The shares are down again today, despite what looks to be encouraging full-year results and a positive outlook. I don’t think it’s hard to spot why. 

Sales up 

Like-for-like sales rose 2.7% over the year to 29 December, with total sales up 56.4% to £1.07bn, thanks to the takeover of noodle chain Wagamama in 2018. 

Adjusted pre-tax profit also rose to £74.5m, compared to £53.2m in 2018. That said, the company reported a loss of £37.3m on a statutory basis, due to the underperformance of its leisure sites. 

Reflecting on today’s results, relatively new CEO Andy Hornby said the company’s prospects had been “transformed” by the Wagamama acquisition (despite a significant minority of its shareholders voting against the deal at the time). Ahead-of-schedule cost savings were also highlighted.

As a result of outperforming its markets, Restaurant Group now plans to focus on continuing to grow this and its Concessions and Pubs businesses at the expense of its Leisure portfolio. It’s aiming to reduce the number of sites of the latter, from 350 to between 260 and 275 by the end of next year. The company also plans to tackle its not-insignificant debt pile.

Unfortunately, all this will come at a cost to those already holding, with the £600m-cap business announcing today that it will “temporarily suspend” its dividend. Cue another drop in the share price (6%, as I type).

Restaurant Group traded on a forecast price-to-earnings multiple of 9 before markets opened this morning. With investors continuing to fret over the impact of the coronavirus on the global economy, I can’t see the shares heading significantly higher anytime soon, especially as prospective buyers will no longer be compensated for having the patience to wait for a sustained recovery in trading.

Factor in the hugely competitive environment in which it operates and the possibility that its entry into the US market might not go as smoothly as hoped and Restaurant Group remains firmly in my ‘avoid’ pile. 

One to watch

Despite today’s downbeat update on how the coronavirus was affecting trading, I’d be far more likely to grab a slice of travel concessions business SSP Group (LSE: SSPG).

Admittedly, now might not be the time to buy. While trading in the UK, Continental Europe and North America (which account for the vast majority of the company’s revenues) has been as expected, operations in other parts of the world have suffered. Passenger numbers at airports in China are roughly 90% lower year-on-year, with declines of 70% in Hong Kong, and between 25% and 30% in countries such as Singapore and Thailand. 

All this means SSP now expects sales in February will be 50% lower year-on-year in the Asia Pacific region. With operations in the Middle East and India also affected, this will likely reduce revenue by £10m-£12m and operating profit by roughly £4m-£5m.  

Clearly, SSP’s share price could face further pressure as the story develops. Nevertheless, I remain attracted to the company’s geographical spread and its ‘captive audience’ business model. As markets continue to head lower, this is one stock firmly on my watchlist as a potential long-term buy.  

The post Want dividends? I’d steer clear of this value trap! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP 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.

Once again, the emphasis will be on picking established, quality businesses with room to grow that also pay dividends.

High returns

While some might view kitchen supplier Howden Joinery as cyclical, I still think it warrants consideration from investors willing to look outside the FTSE 100. Howden sells kitchens to builders rather than homeowners, which means it should get repeat business, regardless of what’s going on with the economy. It also has a couple of things I’m attracted to when screening for stocks: a consistently high return on the money it invests in its business, and zero debt. 

The shares have had a very good run of late and I’d prefer to buy at a cheaper price, but it’s hard to rule out a firm of this quality. The yield is 2%.

Top brands

Like fund manager Terry Smith, I’m rather partial to companies selling small-ticket, branded items that are in demand during good times and bad. That’s why I particularly like stocks in the drinks industry.

The natural pick from the FTSE 250 for this sector would be Robinsons and J2O-owner Britvic. Recent results from the £2.6bn-cap weren’t exactly sparkling, due to problematic trading in France. But this should turn out to be blip rather than a crisis. The shares currently trade on a little less than 16 times expected earnings and yield 3.3%

Food on the go

If you regularly buy something at a station or airport, you’ll know just how valuable a captive market can be for a business. That’s why my third pick is SSP Group, which manages food and drink sites at busy travel locations. Its brands include Upper Crust and Ritazza, but it also manages Burger King and Starbucks outlets.

Perhaps, understandably due to the uncertainty surrounding how Brexit will impact the travel industry, it’s been a rollercoaster 2019 for the shares. However, the long-term trend is most definitely up. SPP’s shares trade on 21 times earnings and come with a 1.9% dividend yield.

