Why IWG plc is set to be a millionaire-maker stock

IWG plc (LON: IWG) seems to offer high growth at a reasonable price.

| 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.

At a time when the FTSE 100 is trading close to a record high, IWG (LSE: IWG) seems to stand out. The workspace company appears to have a bright future like many of its mid- and large-cap peers. Its bottom line is forecast to grow rapidly over the medium term. However, unlike some FTSE 100 and FTSE 250 shares, it appears to offer good value for money. This could make it a sound investment for the long term.

Of course, it’s not the only cheap stock at the present time. Reporting on Thursday was another company which could also offer a wide margin of safety.

Encouraging performance

The company in question is UK merchant banking group Close Brothers (LSE: CBG). It has made an encouraging start to its financial year, with all three of its divisions showing strong profitability. For example in its Banking division, loan book growth was 1.4%, driven by Property and Premium Finance. Meanwhile, there has been no major change in credit performance or trading conditions.

The company’s Winterflood division has benefitted from continued retail investor trading activity. The Asset Management division was boosted by further strong net inflows as well as positive market movements. Managed assets increased by 6.5%, with total client assets rising by 4.5% versus the end of the 2017 financial year.

With Close Brothers trading on a price-to-earnings (P/E) ratio of just 10.3, it seems to offer a wide margin of safety at the present time. This suggests that while earnings growth may be somewhat lacking in the near term, it could be subject to an upward re-rating over the long run. As such, now could be the perfect time to buy it.

Diverse appeal

Similarly, IWG also appears to have a discount valuation compared to many mid- and large-cap shares. It is forecast to record a rise in its bottom line of 23% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of 0.5, which indicates that its shares could move higher after their 20% fall since the start of the year.

The company’s strong profit growth may also provide it with scope to raise dividends at a rapid rate. For example, it may only have a current dividend yield of 2.8%, but shareholder payouts are expected to be covered 2.4 times by profit this year. This should provide the company with scope to raise them over the medium term without jeopardising the financial health of the business. This mix of capital growth and dividend appeal means that the company could be of interest to a wide range of investors.

Therefore, while many shares may seem overvalued at the present time, IWG and Close Brothers appear to have considerable investment potential. Both stocks are cheap and this could enable them to offer index-beating returns over the long run.

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.

Peter Stephens 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

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Is Rolls-Royce’s share price an irresistible bargain?

Is Rolls-Royce's share price the FTSE 100's greatest bargain today? Royston Wild explains why he would -- and wouldn't --…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is the Vodafone share price a wonderful bargain or a horrible value trap?

As the Vodafone share price continues to fall, is it now a stock to buy with a view to a…

Read more »

Hand of a mature man opening a safety deposit box.
Investing Articles

I’d buy 95,239 shares of this banking stock to generate £200 of monthly passive income

Muhammad Cheema takes a look at how Lloyds shares, with a dividend yield of 5.9%, can generate a healthy monthly…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Can FY results give the Antofagasta share price a long-term boost?

The Antofagasta share price has had a good five years. Now the company says it's set to enter a new…

Read more »

Person holding magnifying glass over important document, reading the small print
Dividend Shares

Can I make sustainable passive income from share buybacks?

Jon Smith notes the rise in share buybacks from FTSE 100 companies, but flags up why they aren't great for…

Read more »

Front view of a mixed-race couple walking past a shop window and looking in.
Investing Articles

After the Currys share price rockets, here are more potential UK takeover targets!

The Currys share price has surged 39% higher in response to news of a takeover bid. Which UK stocks could…

Read more »

Investing Articles

Down 25%, where will the British American Tobacco share price go next?

The British American Tobacco share price has taken a hit. But this Fool isn't deterred. He think's now could be…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

2 cheap dividend stocks I’d snap up in a heartbeat!

This Fool is on the look out for quality dividend stocks and earmarks these two firms as great options to…

Read more »