Searching for growth shares often throws up interesting and diverse candidates.
I'm always on the lookout for what are traditionally considered "growth" companies -- that is, ones whose earnings are expected to grow significantly for at least the next couple of years. One way I do that is to run a filter for companies with a low PEG -- I generally follows Jim Slater's liking for a PEG of 0.7 or less, and high earnings-per-share growth forecast for the next year. I run my filter once a month or so, and it usually throws up a few interesting possibilities, as it did this time…
Print those notes
The first that caught my eye was De La Rue (LSE: DLAR), a company that has been printing banknotes for countries from all corners of the globe for 150 years. Today, as the company's website tells us, De La Rue is "the world's largest commercial security printer and papermaker, involved in the production of over 150 national currencies and a wide range of security documents such as passports, authentication labels and fiscal stamps". It also makes sorting and counting equipment for banks and other organizations that handle cash.
What I thought was intriguing is that such a mature company in a mature industry comes out with a low PEG, of 0.5, and an EPS growth forecast for next year of 27%. Here's what De La Rue's figures look like:
| Year | 2006 | 2007 | 2008 | 2009 | (f) 2010 | (f) 2011 |
|---|
| Turnover (£m) | 610 | 688 | 754 | 502 | 540 | 570 |
| EPS (p) | 34 | 48 | 56 | 58 | 73 | 77 |
| DPS (p) | 18.2 | 20.5 | 21.4 | 41.1 | 43.9 | 46.3 |
With a prospective dividend yield of 5% and very little chance of that needing to be cut, this venerable company's P/E of 12 doesn't look too demanding at all. For your money, you get some nice potential growth, but with a good safety net.
Juice those brains
Then I found one that is, admittedly, a bit of a shot in the dark. Many of us will be familiar with online marketing surveys these days, and the increasing number of agencies we can sign up with to earn a small amount of money for each survey we complete.
AIM-listed BrainJuicer Group (LSE: BJU), despite its unsavoury-sounding name, is a company that provides marketing survey software, which, according to its site, is in use by "130 household name clients, including 19 of the world's top 200 companies."
At the start of a new market niche, a low PEG is to be expected, and BrainJuicer's PEG is about 0.4 for 2010. Earnings for 2009 are forecast to grow 14% to 8.4p, and a further 33% in 2010 to 11.2p. The question is whether such growth can continue for many years beyond that, because that's what will be needed for today's price to represent genuine good value.
It's still a relatively new market, which is almost certainly going to see more and more demand in coming years, as online surveying provides a cheap and effective way of gathering marketing intelligence from a large number of people. This one is risky, though. It's a company with just one product in a competitive sector, and it has already seen its share price rise nearly 30% in the past few months. But if you can handle a bit of risk, it might turn into a money juicer.
Immuno-what?
Finally for today, I was also drawn to Immunodiagnostic Systems Holdings (LSE: IDH), involved in the research and development of medical diagnostic procedures and equipment, using immunological techniques. It's another AIM company, with a market cap of £85m, and a share price that has already grown by a sizeable 70% in recent months.
Preliminary results to March 2009 show a rise in earnings per share of 20%, with analysts forecasting 50% growth for the next two years. That indicates a prospective P/E of under 12, with a very low PEG of just 0.23. Dividend yield is tiny, but this is a classic growth stock and everything is staked on the expected more-than-doubling of earnings over the next two years, and then some.
Some of the recent share price growth might have been due to the growing fear of H1N1 flu, with the company's name sounding a bit like it's relevant, and it might have escaped attention in other circumstances. But I think the price hike has been justified, and the analysts (all four of them) with their unanimous "Buy" rating are probably right -- I think there's still some way to go for the Immunodiagnostic Systems share price.
More share ideas from Alan Oscroft:
