2 shares with cracking growth potential

These 2 firms look well-placed to deliver more for investors from here.

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Today’s full-year results underline the growth potential for Curtis Banks Group (LSE: CBP), which describes itself as “one of the UK’s top 3 providers of full Self-Invested Personal Pension schemes (SIPP) and Small Self-Administered Pension Schemes (SSAS)”.

An appealing business

I manage my own investments within a SIPP and suspect that many other folk reading this article do, too. In this world of advanced communications technology, the nuts and bolts of buying, selling and researching shares and investments is easier than it has ever been, making do-it-yourself investing much more appealing, so I can see how the SIPP business may be attractive.

Previously, many SIPP providers offered the service as a ‘bolt-on’ to their many other, and often much larger, financial businesses. So, it’s interesting that Curtis Banks specialises in SIPPs and is beginning to grow by acquiring SIPP assets from other institutions that want to exit the SIPP business, presumably to focus on their core operations.

Chief executive Rupert Curtis explains that the acquisition of Suffolk Life during May 2016 “transformed” his company, with SIPP numbers up by 86%, driving a 75% revenue increase compared to a year ago. Assets under administration jumped from £9bn in 2015 to £18.8bn, but the effect on profits during the year is modest with basic earnings per share up just over 1.5%. It will be interesting to see how a full year of trading increases the firm’s profits, following the Suffolk Life acquisition, as the current period progresses.

A positive outlook

The directors describe the outlook for 2017 as “strong”,  and the firm plans to evaluate further acquisition opportunities as they materialise. Such potential consolidation within the industry could work well for Curtis Banks and drive total returns for shareholders from here.

At today’s share price of 265p, the company trades on a forward price-to-earnings (P/E) ratio of 18 for 2017 and the forward dividend yield runs at 1.9%. Meanwhile, shareholder’s cash offsets borrowings on the balance sheet, suggesting that the firm is well financed to grow from here.

Successful advertising campaign

Window and door replacement company Safestyle UK (SFE) continues to rampage through the British market, driven in no small part by its ‘unforgettable’ advertising campaign. In one interesting counter-intuitive statistic from today’s full-year results, the company said that leads generated from media and on-line marketing rose 23% during 2016, compared to the year before.

The results are good. Revenue ticked up 9.5% compared to a year ago, pre-tax profit climbed 9.7%, basic earnings per share increased 6.7%, and operating cash flow shot up 16%, all driven by installed volumes, which advanced 3.2%. Safestyle clearly continues to win market share.

Growing, but cyclical

The directors capped these achievements by hiking the final dividend 10.3%. At today’s share price of 290p, you can pick up a slice of Safestyle for a forward P/E ratio of just under 13, and the forward dividend yield for 2018 runs slightly above 4.5%. City analysts following the firm expect earnings to grow 3% during 2017 and 8% during 2018 and to cover the dividend payment 1.7 times.

The outlook is positive, the shares in an uptrend, and my only reservation is that the firm’s operations are cyclical, which could lead to an earnings and share-price reversal at some point down the road.

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.

Kevin Godbold 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.

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