However, a low-key profile can be a good thing when it comes to investing. Such a company may have a bright future that isn’t yet widely recognised by the market. I believe Vivo Energy and UDG Healthcare are two such companies. They’re thriving, profitable businesses, and have long-term ‘structural’ growth drivers that could potentially make today’s investors seriously rich.

Rising prosperity in Africa

Vivo is a pan-African retailer and marketer of Shell and Engen-branded fuels and lubricants. It has a network of over 2,100 service stations in 23 countries, which also provide customers with non-fuel services including shops, card services and takeaway and casual dining restaurants in partnership with major brands such as KFC and Burger King. Its commercial arm serves customers across a wide range of industries.

Vivo looks to me like a very good play on the long-term story of rising prosperity in Africa. Today, in a trading update ahead of its AGM, it reported “a positive start to 2019 with performance in line with expectations.”

City analysts expect the company to post earnings per share (EPS) of $0.133 (10.15p at current exchange rates) this year, rising 13.5% to $0.151 (11.5p) next year. At a share price of 125p (a little down on the day), we’re looking at an undemanding current-year price-to-earnings (P/E) ratio of 12.3, falling to 10.9 on the 2020 forecast. Dividend forecasts of $0.04 (3.05p), followed by $0.044 (3.36p), give handy yields of 2.4% and 2.7%.

The company floated at 165p a share just about a year ago. Its balance sheet looks decent, with modest debt. And given the near-term and long-term growth prospects, the shares look very buyable to me at their current level.

Health spending and outsourcing trends

The structural growth drivers I see over at UDG Healthcare are rising health spending in a world where people are living longer, and a trend in the industry to outsource the kinds of services UDG offers.

It enables and supports large pharmaceutical to small biotech companies to bring their products to market, ensuring patients can access these drugs and providing support to educate healthcare professionals and patients on the products. In short, it does a whole load of stuff that allows its clients (currently over 300, including the top 30 pharma companies) to concentrate on their core business. It has operations in 26 countries and delivers services in over 50.

I’m expecting 5% EPS growth this year to $0.486 (37.1p at current exchange rates), with growth accelerating to 10% next year and EPS rising to $0.534 (40.8p). At a share price of 678p, we have a P/E of 18.3, falling to 16.6. Dividend forecasts of $0.18 (13.7p), followed by $0.20 (15.3p), give yields of 2% and 2.3%.

While UDG’s P/Es are somewhat higher than Vivo’s and yields are somewhat lower, the healthcare stock also looks very buyable to me at its current valuation. In a defensive industry with good growth prospects, and the company having delivered dividend increases over three decades, the premium is well worth paying, in my book.

The post 2 FTSE 250 stocks I think could make you seriously rich appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended UDG Healthcare and 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.

One such company is Vivo Energy (LSE: VVO), which is the licensee of the Shell service station brand in 15 African countries that together boast 277m consumers. The company currently runs 1,800 service stations stretching from Botswana to Morocco that are experiencing rapid urbanisation, vehicle usage and economic development.

By running stations for a trusted brand name, Vivo is well-placed to benefit from these trends. Indeed, in the first half of the financial year, it recorded a 4% uplift in the volume of petrol it sold to consumers. But petrol and associated vehicle products like lubricants and car washes aren’t the only driver of growth as Vivo is placing a great emphasis on Western-style retail sales and restaurants at its service stations.

The shift towards these profitable retail operations helped boost gross profits 6% during the period to $312m with adjusted EBITDA increasing 8% $204m. And with net debt at just 1 times full-year EBITDA, the group’s balance sheet is in good shape. Together, solid cash flow being generated from operations as well as access to debt funding provide a solid base for Vivo Energy to continue expanding operations in current countries and beginning them in other ones.

However, despite Vivo’s solid growth prospects the company’s exposure to a wide variety of developing markets, any would-be investors should do extra due diligence before considering investing.

More wealth equals better health? 

This is also true of another fast-growing African business I’ve got my eye on, Integrated Diagnostics Holdings (LSE: IDHC). As its name suggests, IDHC runs 383 medical diagnostic testing branches in Egypt, Jordan, Sudan and, recently, Nigeria.

Just like Vivo, IDHC is taking advantage of rising populations, incomes and health problems to sell its services to increasingly wealthy customers. In the first quarter of its financial year, the group’s revenue rose 29% year-on-year to EGP446m with net profit up 24% to EGP110m.

As these results show, the company is not only growing quickly but is also profitable. Indeed, for the full year, management is guiding for 20% revenue growth and EBITDA margins in excess of 40% at its operations outside of Nigeria, which have just begun and are currently lossmaking.

Although its 12 Nigerian locations are not profitable at the moment, the long-term potential for IDHC in Africa’s most populous country is understandably impressive. And as Nigeria beefs up, the company is still growing steadily in its home markets with new branches opened in each of its three core markets in Q1 and a solid increase in the revenue per test it received during the period.

IDHC has pretty solid growth prospects, but UK investors should be extra cautious considering the currency woes that have hit the company’s USD and GBP results stemming from Egypt’s turbulent political and economic environment. 

The post Forget other emerging markets. Why these African stocks have enormous growth potential appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• 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?

Ian Pierce 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.