2 great ‘hidden’ shares for growth investors

Here are two potential growth shares that might not be so obvious.

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

sdf

Potential growth shares come in all shapes, and don’t always tick the same boxes. Here are two I think have serious long-term potential.

Advertising on the up

M&C Saatchi (LSE: SAA) might not be an obvious candidate for growth investors, who are often looking for explosive growth over a short period.

But the advertising agency’s record is impressive, with EPS having climbed from 15.1p in 2012 to 21.07p for the year ended in December 2016. That’s an overall rise of 40% over four years, and a 13% gain in 2016 alone.

As a result, the share price is up 136% in five years, while the FTSE 350 index has gained just 32% over the same period — and anything that beats the index by such a large margin definitely falls under my definition of growth.

Forecasts do suggest a slowing of earnings growth with just 9% on the cards for this year, to give a PEG of 1.8, which is high enough to fly above the limit that most growth investors look for. But to me that just hides a steady long-term growth prospect.

Revenue in 2016 grew by 26% to £225.3m (and up 19% at constant currency), with operating profit up 24% to £23m. And it’s not just the UK, where Brexit could signal a few tough years for the industry — Saatchi saw big revenue gains in the Americas, the Middle East, Africa, Asia and Australasia.

Chief executive David Kershaw called the year outstanding, adding that “we are confident that we will continue to make good progress in 2017 and beyond.

The dividend was raised by 15% to 8.29p per share, and while a yield of 2.3% on today’s share price is not a huge income, it’s a nice annual bonus to be added to any future share price growth.

Jam tomorrow?

Oxford Biomedica (LSE: OXB) shares have lost 59% over two years to 5.3p, so you might wonder what growth I see there. I could point out that we’ve seen a bit of a recovery of late, and that the price is actually up 68% from its recent low in October 2016, but that’s only part of the picture.

The bigger picture is one of ‘growth tomorrow’, hopefully, as Oxford Biomedica is a small biotech firm specialising in gene and cell therapy. It is not making any profits yet — and isn’t expected to this year nor next either, though the forecast loss per share should drop considerably in 2018.

The key to the firm’s 2016 results announcement was not in its finances, though it appears to have enough cash for now, especially after fundraising £17.5m during the year. But the key is in the collaboration agreements it has with other firms making use of its “world-leading lentiviral vector delivery platform for gene and cell therapy” (to use the words of chief executive John Dawson).

The firm’s collaboration with Novartis for what it calls a “blockbuster potential product” is said to be progressing well and is “close to market“, and collaborations with Orchard Therapeutics, Immune Design and others have been expanded with a new research and development collaboration with Green Cross LabCell.

The company’s own proprietary developments, which target conditions including Parkinson’s, cancer tumours and corneal graft rejection, also appear to be progressing well, though they’re mostly at relatively early stages of development.

Oxford Biomedica is a classic blue sky investment right now, but I think we’re looking at a future growth star.

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

Woman riding her old fashioned bicycle along the Beach Esplanade at Aberdeen, Scotland.
Investing Articles

3 techniques to turbocharge your SIPP for a richer retirement!

Christopher Ruane considers a trio of ways he thinks an investor could use to try and grow the long-term value…

Read more »

ISA coins
Investing Articles

With a £20,000 Stocks and Shares ISA, here’s how someone could make £762 each month in passive income

A well-invested Stocks and Shares ISA might rise in value due to share price growth -- but it can also…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Just released: our 3 top small-cap stocks to consider buying in June [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

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

I asked ChatGPT which stocks will be promoted to the FTSE 100. Here’s what it said!

Each quarter, stocks are promoted to or relegated from the FTSE 100 index. ChatGPT reckons these UK shares are ones…

Read more »

Businessman hand flipping wooden block cube from 2024 to 2025 on coins
Investing Articles

How many Legal & General shares must an investor buy to earn £1k of monthly passive income?

Harvey Jones calculates how much passive income someone could earn by taking a big position in one of the FTSE…

Read more »

Road 2025 to 2032 new year direction concept
Investing Articles

If I couldn’t touch my ISA or SIPP for 10 years, I’d be happy owning these super stocks

Edward Sheldon has been analysing his ISA and pension stock holdings. And he believes these two companies will still be…

Read more »

Businessman with tablet, waiting at the train station platform
Investing Articles

7% yields and low P/E ratios? These 2 cheap shares look promising!

The FTSE All-share is a great place to hunt for cheap shares, in my opinion. I've uncovered two top dividend…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

This FTSE 100 dividend stock could pay me passive income for the next 20 years

This UK stock has rewarded its investors with passive income every year for over 30 years. And it gets better…

Read more »