Chunky yield

A combination of new regulatory hurdles and a lack of volatility in the markets have made the last couple of years pretty uncomfortable for online trading specialist (and market leader) IG Group.  

That said, recent performance has been far from disastrous and the forthcoming general election should be lucrative since traders will want to get involved in a potential ‘Corbyn crash’ or, perhaps more likely, ‘Boris bounce’. While not as cheap as they once were, its shares currently trade on a still-reasonable 17 earnings and yield a chunky 6.3%. 

Go small

All long-term investors should have some exposure to market minnows, in my opinion. That’s why my final pick is actually not a single company but a near-30-year-old FTSE 250-listed investment trust with 79 holdings.

While ongoing costs will be higher than if you were to adopt a passive investment strategy, the fact the Aberforth Smaller Companies Trust share price has grown annually by almost 13% since inception should compensate for this. Moreover, the Trust pays a dividend (most small-cap funds don’t) which, when reinvested, should help compound gains even further. 

The post Have £5k to invest? Here are 5 stocks I’d buy for a FTSE 250 starter portfolio appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Paul Summers owns shares of IG Group Holdings. The Motley Fool UK owns shares of and has recommended Britvic. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended Howden Joinery 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.

Latest trading details released this week illustrated this perfectly as revenues at the FTSE 250 firm powered 19.2% higher to £231.4m between July and January.

Through a combination of acquisitions and rising research and development spending — it hiked total spend here by more than four-tenths in that aforementioned six-month period — Dechra is setting itself up to deliver stunning sales growth now and in the future. City analysts agree and are consequently forecasting profits growth of 13% and 14% in the years ending June 2019 and 2020 respectively.

Flying high

SSP Group (LSE: SSPG) is another share from the UK’s second-tier share index carrying a high valuation — in this case a prospective P/E multiple of 24.3 times — because of its brilliant growth credentials.

Earnings at the business, which offers retail and catering services to travellers at hundreds of airports and rail stations the world over, have long boomed by double-digit percentages and the number crunchers are expecting this enviable trend to keep rolling with rises of 11% and 10% touted for the years concluding September 2019 and 2020 respectively.

And forecasts are fully entitled to be so bullish right now. Thanks to a 3.8% rise in net contract gains in the first fiscal quarter, a result that was driven by strong contract wins in North America in particular, revenues shot 7.6% higher year-on-year at constant currencies. And with SSP describing its pipeline of new contracts as “encouraging”, the investment community can be forgiven for expecting more strong progress on the sales front in the near term and thereafter.

Yummy stuff

Greggs (LSE: GRG) is another FTSE 250 company whose great growth pedigree commands a weighty premium, in this example a forward P/E ratio of 22.3 times. It’s a share whose price continues to go from rise strongly, over 42% in the past three months alone, and I’m expecting it to continue going from strength to strength.

The bakery chain’s attractively priced fare is enabling it to sidestep worsening conditions for the British retail sector, as illustrated by the fact that like-for-like sales in company-managed stores leapt 9.6% in the seven weeks to February 15. Jam doughnuts and cups of tea are staples of the domestic diet and by offering them at affordable prices, Greggs is able to keep growing sales.

This is not the only reason to fall in love with the business, though. New product ranges like its much-publicised vegan sausage rolls are going down a storm too, and so it’s no shock that City brokers are forecasting more solid earnings growth, with rises of 13% in 2019 and 7% next year currently pencilled in. It’s a share which, like SSP and Dechra, could make you much richer in the years to come, I believe.

The post Expensive but exceptional! 3 FTSE 250 growth shares that could help you to retire early appeared first on The Twelfth Magpie.

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

Although news that its highly-rated CEO will be leaving the business has seen some investors flee this morning, I still think the latest set of hugely positive full-year numbers are reason enough for existing holders to retain the FTSE 250 constituent in their portfolios.

Profits take off

The company achieved revenue of a little under £2.57bn in the year to the end of September — a 9.5% rise when exchange rate fluctuations are taken into account. Underlying pre-tax profit advanced 24% to £184.4m, also at constant currency. Thanks to a growth in the number of people flying (many of SSP’s outlets are located at airports), like-for-like sales rose 2.8%. 

