based group provides services in every region of the UK, maintaining, repairing and upgrading the homes of hundreds of thousands of people in all types of communities, ranging from remote rural villages to large inner city estates.

In addition, the group’s Care division provides support to over 15,000 people a year, enabling older and disabled people to continue living in their own homes. The majority of housing revenues still come from traditional contracting partnerships, where Mears is the market leader. But this only accounts for 15% of the UK’s social housing market, meaning there’s still plenty of room for further growth.

And with that growth potential in mind, I think the shares are worth buying at the present time, trading on a modest price-to-earnings ratio of 14, which drops down to 12 for 2018.

The post 2 top small-cap stocks I’d buy in November appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Bilaal Mohamed 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.

A first-half results update from SDL (LSE: SDL) was subtitled Delivering our transformation, but unfortunately it transformed the share price into one worth 22.5% less — down to 498p as I write.

The content management and translation services specialist is in the first year of a three-year turnaround plan, and today’s figures show how much that is needed.

Before one-off items, profit before interest, tax and amortisation slumped from £9.5m at the halfway stage in 2016, to £4.9m this time, and adjusted earnings per share crumbled to 3.19p from 9.11p.

What’s more, chief executive Adolfo Hernandez said that margins in the second half are now expected to be “to be slightly below… the second half of 2016,” telling us  that “the first half performance has underlined the importance of the actions already under way to invest in our turnaround.“

Forecasts for a 29% EPS rise seem unlikely to be met now, and even if full-year EPS remained flat we’d still be looking at a P/E of 22 based on the fallen share price — and that’s with dividend yields of only around 1%.

Unmissable bargain?

Is this an oversold bargain to snap up now, or is it one to avoid?

Translation software and services should continue to see rising demand around the globe, and SDL’s investment in things like cloud technology and machine translation are to be welcomed.

But I’m wary of a technology company having to play catch-up, which is what chairman David Clayton seemed to imply when he said that “our growth in revenue, particularly within our Language Services business had been consistently lower than the market.“

I also don’t like the sudden surprise of today’s announcement, and I can’t help fearing there’ll be more profit warnings before things turn around. I would not buy right now.

Irresistible dividends?

LSL Property Services (LSE: LSL) investors had a better day, seeing their shares pick up 1.5% to 258.5p on first-half results — only a modest gain on the day, but we’ve seen a 14% rise since a trading update on 17 July.

Revenue was flat, but the UK’s second largest estate agency saw its underlying operating profit rise by 37%, with an operating margin growing from 7.5% to 10.2%.

Adjusted earnings per share came in 34% ahead, and net bank debt was slashed by 49% to £31.7m. The interim dividend was held at 4p per share.

Investors have been shunning LSL due to fears that a weakening property market will put further pressure on its dividend — last year’s was cut by 18%, but it was still well covered by both adjusted earnings per share and by cash flow, even if both did fall from 2015 levels.

Ignore the short term

We are likely to see house sales falls this year, but chief executive Ian Crabb reckons that “mortgage costs and availability remain positive and the medium-to-longer term fundamentals of the UK housing market remain robust.“

Taking into account this short-term pessimism, I can’t help feeling LSL shares are oversold. A forecast drop in EPS this year would give us a forward P/E of only 9.6, and that would drop to 9.4 based on a modest EPS recovery pencilled in for 2018.

Last year’s dividend, if maintained, would yield 4.1% — and even if we saw a further reduction, I still don’t see the justification for such a low P/E multiple. I think LSL shares are cheap.

The post Down 20%: are SDL plc shares now an incredible bargain? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Better-than-expected performance

Reporting on Tuesday was technology company Sophos (LSE: SOPH). The cybersecurity specialist’s share price increased by around 12% following the trading update. It showed that the company’s current strategy is working well, with its fourth quarter being relatively strong. In fact, it expects to report Q4 constant currency billings growth of around 27%, excluding any benefit from the recently announced acquisition of Invincea.

Furthermore reported billings, which allow for the currency headwind, are expected to grow by around 18% in the full year. This will take them from $535m in 2015 to $630m in 2016, which is ahead of the current guidance of $610m-$617m. As a result, cash EBITDA (earnings before interest, tax, depreciation and amortisation) as well as free cash flow are expected to be ahead of the consensus range.

Looking ahead, Sophos is forecast to record a rise in its bottom line of 66% in the current year, followed by further growth of 33% next year. This puts its shares on a price-to-earnings growth (PEG) ratio of just 0.8, which indicates that more capital gains could be on the horizon.

Certainly, currency translation may prove to be a headwind during the rest of 2017, but Sophos appears to have a sound strategy through which to deliver improving share price performance. And with dividends expected to rise by 76% during the next two years, the company could become a surprise income play even through it currently yields only 0.8%.

Strong growth prospects

Another technology company which could be worth buying for the long term is SDL (LSE: SDL). Its main focus is on content management and language services, which may prove to be a relatively defensive and resilient niche in which to invest. This could provide a degree of stability to the company’s future financial performance, while its outlook remains highly impressive.

