Improving performance

Reporting on Monday was specialist outsourcing and recruitment solutions provider Servoca (LSE: SVCA). The company announced a rise in sales of 18.8% in the first six months of the year. This is substantially ahead of sales in the first half of the prior year and shows that the company’s strategy is working well.

Its diversified business mix has helped to deliver strong growth, with profit before taxation rising by 28.6% when compared to the same period of the prior year. Encouragingly, it recorded rising revenue in each of its six distinct business units, with it now on target to deliver against its full-year expectations.

Looking ahead, Servoca is forecast to report a rise in earnings of 5% this year. Since it trades on a relatively low price-to-earnings (P/E) ratio of 10.8, it seems to offer fair value for money. That’s especially the case since it has recorded four consecutive years of double-digit earnings growth. This shows that the company’s financial performance may be more robust and resilient than many of its sector peers.

Therefore, while a relatively small and high-risk share to own, its capital growth potential may be high in the long run.

Balanced outlook

Also offering upbeat growth potential within the same sector as Servoca is Robert Walters (LSE: RWA). It has also reported four consecutive years of double-digit earnings growth, with its net profit rising at an annualised rate of 42% during the period. More growth could be on the horizon, with bottom-line growth of 13% forecast for next year.

Certainly, there is scope for this figure to be downgraded should Brexit or the political uncertainty present in the UK cause businesses to be cautious when recruiting staff. However, with a price-to-earnings growth (PEG) ratio of just 0.9, Robert Walters seems to have a robust valuation which suggests a higher share price may be warranted.

In addition to its growth potential, Robert Walters could also become a more enticing income share. It may only yield 2.4% at the present time, but its shareholder payouts are covered over three times by profit. This suggests that dividends could rise at a faster pace than profit, which may lead to a double-digit rise in shareholder payouts over the medium term.

With inflation moving higher and investors likely to seek stocks which can offer an income return that stays ahead of rises in the price level, the recruitment company could prove to be a sound place to invest.

The post Two growth stocks I’d consider buying right now 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.

Gushing higher

Fossil fuel producer LGO Energy (LSE: LGO) has shot 7% higher in Wednesday business on the back of a positive operational update.

The London-based driller has received approval from authorities in Trinidad to perforate a new oil zone well at its GY-671 well in the Goudron Field, it announced. The zone is located within the Upper C-sands and covers a net pay interval of 208 feet.

LGO Energy added that its GY-50 well had been re-entered and logged to a depth of 2,428 feet, and that an application will now be lodged to perforate and complete 223 feet of new net oil pay across two producing zones.

And the energy producer completed a stunning hat-trick by advising it had also identified six additional extra wells, offering an opportunity to create further low-cost production by accessing previously-uncompleted productive zones.

LGO Energy certainly has the wind in its sails at present, the business also receiving shareholder approval in recent days to raise £28m through a rights issue. Still, the unpredictable nature of oil exploration — allied with LGO Energy’s still-fragile balance sheet — makes the business a risk too far, in my opinion.

Toast terrific returns

Drinking hole operator Punch Taverns (LSE: PUB) was last dealing 4% higher on Wednesday following a bubbly trading update.

At first glance the firm’s latest figures provide little cause for celebration: Punch Taverns saw pre-tax profit slump 84% between September and February, to £54.7m. However, the business put these results down to £288m worth of disposals during the past 18 months.

Indeed, Punch Taverns’ restructuring drive certainly appears to be delivering the goods — average profit per outlet rose 3% during the six months, with like-for-like net incomes across its core estate increasing 1.6%.

Punch Taverns is clearly a firm on the rise, and the City expects the firm to bounce from a 29% earnings dip in the year to August 2016 with a 28% rise the following year. I reckon a P/E rating of just 5.8 times for the current period represents a great level to latch onto the company’s improving growth story.

Recruiter on the rise

Recruitment specialist Servoca (LSE: SVCA) also lit up the leaderboards on Wednesday thanks to a 16% session-on-session rise.

The company advised in its latest trading update that “trading performance has shown excellent progress and results for the first six months will be significantly ahead of the corresponding period last year.”

Servoca announced back in December that its Healthcare and Education units continued to perform strongly, underpinning a 20% revenues rise in the year to September 2015. And the business hinted further acquisitions could be ahead to complement solid organic growth.