While unlikely to feature on most income investors’ radars, SSP also announced a final dividend of 5.4p per share. When added to its interim payout, this brings the total cash return for the year to 10.2p — up almost 26% on the previous year. Based on yesterday’s closing price of 685p, this equates to a yield of 1.49%. Yes, that’s hardly massive compared to some returns offered by firms in the FTSE 100, but a payout ratio of just 40% does mean there’s ample room for dividends to grow.

In addition to this, the company also announced a £150m special dividend and share consolidation this morning, highlighting just how confident management is on SSP’s future prospects. Indeed, outgoing CEO Kate Swann stated that trading in the new financial year had been in line with expectations so far, even if “a degree of uncertainty always exists around passenger numbers in the short term.” She added that SSP had an “encouraging” new business pipeline, which includes sites at airports in Brazil, India and the US.

Already priced at frothy 26 times forecast earnings for the next financial year, I’d probably be disinclined to begin building a position at the current time. But the fact that Brexit is unlikely to impact significantly on business over the long term (SSP’s captive customers won’t suddenly disappear) suggests that existing owners shouldn’t be panic-selling either. 

Back on the watchlist

While SSP’s share price has remained relatively resilient up until now, the same can’t be said for budget holiday operator On the Beach (LSE: OTB). The mid-cap has lost 40% of its value over the last six months.

This isn’t all the fault of Brexit. In its most recent update, the business blamed the football World Cup and a surprisingly sizzling UK summer for reducing demand for holidays abroad.

Nevertheless, I feel On the Beach is being unfairly dragged down alongside other operators despite having a far more flexible business model and drastically lower fixed costs. As the company itself stated, the aforementioned fall in demand has been resolved through a reduction in marketing spend — thus meaning that revenue growth has actually “remained strong.” 

Trading on 15 times earnings for the new financial year (which commenced in October), On the Beach could still have further to fall if Theresa May’s draft deal with the EU is rejected by parliament. For now, however, it’s earned a place on my watchlist. 

The post Time to buy or sell this FTSE 250 growth stock after today’s share price fall? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP 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.

The support services giant’s desire for acquisitions has already delivered sparky earnings expansion, and DCC is showing no sign of slowing down on this front. Just last week it snapped up Canada’s Jam Group (a sales, marketing and services provider to the professional audio, musical instruments and consumer electronics product sectors), marking the second such takeover at its DCC Technology arm in the North America region in less than three months.

An aggressive approach to M&A has kept profits on an upward charge in recent years, so there seems little reason to expect DCC to change course any time soon. Latest financials this week underlined the rationale behind such a strategy — for the six months to September the company said that it expects that “group operating profit will be well ahead of the prior year, driven by acquisitions completed in the prior year.”

A proven dividend hero

The FTSE 100 businesses’s long history of strong and sustained earnings growth has allowed it to light a fire under dividends over the past several years. It’s hiked the annual payout for 24 straight years since its IPO back in 1994, and by 60% during the past five fiscal periods, culminating in the total reward of 122.98p per share for fiscal 2018.

With the City anticipating additional profits expansion in the medium term — advances of 17% and 5% are predicted for the years ending March 2019 and 2020 respectively — dividends are expected to keep ripping higher at a sprightly pace. A 136.9p reward is anticipated for this year and a 146.3p payout for next year, figures that yield a handy 1.9% and 2% respectively.

It’s also good value for money. A forward P/E ratio of 19.1 times is a bit heady on paper, sitting above the widely-accepted value region of 15 times or below. However, a corresponding PEG reading around or below the bargain benchmark of 1, in this case 1.2, suggests that it is in fact attractively priced relative to its anticipated growth trajectory.

It’s clearly not the biggest yielder, but for those seeking reliable dividend increases year after year, DCC is hard to fault.

Eateries star

I’d like to draw your attention to SSP Group (LSE: SSPG), another London-quoted dividend growth share releasing bright trading news last week. The business — which operates food and beverage outlets in airports and rail stations across 30 countries — pumped out news of another satisfying quarter and expectations of a 2%-3% like-for-like sales rise in the year to September 2018.

City analysts are expecting earnings to keep booming by double-digit percentages and they are predicting rises of 19% and 11% for fiscal 2018 and 2019 respectively. It’s hardly a shock that SSP is predicted to keep lifting dividends at quite a pace too.

