2 exciting growth stocks you can’t afford to ignore

Peter Stephens — Wed, 05 Apr 2017 12:26:18 +0000

Perhaps the most satisfying part of investing is finding stocks which appear to be undervalued. After all, with the FTSE 100 trading near an all-time high and the stock market being relatively efficient, finding bargain shares seems more difficult than ever. However, there are still opportunities available. Here are two stocks which could deliver exciting growth in future years.

Impressive performance

While the UK economy appears to be experiencing a rather challenging period as Brexit looms, Hollywood Bowl (LSE: BOWL) reported upbeat performance on Wednesday. The UK’s largest ten-pin bowling operator recorded total revenue growth of 7.8% and like-for-like (LFL) revenue growth of 1.2%. This is despite the Easter trading period falling in the second half of the year for 2017, compared to in the first half of 2016. This is estimated to have reduced LFL sales growth by around 2%pts.

Looking ahead, the company’s expansion plans are on track. It expects to open two prime location centres per annum, and already has six centres signed up to provide the pipeline until 2020. Alongside a refurbishment programme which is aimed at improving the customer experience, this should allow the business to deliver improved performance in future.

Trading on a price-to-earnings (P/E) ratio of 15.8, Hollywood Bowl seems to be rather highly valued. However, when its earnings growth forecast of 13% for next year is factored-in, its price-to-earnings growth (PEG) ratio of 1.2 seems fair. Clearly, the UK economy could experience a difficult period as inflation moves higher and consumer spending looks set to be squeezed. However, the company seems to have a sufficiently wide margin of safety to merit investment.

Turnaround potential

Following a 35% fall in its share price in the last year, talent representation and sports marketing company TLA Worldwide (LSE: TLA) could be a strong turnaround play. A key part of this is its forecast earnings growth rate of 33% in the current financial year. This puts its shares on a PEG ratio of just 0.2, which indicates that the market may be undervaluing the business.

According to its most recent update, the company’s Events portfolio continues to perform well. It has a strong pipeline of events over the short term, while the Baseball Representation Platform also appears to have growth potential. It has also enjoyed some success in signing new clients within its Sports Marketing division, while there is the potential to continue to expand into new territories over the medium term.

With dividends increasing by 15% at the interim stage of the year, TLA Worldwide now yields around 3.2%. Looking ahead, further double-digit increases could be on the cards, since the company’s shareholder payouts are covered 3.7 times by profit. This shows that as well as offering a relatively low share price and earnings growth potential, TLA Worldwide could become a stronger income stock over the coming years.

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

More reading

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.

Should You Pile Into Sirius Minerals PLC, Tritax Big Box REIT PLC & TLA Worldwide Plc Today?

Royston Wild — Tue, 29 Mar 2016 13:14:31 +0000

Today I am running the rule over three of the Footsie’s recent headline makers.

Box up a beauty

Real estate investment trust Tritax Big Box (LSE: BBOX) made the headlines in Tuesday business with news of another impressive acquisition.

Tritax — which buys and manages big-space locations like warehouses and distribution hubs — has snapped up Argos’s national distribution centre in Burton-upon-Trent for £74.65m, the firm announced today. This follows the £25.2m purchase of Brake Bros’ distribution site in Bristol last week.

Tritax is clearly a firm on the move — the firm recorded a total return of 19.4% in 2015. And the City expects Tritax to keep earnings growth rolling with expansion of 6% and 4% in 2016 and 2017 respectively.

Sure, these projections may create slightly-heady P/E ratings of 20.9 times and 20.1 times. But I believe dividend yields of 4.6% for 2016 and 4.7% for this year comfortably offset these figures.

Sports superstar

Shares in TLA Worldwide (LSE: TLA) have exploded in Tuesday trade, the company recently dealing 40% higher from the last session’s close.

The sports marketing agency made the headlines last week after announcing it had it had reached an agreement with Atlantic Alliance Partnership on a potential takeover by the US firm.

The deal will see the agency’s shareholders receive 10 new Atlantic Alliance Partnership shares for every 111 of TLA Worldwide’s shares. This represents an indicative offer of 65p per share for the British company, still some way above the current share price of 57p.

Of course, there is always a chance that the bottom could fall out of the deal, as is the case with any takeover attempt. But there is still plenty of room for investors to make a handsome profit should the accord come to pass.

Stuck in a hole?

Shares in Sirius Minerals (LSE: SSX) have endured a wild ride in recent weeks. The company more than doubled in value from February’s troughs to a peak of 24p per share less than a month later, although investor optimism has cooled significantly since then.

The potash play finally released the much-awaited definitive feasibility study for its North Yorkshire polyhalite project during mid-March. The release contained both good and bad news — Sirius Minerals estimates that the asset will have a net present value of $27bn when production commences.

But the cost of developing the asset shocked investors, with the digger expecting to fork out $3.56bn to get the project up and running. Sirius Minerals now plans to raise equity and take on debt to move the project along.

Considering the scale of finance the firm needs to develop the mine, as well as the potential for potash prices to keep on struggling, I believe Sirius Minerals is a risk too far at the present time.

The post Should You Pile Into Sirius Minerals PLC, Tritax Big Box REIT PLC & TLA Worldwide Plc Today? appeared first on The Twelfth Magpie.