The FTSE 250 index is a happy hunting ground for companies growing at exciting speeds. Here’s a look at two such that are expected to grow strongly this year.
FTSE 250-listed Just Eat (LSE: JE) has caught the imagination of many investors since its 2014 IPO. Floating at 260p, the shares have surged to 696p, a gain of 168%. Could there be more prolific capital growth to come?
The growth story is certainly quite impressive. For those unfamiliar with the £4.8bn market cap stock, Just Eat provides customers with an easy and secure way to order and pay for takeaway food from a diverse selection of restaurant partners. The company operates across 13 ‘core’ markets, including the UK, France and Canada and connects around 19m customers to over 75,000 restaurants.
A glance at Just Eat’s financials reveals fantastic top-line growth. Indeed, over the last three years, the company has delivered revenues of £157m, £248m and £376m, a compound annual growth rate (CAGR) of an amazing 55%. Profitability has surged as well, with adjusted earnings per share rising from 4.2p in 2014, to 12.2p last year. First-half results released in July showed the momentum continuing, with orders up 24%, revenue climbing 44% and adjusted earnings per share rising 39% to 7.8p. Can this growth continue?
Looking forward, City analysts expect it to keep delivering in the near term. 36% revenue growth is expected this year, followed by 23% for next year. Earnings per share of 16.6p and 23p are forecast for this year and next.
Those earnings estimates place the stock on a forward P/E of 41.9, falling to 30.3 for FY2018. While shares in Just Eat could potentially keep rising, those valuation figures don’t leave a huge margin safety, which is something to keep in mind, given that competitors such as Deliveroo and Uber are looking to capture market share.
An even better performer
Another FTSE 250 stock performing incredibly well over the last three years is Renishaw (LSE: RSW). Hovering around 1,600p this time three years ago, the shares now change hands for 4,690p, a gain of almost 200%.
Renishaw is an engineering and scientific technology company that specialises in precision measurement and healthcare. The company’s products are used in a diverse range of applications, from jet engine manufacture to dentistry. Renishaw also focuses on metal 3D printing, whereby it designs and manufactures machines which ‘print’ parts from metal powder. The company operates in 35 countries, although the majority of its research and development is carried out in the UK.
Renishaw released a trading update this morning, and the numbers look good, in my opinion. First quarter revenue from continuing operations was £142.3m, a rise of 26% on last year, with sales being boosted by a large number of orders from Far East customers in the consumer electronics markets. Adjusted profit before tax surged 137% to £35.8m and the group had cash of £82.6m at 30 September, up from £64.8m at 30 June. Management said it remains “confident in the future prospects of the group and of achieving good growth in both revenue and profit in this financial year.”
City analysts’ forecasts of 8% revenue growth for both this year and next suggest that the company should continue to grow its top line in the near term. However, on a forward P/E of 32.3, Renishaw is also trading on a lofty valuation.