Last year’s 8.1p per share payout should climb to 10p for the period just passed, and again to 11.2p in the current year, resulting in a forward 1.5% yield. As with DCC, yields might not be the biggest, but as commercial flight demand grows steadily across the world, SPP could prove to be a wise selection for growth and income seekers alike. In my opinion it’s a great selection in spite of its high prospective P/E multiple of 27.6 times.

The post Forget the cash ISA, this cheap FTSE 100 dividend growth stock could help you to retire early appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP 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.

With that in mind, here is a FTSE 100 company which could generate improving financial performance. It may benefit from an operating tailwind, as well as from the changes it is making to its business model.

Improving prospects

The company in question is Burberry (LSE: BRBY). It is currently undergoing a period of change which it is hoped will create a leaner and more focused business. While in the past it had sought to diversify its brand into a range of products and even different price points, it is now refocusing on its core luxury offering. This will entail a period of restructuring, but could lead to improved sales, a greater focus on areas where it enjoys a competitive advantage, as well as higher margins.

Alongside this, Burberry is also seeking to reduce costs in order to become increasingly efficient. Under a refreshed management and creative team, it seems to be making progress with its strategy changes. In the next financial year, for example, it is due to report a rise in earnings of 7%. And with it having exposure to fast-growing markets across the world, especially in emerging markets, its long-term investment potential appears to be impressive.

Clearly, a price-to-earnings (P/E) ratio of around 30 is relatively high even after a 10-year bull market for the FTSE 100. But with the company’s business model experiencing significant change, in the coming years it could justify a higher share price as profitability improves.

Strong performance

Also offering upside potential is operator of food and beverage outlets in travel locations across the world, SSP Group (LSE: SSPG). The company released a pre-close trading update on Wednesday for the period from 1 July 2018 to 30 September 2018. It has been able to trade in line with expectations in the fourth quarter of the year, with like-for-like (LFL) sales growing at a similar level to those recorded in the third quarter. It anticipates LFL sales growth of between 2% and 3% for the full year, with increased passenger numbers in the air sector being the key catalyst.

Net contract gains for the full year are expected to be at the top end of the previously announced range of 4.5% to 5%. The acquisitions of TFS in India and Stockheim are performing well. They are expected to add 1.5% to revenue for the full year.

With SSP Group expected to increase its bottom line by 18% this year and by a further 10% next year, it seems to be performing well. A price-to-earnings growth (PEG) ratio of 1.8 indicates that it could offer good value for money given its long-term financial prospects.

The post Have £1,000 to spend? This FTSE 100 growth stock could help you retire early 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 owns shares of SSP Group. The Motley Fool UK has recommended Burberry. 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 way to earn a place in my retirement portfolio is to deliver market-beating growth over long periods. A company that fits this description is travel catering specialist SSP Group (LSE: SSPG).

This firm operates branded and franchised food outlets at airports, railway stations and motorway services. It currently operates more than 2,500 units in over 30 countries. The company’s brands include Ritazza, Upper Crust and James Martin Kitchen in London.

Although SSP has been in business for 50 years, it only floated on the London market in 2014. Since then, the firm’s shares have nearly tripled in value. Profits have also risen rapidly.

Tasty growth in Q3

In a trading statement on Tuesday, the group said that its revenue rose by 7.3% during the third quarter of its financial year, excluding currency effects. This figure was broken down into like-for-like sales growth of 2.7%, new contract wins worth 3.3% and a 1.3% increase from a small acquisition.

This diverse mix is one of the attractions of this stock for me. There’s a lot of room for growth in this market. Although profits can be affected by short-term dips in passenger numbers, I think it’s fair to assume that passenger numbers will keep rising over the long term.

Expensive but worth it

This business is a significant player in a large, growing market. And it’s surprisingly profitable. Although the group’s operating margin is only about 7%, return on capital employed (ROCE) has risen to 18.5% over the last 12 months.

These high returns are backed by strong cash generation. This has allowed the firm to double its profits since 2015, while reducing net debt.

SSP Group shares currently trade on 28 times 2018 forecast earnings. Although that’s not cheap, I believe the group’s long-term growth potential justifies a hold rating here. I’d aim to buy on the dips.

A 4.7% yield I’d buy

SSP’s growth potential impresses me, but its 1.5% dividend yield isn’t that exciting. To improve the income yield of my retirement portfolio I’d also like to include a few high-yield stocks as well.

