Key points
- Ashmore Group has a compound annual EPS growth rate of 7.7%
- FirstGroup’s bus operations are heading back towards pre-pandemic levels
- These two companies could provide growth over the long term
The FTSE 250 is full of interesting stocks that have delivered growth over the years. I’ve once again returned to the index to find two more companies to add to my portfolio. My plan to to hold shares in these businesses for the long term, because I firmly believe that this strategy yields the best results. Why do these companies fit the bill? Let’s take a closer look.
A FTSE 250 asset manager
The first firm is an asset manager specialising in emerging markets, Ashmore Group (LSE:ASHM). Much of its holdings are based in Asia. Investing in a company of this sort is a double-edged sword, because when panic hits the markets, emerging market assets are usually among the first to fall. This is caused by their higher risk classification. In rising markets, however, this asset class can do very well indeed. Ashmore currently trades at 230p, down 41% in the past year.
For the years ended June 2017 to 2021, company revenue increased from £257m to £292m. What’s more, profit before tax rose from £206m to £282m. Unsurprisingly, therefore, earnings per share (EPS) grew from 25.07p to 36.4p.
By my calculation, this results in a compound annual EPS growth rate of 7.7%. This is both strong and consistent. It should be noted, however, that past performance is not necessarily indicative of future performance.
In a trading update for the three months to 31 December 2021, assets under management decreased from $91.3bn to $87.3bn. While the company has focused on acquiring oversold assets during the recent stock market correction, there is always the further downside market risk that could be negative for the Ashmore share price.
A travel recovery stock
The second stock I’m buying for the long term is FirstGroup (LSE:FGP), a UK and North American operator of trains and buses. It currently trades at 107p, up 17.7% in the past year.
For the fiscal years 2020 and 2021, revenue was flat at about £4.6bn. However, profit before tax in 2021 was £75.2m, a massive improvement from the £388m loss recorded in 2020. As my Motley Fool colleague James McCombie recently reported, the sale of US segments in 2021 bolstered the company’s balance sheet.
In a recent trading update for the three months to 31 December 2021, bus operations climbed to 70% of pre-pandemic levels. This was about 75% in parts of England. This in encouraging news, because it shows operations are not far away from normal conditions.
In addition, train services were running in line with expectations. Nonetheless, there is always the risk of further Covid-19 variants impacting operations. This could have a negative impact on the FirstGroup share price.
Overall, these two FTSE 250 stocks exhibit consistent growth. Over the long term, as markets recover and travel returns to normal, I think these companies could produce strong results. I will be buying shares in both today.
