The business is experiencing a period of heightened risk, however. As such, its shares have delivered poor performance relative to the wider FTSE 100. Yet there could be turnaround potential ahead. That’s especially the case while a number of stocks, such as a FTSE 250 company which released a disappointing update on Friday, continue to be overpriced in my opinion.

High valuation

The company in question is cloud-enabled end-user and network security specialist Sophos (LSE: SOPH). Its performance in the first nine months of the year has continued to be subdued, with billings growing by just 2% in the period. A further sequential improvement in the renewal rate to existing customers in the third quarter was offset by a modest decline in new billings from new customers, as well as a decline in hardware billings.

Investors reacted negatively to the update. The company’s share price declined by over 20% following its release. This means that in the last year, its share price has dropped by around 55%.

Looking ahead, Sophos is forecast to post a rise in earnings of 17% in the current year, followed by growth of 13% next year. While this is a positive outlook, the stock has a price-to-earnings (P/E) ratio of 37, even after its recent decline. As such, it seems to lack a margin of safety and may be worth avoiding.

Recovery potential

As mentioned, SSE faces a number of risks which appear to have contributed to a decline in its share price in recent months. Perhaps its most pressing challenge is the disappointing financial performance which has been recorded in recent quarters. The company released a profit warning in September, with the impact of a price cap on variable tariffs and poor weather conditions being major contributors. The business is also facing uncertainty in terms of its strategy, with plans to merge its energy supply operations with Npower being scrapped.

While SSE has experienced a disappointing period, it may now appeal to value investors. The stock trades on a P/E ratio of 9.8, which suggests that investors have factored in the potential for further challenges. It has a dividend yield of 7.5%, and is expected to raise shareholder payouts by at least as much as inflation over the medium term.

As such, the income and value potential of the stock seems to be high. Certainly, it may be unable to provide a resilient and robust investment opportunity during what is proving to be a turbulent period for the FTSE 100. But from a recovery perspective, it could deliver high returns over the long term.

The post FTSE 100-member SSE’s share price is in freefall! This is what I think you should do appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of SSE. 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.

It’s the second disappointing update this year from the firm. Investors rushing for the exit have now pushed the Sage share price down by nearly 30% from January’s high of 825p.

What’s gone wrong?

In January Sage blamed its French business for a slow start to the year. Today the company said that “inconsistent operational execution” meant that organic revenue growth was “below management’s expectations” during the six months to 31 March.

Organic revenue growth, which excludes acquisitions, is now expected to be 7% this year, rather than 8% as previously guided.

Sage is trying to shift its customers onto a subscription-based model that generates recurring revenue. Unfortunately some customers appear reluctant to make the shift. Today’s figures show that recurring revenue grew by just 6.4% during the first half of this year, compared to 11.1% during the same period last year.

A good business at the wrong price?

One attraction of this business is that many customers pay up front for their services. This means that cash generation is quite strong.

Profit margins are also high — Sage had an operating margin of 20% last year.

Overall, I believe this business could be a good income investment. But adjusted earnings are only expected to grow by 1.2% this year and by 9.6% in 2018/19. And today’s news makes me think that even these forecasts could be in doubt.

Despite the risks, Sage stock still trades on a forecast P/E of 17 with a prospective yield of 2.9%. That’s too expensive for me. I’ll start to get interested if the share price falls below 500p.

Much stronger growth

FTSE 250 network security specialist Sophos Group (LSE: SOPH) is enjoying much stronger growth. The company said recently that it expects to report billing growth of 20%-22% for the year ended 31 March. Management says the business remains on target for annual billings of $1bn by 2020.

Strong growth in billings is encouraging, but what about profit? Since floating in 2015, Sophos hasn’t made a profit. However, analysts expect the group to move into the black this year with an adjusted net profit of $21.7m. Profits are then expected to rise by 59% to $46m in 2018/19.

A cash machine?

Like Sage, Sophos benefits from customers paying upfront for its services. This is why the company generated an operating loss of $23.8m during the first half of the year, but also generated free cash flow of $61.7m.