One company that would be near the top of my list would be ingredients firm Tate & Lyle (LSE: TATE). This business may lack the excitement of a growth stock, but this FTSE 250 firm offers a forecast dividend yield of 4.7% and hasn’t cut its payout for at least 15 years. This kind of consistency can be very valuable for retirement investors.

What about growth?

Tate & Lyle’s sweeteners and ingredients businesses are unlikely to deliver spectacular growth. But this company has been around for more than 150 years and is continuing to adapt to a changing food marketplace.

These efforts seem to be delivering results. Adjusted pre-tax profit rose by 13% to £286m last year, excluding currency gains. Adjusted free cash flow rose by £22m to £196m, helping the firm to cut net debt by £60m to just £392m.

Tate shares remain modestly valued, probably because profits are expected to be flat this year. But with the shares trading on just 12.5 times forecast earnings, I’d argue that this could be a good buying opportunity for long-term investors. I’d be happy to buy this stock today and forget about it for 20 years.

The post 2 FTSE 250 dividend growth stocks I’d buy and hold for my retirement 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 owns shares of SSP 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.

The company’s stock price has leapt an unbelievable 395% in value since this time last year, turning it into a respectably sized £170m market cap firm. And stock pickers’ enthusiasm isn’t without a basis in reality as Yu’s full year results released this morning showed revenue rising from £16.2m to £46.9m year-on-year with adjusted operating profits racing ahead from £0.2m to £3.1m.

And far from being a one-off, Yu is well-positioned to deliver similar levels of growth in the years ahead. Management disclosed that contracted revenue for fiscal year 2018 had already topped £50m and that “revenues for FY 2018 are expected to be ahead of current market forecasts with revenues for FY 2019 significantly ahead of current market expectations.”

Although the group is delivering start-up levels of growth, it’s also in a very good financial position. Net cash balances at year-end were £4.8m, of which £3.5m was set aside for hedging contracts, while operating cash flows turned from a negative £0.8m to a positive £0.5m last year. The rising benefits of scale also meant adjusted earnings per share of 17p came in well ahead of the sole analyst’s forecasts of 13.9p.

Unfortunately, the stock is now much pricier than when I last looked at it with a valuation of 72 times trailing earnings. While I believe Yu’s high levels of revenue visibility, founder-led management team and proven ability to win over customers with its very high levels of customer service give it further room to run, this valuation is simply too expensive for my taste.

Of course, that doesn’t mean in a year’s time I won’t look back and kick myself for not investing in its shares.

A captive market eqauls bumper profits

Travel food concession operator SSP Group (LSE: SSPG) has returned a more sedate 50% over the past year, but this may be even more impressive given the group has been around for years and it’s a giant with a market cap of nearly £3bn.

Part of the company’s success is down to healthy global economic growth that has led more people to travel, but the main driver has been operational improvements. For example, seemingly simple changes such as improved staff scheduling and opening outlets based on successful local restaurants have trimmed millions of pounds in annual costs and brought more customers in the door.

The success of these tweaks was clear in the company’s results for the year to September, when revenue rose 11.7% in constant currency terms to £2,379m due to like-for-like growth of 3.1% and further contract wins, especially in the massive US market it is just now breaking into. And a laser-like focus on costs led to operating profits rising a full 27% to £162m even as management invested heavily in readying stores from new contract wins.

While SSP can’t offer Yu Group levels of growth, it’s still growing profits rapidly and has plenty of room to expand, which together with a more sedate valuation of 27 times forward earnings looks much more palatable to me.

The post 2 top stocks you should have bought this time last year appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP 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.

A much bigger market

Fevertree’s success has been remarkable although, so far, it’s mostly been restricted to the UK. However, the company now appears to be gearing up for a full-scale assault on the US market.

Back in December, the firm gave notice to its US distributor and appointed a North America CEO, Charles Gibb, who will take charge of selling directly into this potentially huge market. Management hope that mixers, such as cola and ginger ale, will find favour in a market where gin & tonic isn’t quite as popular as it is in the UK.

Profits could rocket

As my colleague Rupert Hargreaves recently observed, rumours are circulating that Fevertree might also have become a takeover target for Unilever. This could result in a big payday for shareholders.

But what interests me even more is the profit potential that’s built into the company’s business model. By outsourcing production, Fevertree has avoided the need to invest in big factories and other costly assets.

Taking this approach means that fixed costs are low and the group can enjoy rising profits, without having to scale up its own spending. The impact is clear, with operating margins having risen from 23% in 2014 to 33.6% last year. Strong cash generation has also left the group with net cash of £40m.

