The Motley Fool

Time to take profit on this top growth stock?

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.

Having rocketed 80% in value over the past year before today, few investors in global food and drink concessions operator SSP Group (LSE: SSPG) are likely to be grumbling right now. But does a sky-high valuation suggest that some profit should now be taken? Let’s check this morning’s full-year numbers.

Flying high…for now

In the year to the end of September, revenue climbed 11.7% to £2.38bn (once foreign exchange fluctuations are taken into account) with a 3.1% rise in like-for-like sales the result of growth in air passenger travel and what the company labels as “retailing initiatives“. The latter percentage, when combined with operational improvements and new openings in North America and Asia, allowed SSP to record a stonking 27% jump in operating profit (to just under £163m) over the period. Underlying pre-tax profit soared 38.3% to almost £149m.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

While economic uncertainties have led the Upper Crust and Ritazza owner to speculate that revenue will slow in 2018, it also revealed that the new financial year had started in line with expectations. Although its bi-annual payouts to shareholders remain low relative to some companies on the market, today’s final dividend of 4.9p brings the full-year payout to 8.1p — a 50% increase on that returned to investors last year. A further bonus was the announcement of a proposed £100m special dividend in the near future.

With figures like these, it’s really no shock that SSP’s share price rose over 7% in early trading. Factor-in the company’s rising returns on capital employed, excellent free cashflow and captive audience and you begin to understand why investors continue to clamour for the stock.

Nevertheless, with a valuation of 29 times earnings for the next financial year, I’d say a lot of good news is now firmly priced-in. Indeed, with a price-to-earnings growth (PEG) ratio of over 3 for 2018/19 (with anything below 1 indicating good value) and a market cap approaching £3bn, I’m beginning to question how recent share price performance can be sustained.

All told, I wouldn’t blame those with short investing horizons for realising some of their gains sooner rather than later.

A tempting alternative

Those looking for exposure to the general industry in which SSP operates but unwilling to pay up for its stock may be more tempted by cake-specialist and casual dining operator Patisserie Holdings (LSE: CAKE).  

After what feels like an exceptionally quiet period in terms of news, many existing holders will be eagerly looking forward to full-year results from the £310m cap, particularly after May’s interim numbers revealed an 11% rise in revenue and 16% increase in pre-tax profit. Back then, Executive Chairman Luke Johnson declared he was confident in being able to deliver “a successful second half of the yearBy next Monday, we’ll know whether this was achieved.

Even if the recent rise in inflation and reduction in consumer spending (not to mention Brexit-related nervousness) has impacted negatively on trading, I’d still be tempted by the stock. While not screamingly cheap, Patisserie — trading at 17 times expected earnings for the next financial year — is significantly less expensive than SSP Group. Returns on sales and capital employed are also far higher at the debt-free Birmingham-based business.  

While making an investment around results time is a risky strategy, I think any price weakness could be a great opportunity for new investors to take a position.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended Patisserie Holdings. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.