IQE plc isn’t the only growth hero that could make you stinking rich

Royston Wild explains why IQE plc (LON: IQE) isn’t the only growth star that could make you a fortune.

| 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.

I am not alone in believing that IQE (LSE: IQE) has all the tools to make investors a fortune in the years ahead. The broad application of its semiconductor wafer products across many technologies and applications makes it a popular pick with a range of OEMs across the globe, and the business is investing heavily to expand capacity to fully capitalise on its surging popularity.

But IQE is not the only share I reckon could generate stunning returns for share selectors. Indeed, I reckon building materials play Forterra (LSE: FORT) is also in great shape to make you and I a packet.

And my faith has been reinforced by latest trading details released on Wednesday.

Sales stream higher

It declared today that “trading in the period has continued to be underpinned by good activity levels in the new build residential sector” and that, as a result, it has seen “double-digit growth of brick and aggregate block volumes for the 10 months to October 2017 compared with the same period last year.”

Excluding the September acquisition of pre-cast concrete specialist Bison, revenues at Forterra boomed 12% year-on-year between January and October, it said.

On the back of these bubbly numbers, it added: “Based on the good trading performance in the year to date and the forward order book, the board’s expectations for the full year remain unchanged.”

Profits flying

I am convinced that the long-term outlook is extremely bright. Whilst concerns quite rightly abound over the health of the UK construction sector, the residential market continues to power ahead  and the latest PMI report from IHS Market indicated a “solid increase in residential building work” in October, with the pace picking up from the prior month.

And Britain’s desperate need to build houses — exemplified by Chancellor Philip Hammond’s pledge to build 300,000 new houses per year by the mid-2020s earlier today — should keep demand for Forterra’s products ticking higher.

What’s more, the Northampton-based business is investing heavily to generate future sales growth. It has finished expanding its Claughton brick factory, work which has hiked production levels by 5m bricks per year (up 11% from prior levels). And thanks to its exceptional cash flows, it has the financial firepower to engage in more game-changing M&A action like we saw with Bison.

City analysts are predicting earnings advances of 9% and 12% in 2017 and 2018 respectively, estimates that leave the construction giant dealing on a bargain-tastic forward P/E ratio of 12.1 times.

And with the progressive dividend policy expected to keep yields shooting higher (these register at 3.2% for this year and 3.6% for 2018), I reckon the company is a very appealing stock for both growth and income chasers.

Another growth hero

Now the Square Mile’s army of analysts are not predicting earnings at IQE to rise by the same rate in the near term, an advance of 4% being anticipated for 2017.

But profits are expected to light up from next year as demand across its customer base picks up, and a 27% bottom-line swell is currently being predicted for 2018.

A forward P/E ratio of 53.1 times clearly looks toppy on paper. But in my opinion the prospect of stunning revenues growth from next year merits such a princely 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.

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

Investing Articles

5 FTSE 100 stocks to consider for a lifetime of passive income

I see lots of cheap dividend stocks in the FTSE 100 right now, but prices are starting to rise. Here's…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

3 growth stocks I’m desperate to buy as the FTSE 100 dips

Never waste a dip, says Harvey Jones. Three of his favourite growth stocks have fallen over the last month and…

Read more »

Investing Articles

I’d use a £10K ISA to try and generate £900 in dividends annually like this!

Christopher Ruane explains how he would invest a Stocks and Shares ISA in blue-chip companies to try and set up…

Read more »

Investing Articles

Here’s how I’d build a second income stream worth £1,228 a month by investing £10 a day!

A second income stream could come in handy later in life. This Fool explains how she’d build one by investing…

Read more »

Investing Articles

5 FTSE 250 stocks I’d buy for a lifetime of passive income

Here's why I think the FTSE 250 could be the best UK stock market index to go for in 2024…

Read more »

Union Jack flag triangular bunting hanging in a street
Investing Articles

Buy cheap FTSE shares, says HSBC

Analysts at HSBC have upgraded their rating of FTSE stocks and reckon the blue-chip UK index could carry on powering…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

It could be worth buying the dip for this FTSE 250 stock, down 7% today

Jon Smith spots a sharp drop in a FTSE 250 stock but explains why this could just be a blip…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Still cheap as chips! What’s wrong with the IAG share price?

Harvey Jones can't believe just how low a value markets are putting on the IAG share price. He wants to…

Read more »