These upfront payments are initially booked as deferred revenue, which is classed as a liability. They should generate accounting revenue and (hopefully) profit as they’re delivered over the next year and beyond.

Should you buy?

One of the risks of taking cash upfront is that if future sales growth slows, a company can experience a cash crunch. Although this might not be a problem for Sophos, I am concerned that a lot of future growth is already reflected in the share price.

With the stock trading on 65 times 2019 forecast earnings, I think there’s a high risk that the shares’ recent decline could continue. I think there’s better value elsewhere for income and growth investors.

The post Is dividend stock Sage a top FTSE 100 buy after 10% share price slump today? appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Despite this, there still seems to be further upside potential on offer. As such, now could be the perfect time to buy it for the long run.

Impressive outlook

D4t4’s performance in the latter part of the financial year to 31 March has been better than expected. It has won a handful of contracts which have boosted its performance, including its two largest ever contracts for the Private Cloud Analytics solution. This means that it has delivered a record level of bookings for the year after what was a relatively subdued first half. As a result, revenue and adjusted profit before tax for the 2018 financial year are due to be ahead of the previous year.

In the current year, D4t4 expects to benefit from the recent contract wins. It’s due to report a 13% rise in its bottom line which puts it on a price-to-earnings growth (PEG) ratio of just 0.7. This suggests that it could offer further upside potential – especially if it’s able to continue recent momentum with regards to contract wins.

And while its share price may have risen significantly in a short space of time, now could be the right time to buy it. A dividend yield of 2.1% from a payout which is covered 4.2 times by profit indicates that its total returns could be resiliently high. As such, its risk/reward ratio is enticing at the present time.

Upbeat prospects

Also offering upbeat capital growth prospects within the software and computer services sector is Sophos (LSE: SOPH). The IT security products specialist is expected to deliver a significant improvement in its financial performance over the next couple of years, with its bottom line forecast to rise by 96% in the current year, and by a further 62% next year.

This has the potential to cause a step-change in investor sentiment towards the company. In the last six months, its share price has fallen by around 20% and this means that it now trades on a PEG ratio of around 1. Given its size and the diverse nature of its business, this appears to be a relatively low valuation.

Certainly, Sophos may appear to be highly-valued due to it having a price-to-earnings (P/E) ratio of around 96. However, if it’s able to deliver on its forecasts then it may be able to reverse recent disappointment from an investment perspective. As such, with strong turnaround potential, now could be the perfect time to buy.

The post D4t4 Solutions plc is a cheap growth stock I’d buy after it gains 25% appeared first on The Twelfth Magpie.

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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.

One such company is innovative ingredient solutions producer Treatt (LSE: TET).

Creating value 

Over the past five years, Treatt’s management has proven that it is one of the ablest set of leaders around. Over this period, pre-tax profit has risen by nearly 200% as sales have grown by 50%. Thanks to this growth, shares in the company have powered higher by almost 400% since the beginning of the second quarter of 2013.

And it looks as if this growth is set to continue. Today the company reported that following the performance for fiscal 2017 (when profit before tax jumped 46%), for the six months ended 31 March 2018, revenue increased 11% year-on-year. The core business categories of citrus, tea and sugar-reduction have “continued to drive top-line growth” while new business wins have bolstered the trading performance.

Management expects this trading momentum “to continue in the second half of the current financial year and beyond,” leading me to conclude that the market is undervaluing Treatt’s potential.

City analysts are expecting earnings per share to decline by 3.6% for fiscal 2018, which seems to be a conservative forecast considering today’s reported revenue growth, as well as the expected benefit from US tax cuts. With this being the case, I believe Treatt is one of the best growth stocks to buy now, ahead of a possible re-rating driven by better-than-expected trading performance.

A re-rating is already underway with another top growth stock, cybersecurity solutions provider Sophos (LSE: SOPH). Shares in Sophos jumped 20% in early deals this morning after the company said it anticipates reported billings growth for the year ended March 31 to come in towards the top end of guidance of 20% to 22% thanks to fourth quarter reported billings growth of approximately 23%. 

