Just Eat plc isn’t the only stock expected to deliver blockbuster growth

Royston Wild looks at a hot growth stock alongside Just Eat plc (LON: JE).

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It comes as little surprise that the City expects earnings at Just Eat (LSE: JE) to keep marching skywards for some years to come.

Demand for the takeaway titan’s services continues to rip higher, with legions of couch potatoes the world over hitting their digital devices in growing numbers to get a multitude of tasty treats delivered to their doors. Just Eat saw first-half sales soar 44% year-on-year, to £246.6m, a result that prompted it to hike its full-year sales guidance to £500m-£515m from £480m-£495m previously.

And Just Eat is ploughing vast sums into its marketing and technology, as well as engaging in M&A activity across the planet, to keep order clicks moving higher.

Current forecasts suggest that earnings expansion should decelerate from the skin-ripping rate of previous years. But broker estimates are still not to be scoffed at — the Square Mile consensus points to bottom-line growth of 38% and 37% in 2017 and 2018 respectively.

While a forward P/E ratio of 41.2 times may look toppy on paper, I do not believe investors should be deterred by this heavy reading. Indeed, a corresponding PEG readout of 1.1 suggests Just Eat is actually brilliantly priced relative to its predicted growth trajectory.

Brand power

The City is also pretty bullish on the earnings prospects of Franchise Brands (LSE: FRAN) right now.

In 2017 the Kidderminster firm is predicted to report a 13% earnings rise, and to follow this up with a 44% advance next year. And Franchise Brands’ solid earnings outlook was underlined by half-year results put out on Thursday.

The firm — whose franchise operations include Ovenclean professional cleaning services and Chips Away car repairs — announced that revenues detonated 247% during January-June, to £8.64m, a result that powered adjusted profit before tax and exceptional items 38% higher to just over £1m.

Lauding the results, chief executive Stephen Helmsley commented: “Our principal existing brands have delivered strong growth, and in a relatively short space of time we have created a high quality portfolio of businesses with significant critical mass in the franchising sector. 

We are focused on maximising the earnings potential from all our brands, particularly with the recent acquisition of Metro Rod, where the medium-term upside potential is substantially better than our initial expectations, with the benefit of additional near term investment.” Franchise Brands snapped up drainage specialists Metro Rod back in April for £28.5m.

Despite these solid results, the investment community did not take too kindly to today’s release and sent the share price 10% lower to its cheapest since last November. But I would consider this to be a great buying opportunity.

With the company having invested huge sums into its infrastructure in recent times, I am convinced demand across its premier brands should continue to surge. And while the company’s forward P/E ratio of 23.3 times may look heady on paper, I reckon this should not deter share pickers given its ample growth opportunities.

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 has recommended Just Eat. 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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