2 stocks that could make you rich

Bilaal Mohamed identifies two London-listed firms with spectacular growth 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.

International veterinary drugs firm Dechra Pharmaceuticals (LSE: DPH) has undoubtedly been one of the stock market’s great success stories over the past decade or so. Rapid growth and worldwide expansion have transformed the Northwich-based firm into a global business now valued at more than £1.8bn.

Hop on board

As profits have soared, so too has the FTSE 250 firm’s share price, rising from lows of just 43p in 2003 to today’s record highs of 1,995p. That’s all well and good for those who have kept the faith in the company since those earlier years, but what about new investors? Is it too late for them to hop on board?

This morning the business announced its preliminary results for the year ended 30 June, giving both existing and would-be investors plenty to cheer about. The group posted a 45.1% improvement in full-year revenues to £359.3m, with an even more impressive 54.9% rise in underlying pre-tax profits to £77m, from £49.7m just a year ago.

Animal welfare

I don’t see any let-up in growth for Dechra. Animal welfare is being taken ever more seriously, not only in Western countries, but also in the developing world. So not only is the company continuing to launch new products, it’s also pressing ahead with plans to expand its geographical reach.

For me, Dechra remains a good long-term buy given the potential for further growth and expansion. From a valuation perspective, a forward P/E ratio of 27 may look expensive, but I believe it’s a price well worth paying given the healthy outlook.

Out with the old

Another Cheshire-based firm reporting today was Johnson Service Group (LSE: JSG). Half-year figures for the textile services business revealed another strong performance, with revenues increasing by 19.3% to £138m, driven by strong organic growth of some 4.8% and a full six months of trading from the acquisitions completed in 2016. Adjusted pre-tax profits increased by 23.5% to £16.8m from £13.6m after net finance costs of £1.8m, which were £100k lower than in the previous year.

In a separate statement the AIM-listed group announced the departure of its CEO, Chris Sander, who after 33 years will be retiring in the first half of 2018. Its seems Mr Sandler is leaving on a high with the business in excellent shape and very well placed for continued growth.

More focused

The decision earlier this year to forsake its 200-year-old Johnson Cleaners business was a bold but necessary one in my opinion. By the company’s own admission, the dry cleaning market has been challenging in recent years, and the disposal leaves the group free to concentrate on its higher-margin textile rental businesses.

There’s still plenty of opportunity in this market for both organic and acquisition-led growth and I see a P/E rating of 17 as a very reasonable price to pay for what is now a much more focused business.

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.

Bilaal Mohamed 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.

More on Investing Articles

Newspaper and direction sign with investment options
Investing Articles

When cheap markets meet favourable conditions, sentiment flips very quickly

London’s stock market is cheap — some sectors, even cheaper. Given a change in sentiment, the uprating could be substantial.

Read more »

Investing Articles

Empty Stocks and Shares ISA? I’d snap up these 3 stocks to start with!

Sumayya Mansoor explains how she would start to build wealth from scratch with an empty Stocks and Shares ISA and…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

7.7% yield and going cheap! Why is this unknown FTSE 250 stock flying?

It's no household name, but there's one FTSE 250 stock with a high dividend yield and booming profits that looks…

Read more »

Photo of a man going through financial problems
Investing Articles

I’d stop staring at the Nvidia share price and buy this FTSE 100 stock instead

This writer reckons there is a smarter way to invest in Nvidia today without taking on stock-specific risk. Here is…

Read more »

Young lady working from home office during coronavirus pandemic.
Top Stocks

5 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Young Asian man drinking coffee at home and looking at his phone
Dividend Shares

These 3 FTSE 250 stocks offer me the highest dividend yields, but should I buy?

Jon Smith considers FTSE 250 shares with a very high yield, but questions whether the income is going to be…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Is FTSE 100 takeover target DS Smith a great buy?

A mega-merger between FTSE 100 giants DS Smith and Mondi has the City abuzz. But is there any value in…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

The WPP share price dips as profits fall. Here’s why it could be a top dividend buy

I'm starting to think the WPP share price undervalues the stock, especially if the long-term dividend outlook comes good.

Read more »