Seemingly every company these days boasts about their reliance on big data and its ability to transform their business, but few are as well-placed to follow through on their promises as consumer credit check provider Experian (LSE: EXPN). Experian hoovers up data on customers’ credit history and sells it to businesses before they offer car loans, credit cards or mortgages.
Unsurprisingly, this is a booming market as credit offerings proliferate across the world and identity theft also becomes a larger issue. This is borne out in the company’s Q1 results that showed a 5% rise in organic revenue on a constant currency basis. Much of this growth was down to strong performances in Latin America and Asia, two regions with massive long-term potential for credit services.
Of course, a high moat to entry, strong operating margins of 26.5% at year-end, and considerable growth prospects mean the shares aren’t cheap at 21 times forward earnings. Despite this pricey valuation, Experian’s high cash generation and impressive market share make it a good bet for future growth in my book.
Investors would be forgiven for not being as familiar with discount retailer B&M (LSE: BME) as the company purposely spends next to nothing on advertising and relies instead on word of mouth. Cutting out this major expense alongside no-frills stores led to operating margins of 8.5% last year. While this may not seem impressive next to Experian, it’s great for value retailers and well ahead of competitors such as Poundland.
Good, but not good enough?
Q1 results laid out the growth potential of B&M, as total sales in the UK rocketed by 21.3% after the company opened 12 new stores. With 500 locations now operating in the UK, the company’s target of 850 leaves considerable room to grow in the near term.
Despite the high headline growth, I’m not ready to take the plunge with B&M just yet. The main reason is Q1 saw like-for-like sales growth in the UK shudder to a dead halt at 0%. Admittedly, shoppers become less price-conscious the further from the Financial Crisis we move, but this lack of growth suggests to me a B&M-specific issue: that new stores are cannibalising sales from existing locations. That’s why I’ll be staying on the sidelines for the time being, despite good margins.
Animal magic
Full-year results for aptly named veterinary supplies provider Animalcare (LSE: ANCR) were also rosy as revenue rose 8.6% on the back of increased medicine sales. This continues several years of solid growth for the firm as investing in its pipeline of medicines pays off handsomely.
The company hasn’t squandered the proceeds from extra sales and has built up a war chest of £7.1m with no debt whatsoever. For a small-cap whose sales were only £14.7m for the year, this is a very good sign. Cash isn’t simply being squirrelled away though as dividends are expected to yield 2.4% this year while still being covered 1.9 times by earnings.
The most intriguing bit of news may be that Animalcare finally hired a dedicated export manager during the year and duly saw a 22.8% jump in overseas sales. If the company can maintain 20% operating margins and fully exploit opportunities abroad, the shares may be worth a closer look, despite trading at 21 times forward earnings.
