Why I’d buy this tempting growth share right now

I think strong fundamentals are driving this stock’s recent progress and the opportunity looks attractive.

| 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.

Digital publisher and media company Future (LSE: FUTR) has been turning its business around, but I think the turnaround is maturing to become a fast-growth proposition. Brisk expansion into the digital media space is driving revenue and profit growth that is more than offsetting any weakness in the legacy paper magazine division. The company is making strong inroads into the market in the US, which is a geography with a lot of ongoing potential.

Strong financial and operational progress

Looking back, Future hit its operational nadir during 2015 with revenue, profits and operating cash flow at a low point. Since then, figures for those financial indicators have been building back up, driven by both organic growth and a string of acquisitions, many helping the firm push into new, often digital, areas of business.

The market likes today’s full-year results report, and the share price looks perky. The figures are good. Overall revenue increased 48% year-on-year with 11% of that growth being organic, which suggests the firm’s offering is appealing to its customers. The fast-growing Media division is active in e-commerce, events and digital advertising and saw revenue rise 88%, of which 40% was organic progress. But even the Magazine division increased its revenue by 20%, although that was because of an acquisition.

Adjusted earnings per share moved 33% higher than the year before and the directors restarted dividend payments at 0.5p per share, which I think is a good signal that the turnaround is robust. Around 58% of gross profit came from the exciting Media division during the year and the remaining 42% from Magazines. Meanwhile, the Media division is pushing hard into the US market. Revenue grew 109% in North America and 28% of that was organic. I think the ongoing potential for the company to expand across the pond is one of the key attractions of the stock, although UK revenue moved 38% higher too, and 6% of that advance was organic.

A big market opportunity in America

UK revenue accounted for 70% of the total and US revenue 30%, but if the company keeps growing at or near the rate it has been in America, we could see the geography becoming rapidly more significant to the firm’s overall trading results. Future’s chief executive, Zillah Byng-Thorne, was upbeat in the report and said the financial results are due to the firm’s strategy of “leveraging” its specialist media platform and diversifying its revenue streams “both geographically and across its product offering.” The company completed four acquisitions in the period, which “materially” increased the firm’s global footprint. And  Byng-Thorne said the progress of the US business presents “material opportunities to monetise our significant US online audience.” 

Current trading is ahead of the directors’ expectations, which is a phrase that investors love to hear because it suggests further outperformance to come. Indeed, the outlook is positive and the management team is “confident” that trading for the current year will “continue the trends of the last year with strong growth.”  I think Future is emerging as a robust growth proposition with a great deal of potential surrounding its so-far-successful expansion into the US. I’d be happy to buy some of the firm’s shares right now.

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.

Kevin Godbold 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

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

Is BT Group one of the FTSE 100’s greatest value shares?

BT's share price looks like a bargain when you look at the P/E ratio and dividend yield. Is it one…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

The National Grid share price just plunged another 10%. Time to buy?

The National Grid share price is one of the FTSE 100's most stable, and nothing much happens to it? Well,…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Up 15% in 3 months, but I still won’t touch Vodafone shares with a bargepole

Harvey Jones has been shunning Vodafone shares for years. The FTSE 100 stock is finally showing signs of life, but…

Read more »

Growth Shares

This UK stock could be like buying Nvidia in 2021

Jon Smith thinks he's missed the boat with Nvidia shares, but flags up a UK stock that has some very…

Read more »

Businesswoman calculating finances in an office
Investing Articles

The FTSE 100’s Intertek delivers a bullish update — can the share price soar?

I’d describe Intertek as a quality business with a decent dividend income, but will the share price shoot the lights…

Read more »

Market Movers

Up another 10% yesterday, how high can the Nvidia share price go?

Jon Smith talks through the latest results but flags up why further gains could be harder to come by for…

Read more »

Investing For Beginners

Down 43% in a year, I think this value stock is primed for a comeback

Jon Smith flags up why a FTSE 250 share has fallen so much in the recent past, but explains why…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Nvidia stock is stupidly expensive. Or is it?

Nvidia stock's up over 2,000% in the past five years. Christopher Ruane explains why it could be wildly overvalued --…

Read more »