For example, SDL is forecast to report a rise in earnings of 20% in the current year, followed by further growth of 11% next year. This would follow three consecutive years of strong profit growth, where the company’s earnings increased at an annualised rate of over 100%. Despite its upbeat track record and growth potential, the company trades on a PEG ratio of just 1.7. This suggests there is additional capital gain potential on offer following its share price rise of 50% in the last year.

Furthermore, its shares appear to be cheap when compared to their historic valuation. In the last five years they have traded on an average price-to-earnings (P/E) ratio of 45.5, while at present they have a P/E ratio of 22.5.

The post 2 bargain growth stocks you can’t afford to ignore appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Anything to do with software technology can scare away more conservative investors, but it’s an area where margins are often high, and where great growth candidates can be found. Here are two that impress me.

Language support

Shares in language translation software and services specialist SDL (LSE: SDL) have doubled since September 2013, rising to 501p at the time of 2016 results day.

A “new strategy, structure and branding” has been happening, including the disposal of non-core businesses, and that’s almost done now, with just the tail-end still ongoing.

With resulting one-off items of £13.1m, SDL recorded a pre-tax loss of £15.8m. That’s better than the £25.2m loss a year previously, and continuing operations swung to a pre-tax profit of £11m (with an adjusted PBTA figure of £27m).

Adjusted EPS from continuing operations climbed from 21.17p in 2015 to 26.58p, and the total dividend was doubled to 6.2p per share, with the firm announcing a new progressive policy. On today’s share price that’s a yield of only 1.2%. But chief executive Adolfo Hernandez said the board “remains confident of another year of profitable growth which is reflected in the proposed realignment of our dividend,” and the City will need to upgrade its forecasts now.

There are a few things that impress me about SDL, including the firm’s improving margins and the fact that its software and services are used by a very wide range of clients — we heard that no single customer accounts for more than 5% of total revenue, and that customer acquisition among leading international brands is progressing well.

Forecasts suggest a P/E of 16.5 by 2018, and while that’s high enough to suggest confidence is growing in the firm, it’s low enough for me to think it’s still good value. If EPS growth is maintained over the next few years, I can see the well-covered dividend ramping up attractively. I reckon there’s a good future here.

Software quality

You might not be too familiar with SQS Software Quality Systems (LSE: SQS) — it’s a Cologne-based “specialist in end-to-end software and business process quality solutions” with a listing on AIM.

The big question is why did its shares plunge by 12% on Tuesday? The reason must be down to full-year results for 2016 just released, even though they look good, with chief executive Diederik Vos speaking of “another strong year” and telling us “we enter 2017 with confidence.“

Perhaps Herr Vos’s suggestion that he expects “growth of the overall US market to be relatively subdued following recent policy changes such as on health insurance” dented confidence. But he did enthuse that “we expect to see growth particularly in the German speaking countries, the UK, Ireland and Italy.” Maybe there’s some Brexit fear, too.

But a 17.2% rise in adjusted pre-tax profit and a 19.7% gain in adjusted EPS make me feel that the company’s enviable track record of growth is set to continue. And strong operating cash flow suggests the dividend, with a currently modest 2% yield but progressive, will continue to strengthen.

Net debt rose due to acquisition, though it’s been dropping nicely since the halfway stage and I see no cause for concern.

What really encourages me about SQS is that its shares have consistently offered low PEG ratings, and two more years on 0.8 and 0.9, respectively, make me think there’s more to come for a good few years yet.

The post FY results reveal 2 small caps with hidden growth potential appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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

Legal & General Group

Life insurance leviathan Legal & General Group (LSE: LGEN) has led the FTSE 100 field following news of a gigantic North American deal, and the business was last 3.1% higher on Friday. The business announced an agreement with Royal Philips to provide the electrical giant’s US subsidiary with retirement payments under a group annuity contract. The deal will cover 14,000 retirees and other previous employees of Philips.

 The US has been identified as a key territory for Legal & General looking ahead, and today’s deal marks its entry into the pension risk transfer market. And with the financial giant also making steady headway into other overseas markets, the City expects earnings growth of 14% and 7% in 2015 and 2016 respectively, creating very attractive P/E multiples of 12.9 times and 11.9 times. On top of this, projected yields of 5.4% for this year and 5.8% for 2016 will no doubt cheer income hunters.

Paragon Group of Companies

But Legal & General is not the only FTSE play lighting up the boards in end-of-week trade, and diversified finance provider Paragon Group of Companies (LSE: PAG) was recently chugging 10.6% higher from Thursday’s close. The Solihull firm advised it had bought Five Arrows Leasing Group from Rothschild & Co. for $117m, a provider of equipment, vehicle and construction equipment financing, as well as lease servicing.

The City expects Paragon Group of Companies to have enjoyed earnings expansion of 9% for the year ending September 2015, resulting in a P/E multiple of just 11.9 times. And this reading falls to a splendid 10.3 times for fiscal 2016 as strong market conditions — particularly in the buy-to-let market — create a 15% bottom-line bounce. The finance house’s bubbly outlook is expected to keep driving dividends confidently higher, too, pushing a yield of 2.7% for the outgoing year to a very decent 3.2% for the current period.

