Why I’d buy this secret growth star and this FTSE 100 growth giant

G A Chester reveals a FTSE 100 (INDEXFTSE:UKX) stock and a smaller company that could both appeal to growth investors.

| 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.

NMC Health(LSE: NMC) probably isn’t the first FTSE 100 company that would spring to mind for most people. Indeed, some readers may not even be aware that this £7.5bn private hospitals group is a member of London’s top index, as it only joined the other elite blue-chips as recently as last September.

However, I believe NMC has every prospect of continuing the growth that powered its shares into the Footsie and that the current valuation remains highly attractive. Along with this growth giant, I see great value in a smaller company that released forecast-beating annual results today.

PEG value

Brexit is something investors in NMC don’t need to be concerned about, which is one of the things I like about this business. The group is the leading private healthcare operator in the United Arab Emirates. It operates or manages over 150 assets across 13 countries and made a net profit of $209.2m on revenue of $1.6bn last year. That’s a good bottom-line margin of 13%, which is another of the things I like about the business.

Last but not least, the company has a terrific record of earnings growth, which continued last year with a 33% rise in adjusted earnings per share (EPS) to $1.036. According to a Reuters consensus, City analysts are forecasting a 42% increase this year to $1.47 (110.5p at current exchange rates), giving a price-to-earnings (P/E) ratio of over 32 at a share price of 3,580p. While the P/E is a premium one, the forecast 42% EPS growth means the price-to-earnings growth (PEG) ratio is 0.8. This ratio is well to the good value side of the PEG fair value marker of one and makes the stock a ‘buy’ in my book.


Marlowe (LSE: MRL) was formed as a platform to create shareholder value through the acquisition and development of businesses in targeted outsourced service sectors across the UK. Commenting on today’s results, chief executive Alex Dacre said: “In our second year of trading as Marlowe plc we are pleased to report another strong financial performance and a year of substantial progress in developing the scale and breadth of our platform for growth.”

This sort of acquisitive business model doesn’t always appeal to me, but the chief executive has expertise in successfully executing buy-and-build growth strategies and I like the sectors Marlowe is targeting: namely, critical maintenance services in fire protection, security systems, water treatment and air hygiene. As many of these services are mandatory and necessitated by stringent legislation and regulation, I believe the business should prove more resilient than many through the economic cycle.

Today’s results for the company’s financial year ended 31 March saw a 72% increase in revenue to £80.6m (versus a Reuters consensus of £72.75m) and a 35% rise in adjusted EPS to 14p (consensus 12.7p). The shares are currently trading 3% higher on the day at 417p, which gives a market cap of £144m and a trailing P/E just shy of 30. As with NMC, this is a premium P/E but one I believe is justified by the high rate of EPS growth, which looks set to continue with further acquisitions and increasing economies of scale. I’d be happy to buy a slice of this smaller-cap company today, with its potential to become a mid-cap in due course.

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.

G A Chester 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

1 potential millionaire-maker UK stock I’d like to buy for the long haul

For long-term investors, here’s 1 UK stock to consider buying right now with the potential to help power a growth…

Read more »

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

These cheap UK shares look way too good to ignore right now

With the UK stock market reaching new highs recently, this Fool plans to grab these two remaining cheap shares before…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

This unloved UK stock could rise 120%, according to a City broker

Some City analysts reckon a once-popular UK stock can recover from its massive recent decline and go on to more…

Read more »

Investing Articles

These FTSE dividend shares all offer 6%+ yields!

Paul Summers highlights three FTSE dividend shares that offer big yields. But is the passive income stream sufficient to offset…

Read more »

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

Is Legal & General Group one of the FTSE 100’s greatest value shares?

Legal & General shares boast low P/E ratios and massive dividend yields. Could they be one of the London stock…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

I’m looking for the best FTSE 100 value stocks to buy now. Have I found them?

Barclays, NatWest, and Imperial Brands shares are recovering strongly. But these FTSE 100 stocks still trade on rock-bottom earnings multiples.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Where on earth will Nio stock be in 1 year?

Nio stock has demonstrated extraordinary volatility over the past 12 months, but where will it be in a year's time?…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

6.9% dividend yield! 2 cheap stocks to consider for a £1,380 passive income

Looking for a market-beating passive income? These FTSE 100 and FTSE 250 dividend stocks could provide a healthy second income…

Read more »