German discount grocers Lidl and Aldi have been blazing a trail in the UK for well over a decade now. Surging in popularity over the past 10 years, thanks in no small part to aggressive expansion in that time, they have shown British consumers that they can fill up their shopping baskets without facing an eye-watering tab at the checkout
In times of constrained consumer spending power like these, this strive to deliver exceptional value cannot be underestimated, as traditional retailers like Tesco and Sainsbury’s will attest to. And I’m backing this groundshift in our shopping habits to keep driving profits at B&M European Value Retail (LSE: BME) higher.
The FTSE 250 retailer’s most recent trading release outlined its rising popularity with Britain’s shoppers. It said that it had made a “strong start to the new financial year” as its “disruptive value model continues to prove highly attractive to customers.” Group revenues boomed 21.6% between April 1 and June 30, with UK sales rising 8.3% in the period, or by 1.6% on a like-for-like basis.
B&M isn’t just making terrific progress at home, either. At its Jawoll stores in Germany, revenues rose 7% in the past quarter.
Dear but delightful
What’s more, like Lidl and Aldi, B&M is committed to expanding its store network in the UK and overseas to create strong earnings growth over a long-term time horizon. The business opened four new domestic B&M-branded outlets in the last quarter, as well as four of its Heron Foods convenience stores, putting it well on course to attain its goal of 50 new B&M shops in the current year alone.
City analysts believe the retailer has the recipe to cook up earnings growth of 13% in the year to March 2019, and a 14% rise is predicted for next year as well. And who would bet against profits growing by double-digit percentages long beyond fiscal 2020?
B&M is slightly expensive on paper, with its forward P/E ratio of 19 times sitting just outside the accepted value territory of 15 times, or below. Given the company’s strong growth profile, I consider this slight premium to be more than fair, though.
Good for the environment, good your stocks portfolio!
I would also consider Renewi (LSE: RWI) to be an exceptional selection for growth hunters today.
Following its merger with Dutch business van Gansewinkel Groep a couple of years back, the FTSE 250 firm now has significant revenues opportunities across the continent. More specifically, the move gives it a major presence in the Benelux region (comprising Belgium, the Netherlands and Luxembourg), a part of Europe that Renewi describes as “one of the most advanced recycling markets in the world.”
Rising costs have been problematic of late, but the company is increasingly taking the sting out of this problem with volumes and prices both on the rise. As a consequence, City brokers feel that group earnings will jump 34% in the 12 months to March 2019, and an additional 22% advance is forecast for next year.
At current share prices, Renewi carries a cheap forward P/E multiple of 9.5 times, a figure that I consider seriously undervalues its excellent earnings outlook through the coming years. Throw a prospective dividend yield of 5.1% into the equation too, and I reckon the firm’s a pretty compelling share to pick up today.