Treatt

Industrial chemicals producer Treatt (LSE: TET) — which provides ingredients for the food and fragrance sectors — also enjoyed a bump in Friday’s session and was last 1.9% higher. Investors cheered the firm’s latest trading update which revealed that Treatt had “performed well in the second half of the financial year,” meaning that revenues and profits for the 12 months to September 2015 should meet management’s expectations.

And with demand for speciality foods and beverages heading steadily higher — and especially in the craft beer segment — the number crunchers expect Treatt to deliver delicious returns in the years ahead. Earnings are expected have risen 7% in fiscal 2015, and an extra 8% rise is forecast for 2016, pushing a P/E reading of 15.3 times to just 14.1 times for the current period. And dividend yields of 2.7% for 2015 and 2.9% for 2016 sweeten the firm’s attractive investment case, in my opinion.

SDL

Information management specialist SDL (LSE: SDL) also rose nicely in the final trading session of the week and was last 9.7% higher from the previous close. The Bury St Edmunds business advised that founder and current chief executive Mark Lancaster will be stepping down at the end of the month. It added that “trading for the full year remains in line with its expectations.“

Due to strength across the business — and particularly from its Language Services arm — SDL saw group revenues rise 4% in January-June, to £133.9m, it advised in August. And thanks to the firm’s robust pipeline, the City expects earnings to grow 28% and 24% in 2015 and 2016 respectively, resulting in very appealing P/E ratios of 16.9 times and 13.3 times. And a yield of 0.9% for 2015 and 1% for 2016 provides a handy-if-not-quite-astonishing bonus.

The post Should You Buy Legal & General Group Plc, Paragon Group of Companies PLC, Treatt plc And SDL plc Following Friday’s News? appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000
• How much would I need to invest in these FTSE 100 dividend gems for a £29,061 ISA passive income?

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

Enquest

Fossil fuel leviathan Enquest (LSE: ENQ) was helping lead the FTSE onwards in Tuesday’s session and was last 3.8% higher on the day. The stock has tracked steadily lower in recent months alongside a spluttering oil price — indeed, Brent touched its cheapest for six months below $50 per barrel just yesterday.

And with the chronic supply/demand imbalance still casting a pall over the fossil fuel sector, I reckon the prospect of fresh oil price weakness should drive Enquest’s shares lower before much longer. Latest Baker Hughes data last week showed the number of US rigs rise again, to 664 at the last count, representing the fourth rise during the past five weeks. With output spewing forth elsewhere and a weak global economy failing to suck up the surplus crude looks set to fall again.

The City expects Enquest to punch a third successive earnings decline in 2015, and a 97% collapse is currently pencilled in. While it is true that for the time being the London firm remains well capitalised, the capital-intensive nature of its business — particularly in the cost-heavy regions of the North Sea — could easily see the balance sheet buckle in the event of persistent oil price pressure, and cast doubts on the economic viability of its projects.

SDL

Information management provider SDL (LSE: SDL) failed to ignite the market in today’s session and was recently dealing 3.3% lower. This is despite the business reporting that revenues advanced 4% during January-June, a result that helped drive profit before tax and amortisation 39% higher to £9.3m.

The business advised that revenues and profits from its Language Services arm exceeded its expectations, and although its Technology division disappointed during the period, sales are likely to improve as its pipeline kicks in. With SDL having overhauled its sales team, and its order book boasting a better quality of contracts versus previous years, the future is looking good for the Maidenhead business.

This view is shared by the City, and earnings at SDL are expected to fly 32% higher in 2015 and 19% next year. Although these numbers leave the software play dealing on P/E multiples of 20.7 times for the current period and 17.2 times for 2016 — above the threshold of 15 times that marks decent value — I believe that sub-1 PEG readings through to the end of next year illustrate SDL’s terrific value relative to its growth prospects.

Smiths Group

Conversely, investors welcomed Smiths Group (LSE: SMIN) with greater fanfare than SDL in Tuesday trade and sent shares in the company 5.1% higher from Monday’s close. The engineer shot skywards following media reports that North American activist hedge fund ValueAct had bought up to 5% in the business.

The rumoured share purchase has led to chatter that Smiths Group could be broken up and sold off, with Credit Suisse speculating that such a move could value the business at £15 per share, up from around £12 currently. While the size of the company’s pension deficit remains a massive problem, not to mention the size of its asbestos-related liabilities, the strength of the firm’s medical devices and John Crane seals division has led ValueAct to take the plunge.

The City currently expects Smiths Group to report a 1% earnings decline for the year concluding July 2015, although a 1% bounce is predicted for the following year. Consequently the company changes hands on hugely-attractive P/E ratios of 13.7 times for this year and 13.4 times for the following period. So I believe the capital-based business provides plenty of value for money regardless of ValueAct’s immediate plans.

The post Should You Invest In Enquest Plc, SDL plc And Smiths Group plc? appeared first on The Twelfth Magpie.

More reading

• Finding FTSE 100 gems in the AI fog

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