3 Great Growth Picks For 2016? Ashtead Group plc, NMC Health PLC And WS Atkins PLC

Are Ashtead Group plc (LON: AHT), NMC Health PLC (LON: NMC) and WS Atkins PLC (LON: ATK) set to storm ahead?

| More on:

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.

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.

I’ve been running a PEG filter across the constituents of the FTSE indices again and it keeps throwing up some tempting candidates. The PEG ratio compares a share’s current P/E valuation with its expected earnings growth rate, looking for shares that appear cheap compared to that growth — anything around 0.7 or less is usually considered a good indicator.

Equipment rental firm Ashtead Group (LSE: AHT) has grown its earnings remarkably strongly over the past five years, and the 27% EPS growth forecast for the year to April 2016 would put the shares on a modest P/E of 11.6 and give us a PEG of only 0.4. And 2017 forecasts drop the P/E to under 10 and maintain the PEG at 0.5.

The shares had perked up a bit ahead of today’s third-quarter update and the firm did report a 20% rise in pre-tax profit for the nine months, to £482m, after rental revenue grew by 17%. The full year should be in line with expectations. But the share price was down 13% to 800p by mid-morning, hit by the company’s plans to reduce capital expenditure next year.

There may still be weakness in Ashtead’s US markets, but at today’s price the shares look oversold to me.

Healthy growth

Another that keeps showing up is NMC Health (LSE: NMC), which has yet to release 2015 results. But with the shares priced at 885p, expectations of a 33% rise in EPS put them on a P/E of 22.4 — and a PEG spot on that sought-after 0.7 level. And it gets better — a forecast for 2016 of a further 42% EPS growth would drop the P/E to 16 and the PEG to 0.4. For 2017 we’d end up with a P/E of 13 and a PEG of 0.6. So what does it do?

It’s a healthcare chain in the United Arab Emirates and benefited from demand led by the oil boom of the 80s. Today it has more diverse interests too, with 50% of its turnover in 2014 coming from distribution and other services. Unless the UAE runs out of oil in the next few years, NMC looks like a safe growth prospect.

Poised for the future

WS Atkins (LSE: ATK) counts a role as a contractor to the London Underground among the diverse support services it offers to a number of sectors. It has seen its share price dip by 23% since its recent peak in December, to 1,282p. That’s despite several years of earnings growth already under its belt and with three more forecast.

There’s only a 1% EPS rise forecast for the year to March 2016, but for 2017 there’s a 15% uptick pencilled-in, which would put the P/E on around 11 and give us a PEG of 0.8 — a fraction outside the traditional 0.7 cutoff, but still attractive.

A Q3 update on 10 February told us of “headwinds” in some of Atkins’ markets, but the firm reckons that operating margins are improving, and it’s in some key markets that it should benefit from the ongoing economic recovery.

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.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

2 recession-resistant UK stocks I’d buy and hold for a decade!

Our writer details two UK stocks she believes could still continue to perform well in a recession and not feel…

Read more »

Back view of blue NIO EP9 electric vehicle
Investing Articles

Down 31% this year! Is now the moment to buy NIO stock?

NIO stock has moved sharply downwards in the past couple of months. Christopher Ruane likes the business potential -- but…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 dividend stocks I reckon could grow payouts for years to come!

This Fool is looking for dividend stocks and explains why these two picks could be primed to grow their payouts…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Should I buy, sell, or hold my Rolls-Royce shares at £3.50?

This Fool considers what he should do with his Rolls-Royce shares following the FTSE 100 company's excellent full-year results last…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

With a spare £280, here’s how I’d start buying shares this March

Our writer reflects on what he has learnt on the stock market to explain how he would start buying shares…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Are these expensive FTSE 100 stocks actually brilliant bargains?

Paul Summers takes a closer look at two FTSE 100 stocks that could recover strongly in time, despite already carrying…

Read more »

Investing Articles

What might the recent Aviva share price performance tell me as an investor?

Christopher Ruane looks at how the Aviva share price has performed over the past 12 months and considers whether he…

Read more »

Investing Articles

Down by a quarter, is the BT share price a steal?

The BT share price has more than halved in the past five years. What is holding it down -- and…

Read more »