The Motley Fool

These sliding growth stocks could still smash the FTSE 100

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.

Shares in Patisserie Holdings (LSE: CAKE), the company behind Patisserie Valerie-branded cake-and-coffee destinations, soared 7% this morning after reporting a 20% leap in 2017 profits.

After the rise the shares trade on a P/E of 20, but this seems a fair price considering the momentum behind this rollout story. The company opened 20 new locations in 2017, ending the financial year with 199 branches.

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!

This rapid expansion is self-funded too: the company generated £24m in cash from operations and spent only £9.3m on growing the estate. Given the significant free cash-flow thrown off by the company and a £21.5m net cash position, it has scope to increase the pace of this rollout in the future. 

The firm has impressed me with its cost management skills – while other casual dining outfits are suffering from increasing cost pressures from the rising minimum wage and weak sterling, gross margins have held steady at Patisserie Holdings.

After successful English expansion, the company has turned to Ireland and Scotland to drive further growth. It has only just begun testing the waters in these markets, operating from only five locations, but given its past operational excellence, the growth plans seem promising.

Auto Trader motors on

Shares in Auto Trader (LSE: AUTO) have struggled this year as Brexit cast a shadow over the UK auto market. Weakened sterling has resulted in price inflation for purchases of imported vehicles. Sales of new vehicles have fallen for seven straight months, so its no wonder investors are cautious of the firm.

The company is the UK’s largest automotive marketplace for new and used cars, with an audience three times larger than its nearest competitor. Roughly 80% of UK automotive retailers advertise on the website.

Despite the gloomy outlook, it grew revenues by 7% and profit before tax by 10% in the first half. The shares are currently 24% down from their 2017 peak and, trading on a P/E of 18, it looks an interesting prospect given its clear dominance in online used car sales.

The company’s capital-light business model continued to generate tons of free cash-flow that was used to reduce debt to £347m, to buy back £36m shares and to pay £34m in dividends.

According to CEO Trevor Mathews, Auto Trader’s dominance in the used car markets explains the company’s resilient results. It looks set to meet full-year profit expectations of roughly £171m. Given its dominant position, 65% operating margins and solid free cash-flow generation, I believe Auto-Trader could beat the market for years to come.

While the shares might perform weakly in the short-term due to tough market conditions, the sheer size of its marketplace grants it a competitive advantage over its peers that should facilitate long-term outperformance. 

In my view, both Auto Trader and Patisserie Holdings could be wonderful, durable investments for those following a buy-and-hold strategy. 

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…

Zach Coffell owns no position in any shares mentioned. The Motley Fool UK has recommended Auto Trader and 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.