2 FTSE 250 growth stocks that could make you a fortune

Royston Wild looks at two FTSE 250 (INDEXFTSE: MCX) stocks with exquisite earnings potential.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Diploma (LSE: DPLM) broke out of its long-running downtrend in mid-week business as its latest financial release was well received by the investment community. The technical  products provider was last 7% higher from Tuesday’s close and dealing at levels not seen since late June, above £11.10 per share.

In a bubbly trading update the London-headquarted firm advised that it “has continued to trade well in the second half of the year and remains on track to report results for the full year in line with expectations.”

It expects revenues to grow by around 17% in the 12 months to September 2017, with the tailwinds created by sterling’s decline expected to contribute around 9% to this total. Meanwhile the impact of acquisitions are likely to contribute 2% to the total, Diploma said.

On an organic basis turnover is predicted to have advanced 6%, it added.

Broad-based strength

At its Life Sciences division, Diploma said that revenues are expected to rise by 3%, with sales “helped by stronger second half capital equipment sales in the Healthcare businesses.” Revenues here are also expected to grow thanks to a “good contribution” from clinical diagnostics specialist Abacus which was acquired in April.

Meanwhile, Diploma said that it expects sales at its Seals unit to rise by 4% in the year to September. It commented that “trading activity in North America [has] benefitted from solid revenues in the Aftermarket and a resumption of growth in the Industrial OEM businesses.” In more good news, the company said that revenues at International Seals have returned to growth during the second half of the year.

To round off the good news, Diploma said that sales at its Controls arm are expected to rise 13% for the full year, the division “benefitting from new project activity and a strong focus on developing new sales opportunities.”

It is no surprise that investors have been piling back into Diploma on Wednesday given this broad-based strength. And it is also not difficult to see earnings take off in the years ahead as the company uses its formidable cash flows to fund acquisitions.

The City certainly thinks the FTSE 250 star should continue delivering meaty earnings growth, and has forecast bottom line expansion of 15% and 6% in fiscal 2017 and 2018 respectively.

I reckon the firm is a wise buy right now even in spite of its high paper valuation — the company sports a forward P/E ratio of 22.6 times.

Brace for take-off

I also believe BBA Aviation (LSE: BBA) is worthy of serious attention right now given its robust position in a growing market. The flight support and aftermarket play’s broad base and market-leading capabilities are helping it outperform the wider market, and organic revenues at its Signature support arm rose 3.2% during January-June. And I am confident that the company can continue delivering healthy sales growth as the US economy steadily improves.

The number crunchers expect BBA to report an 18% earnings advance in 2017, and to follow this with another double-digit rise — this time by 10% — in the following year.

And these projections make the flying ace excellent value for money. A prospective P/E rating of 17 times may not be much to shout about, although a PEG ratio bang on the value watermark of 1 certainly is.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended BBA Aviation. 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.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »