A secret growth stock to watch in 2018

Royston Wild looks at a growth share with exceptional earnings potential.

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Goals Soccer Centres (LSE: GOAL) hasn’t exactly had the best of it in recent times. The soccer specialist’s share price has dived by exactly two-thirds over the past year alone and if Monday’s pre-close update is anything to go by, that much-awaited recovery could be a very long time coming.

Goals Soccer Centres fell 5% today after announcing that while total sales increased 0.5% during 2017, to £33.7m, on a like-for-like basis revenues actually dropped 0.5% year-on-year. The AIM-listed business advised: “The decline was exacerbated by the disruption of closure due to investment in upgrades.”

As a result profits for the full year will be roughly in line with the lower end of estimates, the company advised.

Goals noted that the trading conditions it had experienced in the summer had carried through into the the second half. On the one hand it advised: “Major Arena investment is delivering good sales growth in a large group of sites, whilst minor refurbishment has reduced the rate of sales decline.” But it added: “Sites that have yet to receive investment have continued to perform poorly.”

On the defensive

The sluggish rate at which the turnaround programme is progressing continues to infuriate the market, as illustrated by the company’s steady share price slide. Back in August it confessed that its return to profit is taking “slightly longer than anticipated,” and the resignation of chief executive Mark Jones the following month was hardly a ringing endorsement that its recovery strategy is running to plan.

Today’s update will pour further scrutiny on hopes that profits are finally about to flip higher.

Prior to the release, the business was expected to have endured a 21% fall in 2017, the fourth bottom-line reverse if realised. Meaty increases of 13% and 10% were forecast for 2018 and 2019, however brokers are likely to be busy scribbling out these estimates in the wake of Monday’s profit warning and further downgrades, of course, cannot be ruled out further down the line.

A forward P/E ratio of 9 times may be cheap, but not cheap enough to encourage me to invest. The business may have its fans, but I think risk-averse investors should give Goals Soccer Centres a wide berth.

Animal magic

Instead, I believe those seeking little-known growth stocks would be better served by checking out Animalcare Group (LSE: ANCR) today.

The medicines giant advised today that total revenues rose 9.5% during the 12 months ending December, to £91.9m, or 3.4% on a constant currencies basis. As a consequence, profits should meet management expectations, the business added.

Animalcare has proven over many years its mettle as a reliable earnings generator. And while profits expansion is expected to slow to 1% in the year to June 2018, this should speed up again before long (an 11% rise is forecast for fiscal 2019).

This comes as no surprise given the strength of the veterinary care specialist’s product pipeline, not to mention the long-term benefits afforded by its reverse-takeover of rival Ecuphar last June. In my opinion, Animalcare is a growth great worthy of a premium prospective P/E multiple of 19.5 times.

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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.

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