So the FTSE 100 has had a rocky start to 2016. And people are deserting shares due to fears of China, banks, recession, or whatever… Is that a good time to be looking for growth shares? Most definitely.
Growth in travel
Shares in Go-Ahead Group (LSE: GOG) have actually fallen by 17% since their December peak, but interim results released Thursday gave them a 6% boost back up to 2,380p. Go-Ahead operates bus and commuter train services, and provides ground handling services for the aviation industry too, which might perhaps not sound all that glamorous.
But a 25% rise in EPS forecast for the year to June 2016 puts the shares on a lowly PEG ratio of 0.5 — the PEG compares the firm’s P/E (currently 12.2 for Go-Ahead) with its earnings growth, and anything under 0.7 tends to get growth investors salivating.
The first-half figures suggested everything is on track, with the firm’s full-year expectations unchanged. Adjusted earnings per share rose by 25%, bang on the full-year forecast target, and the interim dividend was lifted by 6.5% to 28.33p per share, nicely ahead of inflation.
Recruitment strength
Michael Page International (LSE: MPI) has seen its shares lose 24% in the past 12 months after a depressing fall since the turn of the year to 377p. That’s despite the global recruitment specialist having put in two years of healthy EPS growth, and despite a Q4 update telling us of a 9.2% rise in gross profit to a record £555.9m. Fourth quarter conditions did apparently deteriorate a little, and the fear might now be that EPS growth could come in below the tipsters’ forecast of 11% — results are due on 10 March.
But the 23% EPS growth currently forecast for 2016 keeps the P/E down to a modest 15 and gives the shares a PEG of 0.7. There’s a 3.2% dividend yield predicted too, which is around the FTSE average and better than a bank savings account. So could we be looking at a great growth opportunity with a decent dividend thrown in for good measure? The City seems to think so, offering a healthy buy consensus.
Bricks and mortar
My third growth candidate is FTSE 250 housebuilder Crest Nicholson (LSE: CRST), whose shares are up 27% in the past 12 months to 572p, and by 110% in five years.
For the year ended October 2015, Crest Nicholson reported an 8% rise in completed homes, and a 32% boost in pre-tax profit to £154m from revenue of £805m, and lifted its dividend by 38%. The whole sector has been enjoying a very rosy spell of late with massive profits for those who invested in the downturn, and the thing is there’s no sign of it stopping.
With a strong forward sales book, Crest reckons it’s on target for £1bn in revenue in 2016, and is aiming for £1.4bn by 2019. Analysts are forecasting a further 20% rise in EPS this year, and that puts Crest Nicholson shares on a very low P/E of 9.5 and a PEG of just 0.5. Oh, and there’s a 4.9% dividend predicted too.
