Just Eat plc isn’t the only FTSE 250 stock expected to deliver blockbuster growth

Edward Sheldon profiles a FTSE 250 (INDEXFTSE:MCX) stock that has outperformed Just Eat plc (LON:JE) over the last three years.

| 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.

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.

Powerful growth

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.

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.

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Just Eat and Renishaw. 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

Investing Articles

How many National Grid shares must I buy for a £100 monthly second income?

I think National Grid could be one of the safest options for investors seeking a dividend income. And today its…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

NIO stock is down 90%. Will it recover?

NIO stock has fallen significantly from its 2021 all-time high. But could now be a chance for this Fool to…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

These 2 UK shares could help me reach £1,000,000 in my Stocks and Shares ISA

A FTSE 100 compounding machine and a FTSE 250 value stock are the UK shares Stephen Wright thinks could help…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

If I’d invested £1,000 in Lloyds shares at the start of the year, here’s what I’d have now

The stock market is unmoved, but Stephen Wright thinks last year’s record profits might give Lloyds shares a long-term boost.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

I’ll snap up shares in this growth stock in March if others don’t get there first

This Fool says shares in this growth stock are stable, full of profit, and might be undervalued. But there are…

Read more »

Rainbow foil balloon of the number two on pink background
Investing Articles

My 2 top energy investment trust picks for a passive income

I'm aiming to buy more of these investment trusts for a passive income and the reasonably stable energy sector returns…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

5.5% dividend yield! Shares like these could be great for my retirement

Oliver Rodzianko thinks this company with a stellar dividend yield could be very useful when looking for income from his…

Read more »

Investing Articles

Should I buy this FTSE 250 stock as it soars back to the FTSE 100?

This FTSE 250 stock has rallied following its pandemic woes. This Fool thinks now could be a good time to…

Read more »