I reckon most investors have room in their portfolio for a growth share or two, and I’m looking at three that I think have great potential for the coming year and beyond.
A falling bargain
Shares in BTG (LSE: BTG) have had an erratic year, losing 14% over 12 months to today’s 565p, despite a number of upwards spikes along the way. The firm operates in the specialist healthcare market, and that’s a solid business to be in.
At the first-half stage reported in November, BTG announced a 24% rise in revenue (10% at constant exchange rates), and recorded a modest 4% rise in adjusted operating profit — although adjusted EPS did drop by 5%.
Chief executive Louise Makin said that “the outlook for the full year is strong,” and told us the firm is expanding its Interventional Medicine business with a view to building “leadership positions in selected areas of interventional medicine.“
Why the share price fall? Well, growth investors often desert a company when earnings rises slow. But such years are to be expected, and forecasts for the following year suggest earnings growth of 45%. That would give us a P/E of 17 and a PEG ratio of just 0.4 (where less that 0.7 is usually seen as very good).
I see an emotional over-reaction that’s left us with a nice buying opportunity.
A storming rise
My second pick is also in the health business, and it’s NMC Health (LSE: NMC). In this case we’ve seen a very strong year with the share price up 61% to 1,452p — and over five years it’s soared by 575%.
You might balk at buying shares after they’ve climbed so far — you might not want to be holding them when a slow year comes along. But the thing is, even with that track record, NMC shares still look cheap on fundamentals to me.
For 2016, analysts are expecting a 47% rise in EPS, with a further 34% next year. There’s a dividend too, though it’s still early days in the firm’s development and yields are tiny. PEG ratios stand at 0.5 for this year and for next, with a 2017 P/E of 18.
Prospects look great, with the firm having acquiring the Al Zahra Hospital this month and having launched a successful placing.
Resurgent oil?
Finally I’m turning to small oil and gas explorer Indus Gas (LSE: INDI). Indus shares were flying high until September, when they took a tumble as it looked like the wheels might be coming off the tentative oil price recovery.
Full year results were positive overall, but Indus’s cash and debt position was looking a little risky. Although there was an operating profit of $33.15m, capital expenditure was high, there wasn’t much cash on the books, and debt at 31 March stood at $321m with $37.56m due within a year.
But we also heard that “during the next 12 months, we expect a further step change in the growth of the company,” and the analysts do seem to be on board. EPS by March 2107 is expected to rise by 134%, putting the 292p shares on a PEG of just 0.1, with a 2018 PEG of a still very attractive 0.4.
The price of oil does need to recover further and I can see investors remaining cautious, but this year could be transformational for the fortunes of Indus.
