2 FTSE 250 growth stocks I’d buy and hold for the next five years

Royston Wild discusses two FTSE 250 (INDEXFTSE: MCX) stars with brilliant investment potential.

| 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.

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.

Market appetite for SSP Group (LSE: SSPG) is showing no signs of slowing down just yet. The company, which operates food and drink outlets in airports and railway stations across the globe, has seen its share price explode 38% since the start of 2017 alone.

And it is not difficult to see why share pickers want to load up on the London-based business. It announced last month that, at constant currencies, revenues surged 14.7% between April 1 and June 30, or 3.6% on a like-for-like basis.  Factoring-in the positive impact of sterling weakness, sales actually soared 21.7% in the period.

These numbers beat analysts’ forecasts and I believe there is plenty of opportunity for the FTSE 250 stock to continue growing revenues at a stratospheric rate as passenger numbers chug higher across its global markets.

Earnings explosion

The City’s army of brokers certainly expect SSP to keep growing earnings at double-digit rates, and have chalked-in rises of 19% and 10% for the years to September 2017 and 2018 respectively.

A subsequent forward P/E ratio of 29 times is fair value, in my opinion, given the strong chance that profits could keep growing at a blistering rate.

What’s more, predictions that dividends will continue blasting higher also make SSP worthy of serious consideration, in my opinion. The 5.4p reward doled out in fiscal 2016 is predicted to stomp to 6.6p in the present period — yielding 1.2% — and to 7.2p next year, yielding 1.3%.

Treat yourself

Like SSP, Domino’s Pizza Group (LSE: DOM) is also expected to serve up decent earnings growth in the medium term, even if profits are likely to cool from the double-digit rises of recent years.

City analysts have chalked-in a 5% bottom-line swell in 2017, and an 8% advance in the following 12 months.

Domino’s has seen its share price collapse by a third since March’s full-year numbers, as fears of a prolonged sales slowdown have intensified. The company announced then that like-for-like sales crept just 1.5% higher during the first nine weeks of the year (comparable takings rose 7.5% in 2016), and patchy releases since then have hardly boosted investor sentiment.

But I believe Domino’s has what it takes to hurdle these current troubles and deliver brilliant sales growth in the years ahead. The company hiked its target for the number of UK outlets back in the autumn to 1,600 from 1,200, of course, while it has also invested heavily to bolster its position overseas.

As such, I reckon the pizza play remains a brilliant selection for long-term investors, even if it trades on a slightly-toppy forward P/E ratio of 18.7 times.

In fact, the prospect of delicious dividend growth in the years ahead adds an extra layer of appeal to Domino’s. Last year’s 8p per share payment is predicted to increase to 8.6p in 2017, and again to 9.2p next year.

These projections create chunky yields of 3.2% and 3.4% respectively.

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 of the shares mentioned. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended Domino's Pizza. 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

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »

Investing Articles

£13,200 invested in this defensive stock bags me £1K of passive income!

Building a passive income stream is possible and this Fool breaks down one investment in a single stock that could…

Read more »

Investing Articles

I think the Rolls-Royce dividend is coming back – but when?

The Rolls-Royce dividend disappeared in 2020 and has not come back. But with the company performance improving, might it reappear?

Read more »

British Pennies on a Pound Note
Investing Articles

Should I snap up this penny share in March?

Our writer is considering penny shares to buy for his portfolio next month. Does this mining company merit a place…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Stock market bubble – or start of a bull run?

Christopher Ruane considers whether the surging NVIDIA share price could be symptomatic of a wider stock market bubble forming.

Read more »

Investing Articles

Buying 8,254 Aviva shares in an empty ISA would give me a £1,370 income in year one

Harvey Jones is tempted to add Aviva shares to his Stocks and Shares ISA this year. Today’s 7.37% yield isn't…

Read more »

Investing Articles

Is the tide turning for bank shares?

Bank shares are trading on stubbornly cheap-looking valuations yet business performance in the sector is broadly robust. Should our writer…

Read more »