A word of warning

Of course, Fevertree could flop in the US and a takeover bid might not materialise. If this happens — or if growth slows in the UK — the group’s shares could fall sharply and a forecast P/E of 62 doesn’t leave much room for error.

Despite this, I think the risks are worth taking. This is a stock I’d continue to hold.

Another growth star

Fevertree isn’t the only growth stock that’s caught my eye. Catering firm SSP Group (LSE: SSPG) has risen by 137% over the last three years. The group, which operates restaurants and cafes in travel locations such as airports, has also seen profits rise 74% since 2015.

Management credibility is high following several successful years. It’s worth remembering that chief executive Kate Swann’s previous role was at WH Smith, where she masterminded the retailer’s successful expansion into the travel sector.

New year has “started well”

In a trading statement issued today, SSP says its financial year has “started well”, with revenue growth of 12.2% during the first quarter. The gains include like-for-like sales growth of 2.7%, and net contract gains of 8.1%.

These figures suggest to me that the group’s existing outlets are performing well and that it’s winning attractive levels of new business.

Although SSP shares trade on a fairly demanding 2018 forecast P/E of 29, I believe the group’s steady growth and strong financial performance could justify this price tag. Earnings are expected to rise by 14% this year, and the tone of today’s Q1 statement sounded very positive to me.

I wouldn’t be surprised if the firm upgraded its guidance as the year unfolds. I’d continue to hold.

The post Why growth stock Fevertree Drinks plc could still be a buying opportunity appeared first on The Twelfth Magpie.

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• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• 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?

Roland Head has no positions in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended WH Smith. 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.

Flying high…for now

In the year to the end of September, revenue climbed 11.7% to £2.38bn (once foreign exchange fluctuations are taken into account) with a 3.1% rise in like-for-like sales the result of growth in air passenger travel and what the company labels as “retailing initiatives“. The latter percentage, when combined with operational improvements and new openings in North America and Asia, allowed SSP to record a stonking 27% jump in operating profit (to just under £163m) over the period. Underlying pre-tax profit soared 38.3% to almost £149m.

While economic uncertainties have led the Upper Crust and Ritazza owner to speculate that revenue will slow in 2018, it also revealed that the new financial year had started in line with expectations. Although its bi-annual payouts to shareholders remain low relative to some companies on the market, today’s final dividend of 4.9p brings the full-year payout to 8.1p — a 50% increase on that returned to investors last year. A further bonus was the announcement of a proposed £100m special dividend in the near future.

With figures like these, it’s really no shock that SSP’s share price rose over 7% in early trading. Factor-in the company’s rising returns on capital employed, excellent free cashflow and captive audience and you begin to understand why investors continue to clamour for the stock.

Nevertheless, with a valuation of 29 times earnings for the next financial year, I’d say a lot of good news is now firmly priced-in. Indeed, with a price-to-earnings growth (PEG) ratio of over 3 for 2018/19 (with anything below 1 indicating good value) and a market cap approaching £3bn, I’m beginning to question how recent share price performance can be sustained.

All told, I wouldn’t blame those with short investing horizons for realising some of their gains sooner rather than later.

A tempting alternative

Those looking for exposure to the general industry in which SSP operates but unwilling to pay up for its stock may be more tempted by cake-specialist and casual dining operator Patisserie Holdings (LSE: CAKE).  

After what feels like an exceptionally quiet period in terms of news, many existing holders will be eagerly looking forward to full-year results from the £310m cap, particularly after May’s interim numbers revealed an 11% rise in revenue and 16% increase in pre-tax profit. Back then, Executive Chairman Luke Johnson declared he was confident in being able to deliver “a successful second half of the year“. By next Monday, we’ll know whether this was achieved.

Even if the recent rise in inflation and reduction in consumer spending (not to mention Brexit-related nervousness) has impacted negatively on trading, I’d still be tempted by the stock. While not screamingly cheap, Patisserie — trading at 17 times expected earnings for the next financial year — is significantly less expensive than SSP Group. Returns on sales and capital employed are also far higher at the debt-free Birmingham-based business.  

While making an investment around results time is a risky strategy, I think any price weakness could be a great opportunity for new investors to take a position.

The post Time to take profit on this top growth stock? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended Patisserie Holdings. 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.