The number crunchers expect Servoca to enjoy a 15% earnings gain for fiscal 2016, leaving the business dealing on an ultra-attractive P/E rating of 10.6 times. And a sub-1 PEG reading of 0.7 underlines Servoca’s terrific value. I reckon the business could prove a very shrewd growth stock at current prices.

The post Should You Buy Servoca Plc, LGO Energy PLC & Punch Taverns plc Today? 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 shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The reasons for the reduced forecast in profitability for the company are a significant increase in organic investment in new places, with capital expenditure of over £50m expected for the current year which is set to cause increased development losses. Furthermore, Cambian is also feeling the impact of staff vacancies which has reduced the number of admissions to its schools and children’s services.

Clearly, today’s update is hugely disappointing and investor sentiment has been dealt a major blow. However, Cambian is still set to make strong progress, with it due to deliver growth in the current year and, looking ahead, it expects that further investment in people and in its systems will underpin growth in 2016 and beyond.

In the short term, though, its shares could come under further pressure as the market digests today’s news flow. As such, it seems to be a stock to watch, rather than buy, until more information is gleaned regarding its ability to meet its future guidance.

Meanwhile, recruitment and outsourcing specialist Servoca (LSE: SVCA) has seen its share price soar by over 20% today after upgrading its guidance for the full-year. The company has stated that it now expects results to come in significantly ahead of expectations due to strength in both of its key divisions.

In the Education recruitment business, the crucial September month was hugely positive and Servoca now expects it to beat internal targets in the coming months. Furthermore, the Healthcare recruitment business carried strong momentum into the second half of the year and this pace of growth has accelerated, with the contribution to the company’s profitability from this space continuing to rise.

Looking ahead, Servoca was due to post a rise in earnings of 39% in the current year, which it now expects to beat. And, with further growth in net profit of 40% being pencilled in by the market for next year, it appears to be in the midst of a period of exceptional growth.

Despite this, it trades on a price to earnings growth (PEG) ratio of only 0.5 (using the lower growth forecasts which do not reflect today’s announcement) and this indicates that Servoca could be set to continue the run which has seen it soar by 83% since the turn of the year. Certainly, its shares could continue to be volatile but, for long term investors, they appear to be worth buying at the present time.

The post Buy Or Sell? Cambian Group plc Down Over 30%, Servoca Plc Up More Than 20% 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. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Whitbread: A Long-Term Play

Its interim management statement for the 13 weeks to 28 May showed why Whitbread (LSE: WTB) deserves plenty of attention: like-for-like sales growth at Premier Inn and Costa stands at 6.3% and 5%, respectively. 

Moreover, Whitbread plans to open around “5,500 new Premier Inn UK rooms and around 250 net new Costa stores worldwide“. 

“Our committed UK pipeline has grown to 13,339 rooms and construction is underway on 42 new hotel sites as well as 19 hotel extensions,” it added.

The stock’s performance is broadly in line with that of the FTSE 100 at the time of writing, and that’s because investors want even more growth from this stock market darling — but at 21x forward earnings, WTB remains a buy, in my view. If it keeps up with this growth rate, revenues will have grown at a compound annual growth rate of 14.4% between 2013 and 2016 — and there’s more to come. 

WTB remains a long-term value play. 

Ashtead Group: Focus Is On Cash Flows 

Ashtead (LSE: AHT) is doing well both in the US and in Britain, its annual results showed today. So, why is AHT down 2.6% today at the time of writing, and 4% year to date? 

It looks like analysts are less upbeat about its growth prospects at 1,100 a share, where it currently trades. Barclays, for instance, decided to cut its price target to 1,375p today, which implies a rather high forward price-to-earnings ratio of about 20x. 

Certainly, the yield it offers isn’t particularly appealing, but its growth rate is outstanding. Fundamentals are solid, while net leverage is under control. If anything, additional cash returns to shareholders should be ruled out at least until its core cash flow profile improves. 

That said, I’d hold onto AHT if I were invested. 

Keep An Eye On Consort Medical (£455m market cap) & Servoca (£28m market cap)

These are two smaller business that investors should keep on the radar, in my opinion. 

