2 secret stocks expected to deliver brilliant profits growth

Royston Wild runs the rule over two shares predicted to deliver stonking profits growth now and next year.

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Investors in Lombard Risk Management (LSE: LRM) took fright and headed for the exits in Wednesday trade after the release of less-than-reassuring trading numbers.

The business, which provides collateral management and regulatory reporting solutions, announced that revenues ducked 16.4% during the six months to September, to £12.7m, a result it put down to “a temporary fall in services revenues and some delays in contract signings.”

As a result, pre-tax losses at Lombard Risk ballooned to £5.9m, from £100,000 a year earlier.

Chief executive Alastair Brown called the results “unsurprisingly pretty sober.”

He said: “A number of opportunities we had hoped to secure in the period remain in the pipeline as market distractions such as MiFID II caused companies to delay on committing to new projects.

This leaves us much to do in the second half, and converting our strong visible pipeline will be crucial to us meeting market forecasts,” he added.

A risk too far?

The City’s army of analysts had been expecting Lombard Risk to continue on its path of steady bottom-line improvement, flipping from losses of 0.18p per share in the year to March 2017, to earnings of 0.5p in the present period.

And earnings were predicted to continue tearing skywards beyond this year with the number crunchers touting a 152% earnings improvement — to 1.2p — in fiscal 2019.

Thanks to today’s whopping 31% share price slide, these current projections result in a forward P/E ratio of 14.7 times, below the widely-accepted benchmark of 15 times that signals decent value for money.

And some share pickers could argue that the scale of transformation over at Lombard Risk makes it worthy of consideration at these prices — indeed, Brown commented today: “during the period strong foundations have been put in place, with an improved salesforce, a new development centre in Birmingham, and a renewed effort to target new business as well as extant cross-selling opportunities.”

However, potential buyers should be on guard for meaty downgrades to earnings forecasts given the challenging trading conditions Lombard Risk is toiling in. I reckon risk-averse investors may want to sit on the sidelines for now.

Powering on

Flowtech Fluidpower (LSE: FLO) is another stock expected to deliver perky profits growth in the near-term and beyond, and I am much more happy to endorse its earnings outlook than Lombard Risk’s.

With demand for its hi-tech products continuing to swell — these shot 34% higher during January-September to £54.5m, Flowtech advised last week, or by 12.4% on an organic basis — it comes as no surprise that the company’s share price is following suit. It has just topped out at 179p per share, taking total gains since the turn of 2017 to 43%.

City experts anticipate much, much more to come, and are predicting a 35% earnings rise in 2017 to be followed with a 17% advance next year. And current estimates make Flowtech stunning value, too, with the firm rocking up on a prospective P/E multiple of 13 times, and a sub-1 PEG readout of 0.4.

I reckon those seeking great growth shares on a budget could do a lot worse than pile into the AIM star.

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 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

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

5 steps to start buying shares with £5 a day

In a handful of steps, our writer explains how someone new to the stock market could start buying shares for…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

3 essential factors for investors to consider when aiming for passive income success

Mark Hartley outlines three of the most important considerations investors are faced with when attempting to secure a lucrative passive…

Read more »

Investing Articles

£10,000 invested in Barclays shares 1 month ago is now worth…

Barclays shares have carried on where they left off in 2024, by climbing far faster than the FTSE 100. Harvey…

Read more »

Investing Articles

I’ve been watching the easyJet share price like a hawk. Here’s what it did last week

Harvey Jones can't take his eyes off the easyJet share price. He thinks it looks good value and ready to…

Read more »

Investing Articles

A £10,000 investment in Nvidia stock 6 months ago is now worth…

Nvidia stock's shown a lot of volatility for a mega-cap company in recent weeks. Dr James Fox explores how an…

Read more »

Investing Articles

4 reasons Ferrari could continue to be a stock market winner

The global luxury goods market may have struggled in recent years, but you wouldn’t guess that from Ferrari’s soaring stock.

Read more »

Investing Articles

5 perfect starter stocks to consider for a Stocks and Shares ISA in 2025

Wondering which shares to buy for a newly opened Stocks and Shares ISA? Our writer thinks these five investments are…

Read more »

Row of terrace houses.
Investing Articles

Thinking about buy-to-let? Consider these UK stocks instead

Owning UK property stocks could be a better way to invest in buy-to-let, though there are drawbacks. Royston Wild explains.

Read more »