Attention seems very much focused on the FTSE 100 and its meanderings above and below the 7,000 level right now. But with the UK economy arguably set for a new period of growth, should we not be looking to the slightly smaller companies of the FTSE 250? I reckon there are rich pickings there, and here are five that have caught my attention as possible growth prospects:
Redrow (LSE: RDW) builds houses, and housebuilders are stupidly cheap — and it really does seem to be as simple as that. Since mid-2012 we’ve seen a three-fold rise in the Redrow share price to 357p, but even after that we’re still looking at P/E multiples of under nine this year and dropping to less than eight on 2016 forecasts. These are companies that built up their land banks at knock-down prices and are set to reap the profits over the next ten years.
Investec (LSE: INVP) is a specialist banking and investment firm, and it’s just the kind of company I’d expect to do well when economies get firmly back to recovery. With growth forecasts suggesting a P/E for March 2017 of under 11 and a PEG ratio of 0.6 for 2016 followed by 0.8, we’re looking at a definite growth prospect. Couple that with expected dividend yields of 4 to 5% over the next couple of years, and it’s surely worth a closer look.
How about Pace (LSE: PIC), the digital TV technologist? The shares are down 24% over the past 12 months to 341p, but the P/E could well be bottoming out at around eight based on 2016 estimates. With a return to EPS growth forecast for that year, is it worth a punt now? Well, Pace has put in a good spell of strong EPS growth, and in a relatively lean year its shares do look a little oversold to me.
Moneysupermarket.Com (LSE: MONY) shares have more than trebled over the past five years, to 270p, but is there anything left? The shares are highly valued on forward P/E multiples of 21 and 19 for this year and next, with dividend yields only a little above the FTSE average at 3.3 to 3.5%. But if long-term growth lives up to expectations, we could still be looking at a bargain here.
Our fifth here, Stagecoach (LSE: SGC), has faced uncertain times during the recession. But it kept earnings reasonably stable and, perhaps more importantly, progressively lifted its well-covered dividend through the past five years. The year to April 2015 should be flat, but we have double-digit EPS growth forecast for the following two years. With dividend yields of around 3% and rising, Stagecoach looks like a relatively safe growth prospect.
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com and Stagecoach. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.