I’d consider buying these brilliant growth bargains before it’s too late!

Royston Wild discusses two stocks with exceptional earnings potential.

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While investor appetite for Stobart Group (LSE: STOB) has stomped higher in recent months, I believe the business has much, much further to run as its long-running transformation drive continues to deliver the goods.

Stobart has seen its share value grow 32% grow since the start of the year, and strike a fresh record above 233p on Wednesday following the release of excellent full-year financials.

The FTSE 250 firm announced that revenues from continuing operations rose 2.1% during the year to February 2017, to £129.4m, a result that helped underlying pre-tax profit power 48.9% higher to £27.4m.

News that long-time chief executive Andrew Tinkler will step down from his role grabbed the headlines, however. Tinkler will take the reins at the firm’s newly-established Stobart Capital investment unit.

Hot growth plan

Tinkler’s tenure established the business as a multi-pronged transportation giant with splendid growth potential.

Indeed, Stobart commented today that “we are confident that the year ahead will see further progress towards the clear objectives for each of the group’s three growth operating divisions of Energy, Aviation and Rail and further value-creating realisations from our Infrastructure and Investments assets.

The company is seeking to move 300,000 more passengers from London Southend airport from next year, for example, while it is also aiming to shift 2m tonnes of biomass by 2018. Stobart has its sights on supplying 60% of the country’s material needs.

City analysts certainly expect it to build on last year’s strong performance, and have pencilled-in growth of 19% and 70% in fiscal 2018 and 2019 respectively.

And despite recent share price strength, current projections still make Stobart brilliant value. Sure, a forward P/E ratio of 38.2 times may sail well above the broadly-regarded value watermark of 15 times, but I reckon the business is worthy of such a premium given the exciting growth targets for its Energy and Aviation divisions.

Besides, a smashing 5.2% dividend yield suggests that it still offers plenty of value at current share prices.

A sound bet

With wagering and net revenues rising across all of its four major divisions, I reckon bookmaker William Hill (LSE: WMH) should also bid farewell to the earnings lumpiness of recent years.

There was plenty that was positive to pick out from its latest financials this week, but the steady improvement at its Online division really stood out. The gambling house has invested huge sums in product improvement, better marketing and technological enhancements recently. And these measures helped net revenues here rise 16% during the 17 weeks to April 25.

While regulatory uncertainty of course remains a barb for the business, I believe William Hill’s self-help actions — allied with its strong position across Europe, the US and Australia — should continue to deliver meaty earnings growth. And this view is shared by the number crunchers who expect earnings to rise 8% in both 2017 and 2018.

I reckon a subsequent forward P/E ratio of 12.2 times is terrific value given William Hill’s improving momentum. And a chunky 4.3% dividend yield sweetens the investment case.

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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