The following FTSE 250 stocks have been flying lately and could hit lucrative new highs in 2017 and beyond.
Express yourself
Investors have enjoyed a smooth ride on National Express Group (LSE: NEX), with the share price up 73% over the past five years. Over 12 months, it is up a comfortable 10%, as it has avoided any major bumps in the road. The last time I hopped on board a National Express coach was for a trip home from a glamorous weekend in Coventry. But this is now an adventurous international organisation, with interests across the US, Spain, Germany Morocco and beyond.
It seems in a hurry to leave the mature UK market behind, recently offloading its ‘c2c’ operation to try its luck in faster growing territories such as Bahrain and Singapore. It made 11 acquisitions in the last year, all of which are quickly proving profitable.
Cash through coach
Foreign expansion plans looks justified as National Express posts rapid growth in North America. 2016 revenue and operating profits were up 14.3% or 11.9% on a constant currency basis, alongside record passenger numbers in Spain and Morocco, and 20m passengers in the first full year of German rail operations. Total company profits grew 10.6% to £2.1bn, a 20% hike in constant currency terms.
Those currency tailwinds may reverse as sterling recovers but National Express continues to benefit from a low oil price, as crude drops below $50 a barrel again. The dividend policy is progressive, with a 10% hike in 2016, and today’s 3.47% yield is expected to hit 4.1% by the end of next year. Forecast earnings per share (EPS) growth of 7% this year and 8% in 2018 should keep the show rattling along, and a valuation of just 13.25 times earnings means you ride in style.
V for Victrex
Global supplier of high performance polymer solutions Victrex (LSE: VCT) has been somewhat racier, rising 27% over the past 12 months, although that does follow a bumpy few years. It was given a lift by the post-Brexit collapse in the pound as it generates more than 97% of its sales from outside of the UK. However, this was reduced by its policy of hedging currency up to 12 months in advance, and with the pound now recovering, it may fail to cash in.
Still, it is an exciting prospect, pioneering lightweight, durable metal-replacement polymers that can withstand the harshest operating conditions. This is a strong growth area across aerospace and automotive industries, as lighter vehicles are far more fuel-efficient, with further applications across energy, medical, electronics and industrials. It has also spied opportunities in another breakthrough area, 3D printing, with its recent £10m purchase of Zyex.
Flying high
Victrex suffered a rough start to 2016, which led to a 30% drop in consumer electronics volumes for the full year, although things picked up in the second half. Annual group revenues fell 4% to £252.3m, with profit before tax down 6% to £100.3m. The dividend was held at 46.82p. The current yield is 2.4%, covered 2.1 times.
The future looks brighter with a forecast EPS increase of 7% in the year to 30 September 2017, then another 11%. Juicy operating margins of 39.8% and a 26.1% return on capital employed bolster the investment case. Victrex is no lightweight.