Consort Medical‘s (LSE: CSRT) results were a mixed bag, but there’s a lot to like in the way management is pushing ahead with an aggressive capital allocation strategy that may eventually allow its stock to beat its previous records over the next 24 months.

“Unchanged final dividend of 11.68p per share; total full year dividend unchanged at 18.11p,” was one element I did not like in its release, but was in line with expectations. A closing net debt position of £99.2m (FY2014: net cash £25.8m), which implies net leverage of 2.3x (“comfortably within the banking facility covenant”) signals efficiency, at least financially, however. 

On average, its shares have risen at a 40% clip over the last five years: they do not trade in bargain territory, based on cash flow multiples, but they are not expensive, either. 

Elsewhere, Servoca (LSE: SVCA) is up 30% this year. Volumes are thin, which heightens the risk of the investment, of course. I am fairly relaxed about that, and I’d focus on the unaudited interim results (for the six months ended 31 March 2015) of this specialist outsourcing and recruitment solutions provider, which showed today a strong rate of growth for revenues and earnings as well as declining net debt. All good here. 

This is a business at a growth stage, operating in a very promising sector and with a clear focus (healthcare, education) on operations. Its lofty valuation could drop fast if management continues to deliver, drawing the attention of bigger recruitment agencies in the UK, where consolidation is likely to speed up sooner rather than later. 

The post Is It Too Late To Invest In Whitbread plc, Ashtead Group plc, Consort Medical plc & Servoca Plc? 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?

Alessandro Pasetti 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.

It was a different story at staffing specialist Servoca (LSE: SVCA), whose shares rose strongly this morning after the firm issued a short but sweet trading statement, informing the City that results for the first half of this year are expected to be “ahead of internal expectations”.

Both companies have attractions, but are they a buy?

Benchmark Holdings

Mr Woodford’s 14.5% stake in Benchmark only translates into 0.6% of the Woodford Equity Income Fund, so today’s fall won’t have a major effect on the fund’s returns.

However, Benchmark’s private investors may be suffering: Benchmark shares are down by 24% so far this year, and are now quite close to the 73p level at which they entered trading in December 2013, when the firm was floated on AIM.

So what’s gone wrong? On the face of it, Benchmark has done well. Sales have grown from £12.9m in 2012 to £35.4m in 2014, and were expected to hit £63.9m this year, generating a forecast profit of £8.4m.

Unfortunately, a substantial proportion of the firm’s revenue and profits appear to depend on a single product, Salmosan, which is a sea lice treatment used on fish farms.

Salmosan is a mature product without patent protection, and the firm has been losing sales to cheaper generic competitors more quickly than expected. As a result, full-year revenue and profits are now expected to be “significantly below market expectations”.

Benchmark says that it has regained its market share by signing volume deals with major customers, but these are presumably at lower rates than previously, suggesting profit margins will now be lower.

Before today’s fall, Benchmark shares traded on around 25 times current year forecast earnings. I suspect that once earnings forecasts have been revised downwards, that multiple will be maintained at the new share price.

Benchmark has several new products in the pipeline, and could have exciting long-term potential. However, I feel forward visibility of earnings is poor and further disappointments are possible, so I wouldn’t be a buyer at the current price.

Servoca

Servoca provides specialist staffing and recruitment services to the education, healthcare and criminal justice sectors.

The firm reported revenue of £49m last year, on which adjusted earnings per share were 1.08p. At the current share price of around 24p, this places the shares on a trailing P/E of 21, but today’s trading statement makes it clear that the firm is on course to deliver substantial growth this year, suggesting that full-year earnings are likely to be higher than current forecasts of 1.3p per share.

In my opinion, these forecasts could rise by around 10%, following today’s update, giving full-year earnings per share of around 1.45p, or a forecast P/E of around 16.

Encouragingly, Servoca’s chief executive Andy Church was a heavy buyer of shares earlier this year, when he purchased a further 735,616 shares, taking his total stake in Servoca to 5.49%.

Servoca looks like an interesting growth opportunity, in my view, and could be a promising buy.

The post Do Benchmark Holdings PLC And Servoca Plc Deserve A Buy Rating? appeared first on The Twelfth Magpie.

More reading

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

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