3 Stocks Expected To Punch Rip-Roaring Growth: ARM Holdings plc, Wolseley plc And Bellway plc

Royston Wild examines the investment cases for ARM Holdings plc (LON: ARM), Wolseley plc (LON: WOS) and Bellway plc (LON: BWY).

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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.

Today I am looking at three stocks anticipated to enjoy smashing earnings growth.

ARM Holdings

Cambridge-based ARM Holdings’ (LSE: ARM) (NASDAQ: ARMH.US) top-tier supplier status with tablet PC and smartphone manufacturers like Apple and Samsung has seen it emerge as a favourite for those seeking high-quality tech stocks. And the company’s efforts to branch out into the network and servers segments is also currying favour with the investment community.

Indeed, the City expects ARM Holdings keep its staggering growth story rolling — the company has seen the bottom line rise at a compound annual growth rate of 18.2% since 2010 — and expansion to the tune of 74% and 20% is chalked in for 2015 and 2016 correspondingly.

However, investors should be aware that with mobile device sales nearing saturation point in critical markets, buyers increasingly switching from premium products to cheaper models, and competitors such as Intel boosting R&D in this area, ARM Holdings could see these growth projections come under pressure. And with the firm dealing on elevated P/E multiples of 37.4 times and 31.6 times for 2015 and 2016 correspondingly, the business remains highly susceptible to a sharp share price correction should the outlook in key markets become muddier.


With construction activity continuing to rise across the West, I reckon that Wolseley (LSE: WOS) remains in a sweet spot when it comes to earnings growth. Although its European markets remain choppy, the heating and plumbing product specialist saw sales accelerate during the last quarter — these advanced 8.3% during November-January, up from 7.1% in the previous three-months. In particular Wolseley keeps on chugging along in the US, and sales here jumped 11.1% in the quarter.

Like ARM Holdings, Wolseley has a tremendous record of generating double-digit earnings rises for some time now, and the number crunchers anticipate further expansion in the region of 15% for both the years concluding July 2015 and 2016.

As a consequence a P/E ratio of 17.3 times for the current year falls to 15 times for 2016, bang on the benchmark of which illustrates brilliant bang for one’s buck. And Wolseley’s excellent value is illustrated further by PEG ratios of 1.1 for 2015 and 1 for the following 12-month period; any readout around or below 1 is generally considered a steal.


Housebuilder Bellway (LSE: BWY) is in great shape to keep on enjoying resplendent earnings growth as Britain’s homes shortage, combined with positive lending conditions and various government initiatives to aid first-time buyers, keeps sales and house prices ticking steadily higher. And with the firm investing heavily in its land bank and opening new divisional offices, I believe profits should continue rolling comfortably higher in the coming years.

Bellway has grown earnings at an eye-rubbing compound annual growth rate of 51.6% during the past five years, and such exceptional growth is not expected to hit the buffers any time soon — indeed, the stock is predicted to follow up a 37% bottom-line bulge for the year ending July 2015 with an extra 10% rise in 2016.

And these projections create ridiculous value for money. Bellway sees a P/E multiple of just 9.5 times for this year slip to 8.6 times for next year — a number below 10 times is widely regarded as outstanding value. Meanwhile the company carries a PEG readout of a mere 0.3 for 2015 and 0.8 for 2016.

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 considered so you should consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and own shares in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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