Huge opportunity 

Over the past four months, the stock has fallen out of favour with investors due to concerns about its valuation and growth potential. For example, to justify the current valuation of 85.1 times forward earnings, profits need to be expanding at a rate of 86% or more per annum. For 2018, analysts are expecting the firm to report its maiden profit of $0.07 per share, with earnings rising 61.4% to $0.11 for 2019.

This rate of growth alone does not justify the valuation, but in my view, the company deserves a high valuation due to the opportunity ahead of it. 

The value of the cyber security market is currently growing at a rate of around 11% per annum and will be worth an estimated $165.2bn by 2023. If Sophos can grab just a 1% share of this market, its sales could triple from $529m reported for 2017 to $1.65bn by 2023. If earnings can grow at the same rate, I’m convinced that shares in Sophos deserve their current premium valuation.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, it’s not the only stock which could offer high earnings growth over the medium term. Reporting on Thursday was another company that could be worth buying right now.

Impressive outlook

The company in question is provider of cloud-enabled end-user and network security solutions Sophos (LSE: SOPH). Its trading update showed that it continues to make progress with its strategy. Billings in the first nine months of the financial year increased by 21%. It was able to generate strong growth across all of its regions, with the Americas and EMEA rising by 22%. Its cash flow performance also improved, with net cash flow from operations up 21% versus the same period of the prior year.

Looking ahead, Sophos is expected to report a rise in its bottom line of 137% in the next financial year, followed by further growth of 77% in the 2020 financial year. Despite such a strong growth rate, it trades on a price-to-earnings growth (PEG) ratio of just 0.9. This suggests that it could offer a wide margin of safety and that there could be significant upside potential on offer.

While there is scope for a downgrade to its outlook, demand for its products looks set to increase in future years. This tailwind could enable to it to provide improving financial performance over the long term.

Positive prospects

Also beginning to enjoy a positive tailwind is Rolls-Royce. As mentioned, the defence sector has experienced a number of difficulties in recent years. Cost cuts across the developed world have meant that demand for military products has fallen, and this has caused a number of companies across the industry to report disappointing returns.

Now though, the company has a sound strategy under its current management team. Cost cuts could help to make it more efficient and are expected to contribute to a rise in earnings of 40% in the next financial year. With the company trading on a PEG ratio of just 0.5, it seems to offer excellent value for money. That’s particularly the case while the FTSE 100 trades within 6% of its all-time high.

Looking ahead, Rolls-Royce could also become a more enticing income stock. It is due to increase dividends per share by around 28% over the next two years. While this puts it on a forward dividend yield of just 1.9%, it is expected to pay out just 36% of profit as a dividend. This suggests that it could afford a much higher payout – especially when its bottom line is forecast to rise rapidly. As such, its total return potential seems high.

The post Rolls-Royce Holding plc isn’t the only growth stock I’d buy with £1,000 right now appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Rolls-Royce. 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.

Pricey grocer

Today’s results show revenue of £1.5bn for its latest financial year (53 weeks ended 3 December), which was 15.2% ahead of the prior 52-week year, or 12.7% on an adjusted basis. Pre-tax profit for the year was £1m.

To put these numbers into one context, Tesco, in its last financial year, delivered 38 times Ocado’s revenue and 145 times its pre-tax profit. Yet the FTSE 100 firm’s market cap is little more than five times bigger. Sure, Ocado has more scope to increase its share of the UK grocery market, but not that much more. And certainly not enough to merit a forward price-to-earnings (P/E) ratio of 330.

More than yams and cans in vans

However, Ocado isn’t simply a business that delivers groceries in vans. It’s built a whole technological and physical ecosystem, which includes digital commerce platforms and robot-operated warehouses. After a number of years of touting its end-to-end solution to international retailers — and repeated promises a first deal was imminent — 2017 was the year it finally happened. It inked an agreement with an unnamed regional European retailer in the summer. And it’s since announced a second deal with France’s Groupe Casino and a third with Sobeys in Canada.

Ocado has always had supportive institutional investors, who have bought into its ambitious, long-term vision but also a fair number of hedge funds, who have backed against it. Currently, there are eight declared positions, which together have sold short 10% of the company’s stock.

The shares have almost doubled in little more than two months. The company is confident of inking more international deals but I think it will need a good few even to justify the current price. As such, I think the valuation is overly high at this point, so it’s a stock I’m avoiding for the time being.

Hot stock in hot sector

Another FTSE 250 stock I’m avoiding on the basis of a super-high valuation is cybersecurity group Sophos (LSE: SOPH). The company describes itself as “a leading global provider of cloud-enabled end-user and network security solutions, offering organisations end-to-end protection against known and unknown IT security threats through products that are easy to install, configure, update and maintain.”

Obviously, cybersecurity is a market where there is strong demand and Sophos is seeing good momentum in its business. However, I believe investors have fallen head-over-heels in love with this ‘hot’ sector and driven Sophos’s shares up to an over-elevated level. They’ve soared from an IPO price of 225p in 2015 to around 600p today, valuing the business at £2.8bn.

According to Reuters, analysts are forecasting earnings per share of $0.07 (5p at current exchange rates) for the company’s financial year ending 31 March, followed by $0.11 (7.9p) for fiscal 2019. This gives P/E ratios of 120 and 76. I don’t see much wrong with the business but the current valuation simply looks too high to my eye.

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G A Chester 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.

Since hitting 18-month highs above £33.70p per share back in October, the Primark owner’s share price has been locked in a heavy downtrend and it has shed almost a fifth of its value since then.

Stock pickers have taken fright at the clear decline in retail conditions since the start of the autumn (just today researcher GfK announced that consumer confidence slumped to a four-year low of -13 in December, causing plenty of concern for Britain’s retail sector as we enter 2018).

But rather than sink in the current climate, I reckon ABF’s profits could thrive. I see current weakness as a prime buying opportunity.

Primark powers on

Full-year financials released in November certainly didn’t smack of a business in distress. At actual currencies the FTSE 100 firm saw revenues rise 15% in the 12 months to September, to £15.4bn, or 6% at constant exchange rates. As a result, adjusted pre-tax profit rose 22% to £1.31bn. And there is plenty of reason to expect turnover to keep on booming.

The rising pressure on shoppers’ wallets saw sales at its low-cost Primark stores in the UK rise 10% year-on-year, the company noting that its share of the market grew “significantly” in the period. UBS estimates that the chain commands just 15% of the British clothing market, leaving plenty of room for further growth.

And of course, expansion in Europe and the US also creates splendid revenues opportunities in the years ahead (sales at Primark leapt 16% in Continental Europe in the last year).

City analysts do not expect the troubles on the high street to put paid to future earnings expansion, and are predicting a 7% bottom line improvement during fiscal 2018.

And in this environment, it is expected to keep lifting dividends at a rapid rate. The company lifted the full-year payout 12% last year, to 41p per share, and another hefty hike — to 44.7p — is predicted for the current year. This yields a very handy 1.6%.

Investors may consider a forward P/E ratio of 20.6 times too expensive, but in my opinion ABF is worthy of such a premium rating given the brilliant growth opportunities over at Primark, not to mention the brighter outlook for its Sugar division.

Tech titan

Sophos Group (LSE: SOPH) is another great growth share that has been on the back foot more recently. Its market value has dipped 15% since punching record peaks of 646p per share just a month ago following a share placing.

Demand for the online security specialist’s services continues to strengthen, the business witnessing a 22% jump in billings between April and September (and 29% in the final three months of the period), and 280,000 more clients added during the period.

And this growth is broad based too, Sophos reporting double-digit percentage sales across all of its major regions.

With sales steadily taking off, the City is expecting the FTSE 250 firm to bounce from a 63% earnings decline in the year to March 2018 — the third drop in a row if realised — with a 133% improvement next year.

A forward P/E ratio of 100.3 times may be too rich for many investors, although a sub-PEG reading of 0.8 suggests Sophos is actually attractively priced relative to its growth prospects.

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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.

Although revenues at HPE’s software business continued to decline in the three months to July, it has reacted positively by taking  measures to cut costs and reduce its exposure to less profitable lines. As such, operating margins improved 7.1 percentage points to 24.9% in the period.

Meanwhile, it’s also seeing a degree of stabilisation in revenues, down 3% year-on-year in Q3, which compares favourably to the 9% on-year fall in the second quarter.

Allay fears

These results should allay investors’ fears that Micro Focus overpaid and overstretched to buy Hewlett Packard’s non-core software business in an $8.8bn deal. Micro Focus has a great deal of experience of integrating and managing legacy software businesses following a series of acquisitions under executive chairman Kevin Loosemore’s leadership.

It’s a strategy that has worked very well, and shares in the company have more than tripled over the past five years. And there may be still more to come as valuations remain tempting – shares in the company trades at just 14.7 times its expected earnings this year and have a prospective dividend yield of 3.5%.

Upbeat update

Meanwhile, shares in software security company Sophos (LSE: SOPH) dipped as much as 2% despite an upbeat update today. It showed the company is on track to exceed its previous guidance on billings growth, with robust customer demand boosting sales.

Following strong momentum in billings growth since April, the company now expects related growth of around 20% for the full year, compared to its previous guidance of mid- to high-teens growth. The trading update demonstrates Sophos’s mid-market strategy is continuing to deliver strong financial results, with recent momentum picking up.

Growing awareness

Sector fundamentals also remain bright as awareness of cyber security risks only continue to build. Businesses and consumers increasingly recognise the need to protect themselves from cyber attacks. And Sophos is not just doing well because it’s in a growing market, it’s gaining market share and winning significant new customers. Sophos is one of the fastest growing network security vendors in the IT security market, and it has achieved this through continued innovation, together with its efforts to develop best-in-class customer support.

But although expectations for the firm’s revenue and earnings growth are certainly captivating, valuations seem stretched after shares have soared by 110% over the past 12 months. Based on this year’s expected underlying earnings per share of 4.8p, shares of Sophos trade at an extremely high forward P/E of 99.5. And even after factoring in estimates of a further 39% increase in its bottom line in 2018/9, its forward P/E would fall to a still-pricey 83.6 next year.

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Although fears of a second bubble may have been overstated, finding a great tech-related stock trading on a still-vaguely-sensible valuation feels like more of a challenge these days. That’s not to say it’s impossible. Here’s one that’s caught my eye.

Record first half

Over the last year, shares in Computacenter (LSE: CCC) have done rather well, rising 15% before today. On a longer timeline, the stock has been an even bigger winner for holders, having five-bagged in just nine years. What’s more, this morning’s interim results suggest that the shares are heading in only one direction.

In the six months to the end of June, revenue climbed 15% to £1.7bn with particularly strong growth being seen in Computacenter’s German business. Adjusted pre-tax profits also rose a very encouraging 66% to just under £42m. Even if some of the latter can be attributed to beneficial currency movements, the majority of growth appears to have been generated from improved operational performance.   

While the business now faces the tough challenge of matching its performance in H2 last year, CEO Mike Norris stated that Computacenter remains “on track for a record performance” and “marginally ahead” of management expectations conveyed in its April trading update. In his words, Computacenter’s board has “never been more optimistic about the market’s potential, as customers invest capital, digitalise their businesses and require support to reduce their long-term operating costs”. 

Today’s forecast-beating numbers have seen shares soar 17% in early trading. On a valuation of 18 times forecast earnings, however, the stock still looks a great deal, particularly as Computacenter also declared that it would return more cash to shareholders (approximately £100m) in Q4. 

A risky bet?

For evidence that Computacenter’s valuation still looks more than reasonable, check out £2.3bn cap network security solutions provider Sophos (LSE: SOPH). Right now, its shares are firmly in nosebleed territory, trading as they are on 98 times 2017/18 earnings.

True, recent results have been more than positive. The company’s financial performance in Q1 was ahead of management’s own expectations thanks to strong demand for its next-generation anti-ransomware solutions following the high-profile WannaCry and Petya cyber attacks in May and June.

Having achieved a 16% rise in billings (19% at constant currency) over the three months to the end of June, CEO Kris Hagerman stated that the Abingdon-based company “continues to grow faster than the overall industry and gain share“. He also expects this momentum to continue, allowing the company to meet its full-year expectations. 

Trouble is, with such high hopes comes the possibility of huge disappointment. While it would be hard to deny that Sophos has managed to build an enviable position in a white hot industry (leading shares to double in value over the last year), any sign of weakness will surely be punished by the market.

A huge drop isn’t guaranteed, of course. Just look at Fevertree, Purplebricks and Blue Prism for evidence of stocks that have continued to defy gravity. No, the question investors need to ask is whether they are happy with the level of risk they are taking by buying/holding a stock at this kind of valuation. It is, after all, the only thing we are able to control.

With its still-decent valuation, solid balance sheet and encouraging recent performance, I think Computacenter is a far better play for more cautious investors.

The post This five-bagger value stock still looks like a bargain appeared first on The Twelfth Magpie.

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Paul Summers 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

The shares edged higher in early trading to above 2,000p, taking its gains to 60% since a multi-year low in February last year.

Doesn’t move the dial

Aveva’s core end markets of Oil & Gas and Marine, which together account for over 60% of group revenue, have been in a cyclical trough over the last three years. However, the company confirmed today the early signs of improvement in Oil & Gas that it had noted in its annual results in May.

This, together with the full-year in-line outlook, means there should be little, if any change to analysts’ forecasts. Indeed, the fact that the shares have retreated towards yesterday’s closing level of 1,975p, as I’m writing, shows that today’s update doesn’t really move the dial.

Earnings upgrades needed?

The City consensus is for an 8% increase in earnings to 72.2p a share, giving a price-to-earnings (P/E) ratio of 27.4 and a price-to-earnings growth (PEG) ratio of 3.4. These are high ratings and they remain elevated at 25.6 and 3.7, respectively, when we look ahead to forecasts for the company’s 2018/19 financial year.

Aveva is a sound business with a strong balance sheet — net cash has increased to £152m from £131m over the past three months — but it looks to me as if we’d need to see upgrades to earnings forecasts for the shares to move materially higher from their current level.

Prodigious demand

In contrast to the headwinds Aveva has faced, another FTSE 250 tech firm, Sophos (LSE: SOPH), has enjoyed a backdrop of prodigious demand in its area of business.

This cyber-security solutions group has seen its shares soar from an IPO price of 225p in July 2015 to a current 438p, giving it a market cap of just over £2bn. The latest leg-up came after it posted forecast-busting 2016 results in May.

Attractive ratios

For 2017, the City is expecting to see revenue of $628m (£487m at current exchange rates), rising to $732m (£567m) in 2018. This gives a price-to-sale ratio of 4.2, falling to 3.6, which strikes me as attractive for a company whose top line is advancing strongly.

Turning to the bottom line, earnings are forecast to leap 43% from $0.07 (5.4p) a share to $0.10 (7.7p). The resulting P/Es of 81 and 57 are markedly higher than Aveva’s, but Sophos’s much higher forecast earnings growth gives it a far more appealing PEG of 1.3.

Flattering highlights

Not that the company’s management shouts much about such standard numbers as revenue and earnings. Instead they headline things like “billings” (significantly higher than statutory revenue) and other flattering metrics like “cash EBITDA” and “unlevered free cash flow”.

While this irks me (and could be viewed as a red flag), City analysts appear to have no concerns. Of nine brokers tracked by financial website Digital Look, seven rate Sophos a “strong buy”, one a “buy” and one is “neutral”.

The post Could these hot FTSE 250 stocks help you retire early? appeared first on The Twelfth Magpie.

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G A Chester 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.