5 Growth Greats: Ashtead Group plc, Legal & General Group Plc, Whitbread plc, The Sage Group plc And Reckitt Benckiser Group Plc

Today I am looking at five London lovelies poised to enjoy spectacular earnings growth.

Ashtead Group

I reckon that equipment rental specialists Ashtead (LSE: AHT) should enjoy resplendent profits growth as activity across the construction and industrial sectors clicks through the gears. The London firm’s Sunbelt and A-Plant segments in North America and Britain continue to pull up trees, grabbing market shares from Ashtead’s key rivals, while the business has the financial firepower to remain busy on the acquisition front and complement bubbly organic sales growth.

This view is shared by the City, and Ashtead is anticipated to follow a 32% earnings bounce for the year concluding April 2015 with rises to the tune of 26% and 16% in 2016 and 2017 respectively. Consequently the P/E ratio is expected to dive from 19.2 times for the year just passed to 15.3 times for 2016, and again to 13.4 times for next year — any reading below 15 times is widely considered barnstorming value.

Legal & General Group

In my opinion life insurance giant Legal & General (LSE: LGEN) is in great shape to punch excellent bottom-line growth in the years ahead. The business is ploughing vast sums into its operations in developing regions, giving it improving access to a customer base where product penetration remains low and disposable incomes are on the rise. As well, the Legal & General also continues to innovate amid regulatory and demographic changes in Western markets, helping its products to fly off the shelves.

As a result, the abacus bashers expect the insurer to record terrific earnings growth of 12% in 2015, a projection which creates a P/E ratio of just 14.1 times. And this number drops to 13 times for 2016 amid predictions of an addition 9% advance.


I am convinced that Whitbread’s (LSE: WTB) ambitious expansion programme should deliver brilliant earnings growth looking ahead. The business — which runs the Premier Inn brand — is planning to have 85,000 hotel rooms open in the UK by 2020, up from around 59,000 presently. Whitbread is also ramping up the number of its Costa Coffee shops and machines, both at home and abroad, and is targeting sales of £2.5bn within the next five years compared with £1.6bn at the moment.

The strength of Whitbread’s product offering has helped to generate explosive, double-digit earnings growth in recent years, and analysts see no end to this trend any time soon. Indeed, the bottom line is expected to power 13% higher for the year concluding February 2016, and by 12% the following year. It is true that these forecasts create elevated P/E multiples of 22.2 times and 19.5 times for these years, but I believe Whitbread’s reputation as a reliable earnings generator justifies these high ratings.

The Sage Group

Software play Sage (LSE: SGE) also has a decent track record when it comes to generating solid earnings growth. And this month’s trading update underpinned my belief that profits should continue rattling higher — organic revenues jumped 6.2% during October-March to £682m. Meanwhile cost-cutting measures helped drive the operating profit margin above Sage’s target of 28%, up 70 basis points from the corresponding period last year.

Sage is expected to keep earnings chugging along with an 11% rise in the year concluding September 2015, and an extra 7% improvement is pencilled in for the following 12 months. Like Whitbread, these figures leave the business changing hands on P/E ratios above the value watermark of 15 times, at 21.6 times for this year and 20.3 times for 2016. Still, I reckon the firm’s leading position in the accounts and payroll software market should keep the bottom line steadily expanding.

Reckitt Benckiser

I believe that strident emerging market spending power — allied to recovering economic growth in established regions — should power revenues through the roof at Reckitt Benckiser (LSE: RB) in the coming years. Led by its vast suite of Powerbrands, from Nurofen pain relievers through to Finish dishwasher tablets, the company saw like-for-like sales gallop 5% higher in January-March to £2.2bn.

And I expect the terrific brand power of these labels, combined with a steady stream of innovation, to keep sales marching higher. Indeed, the City expects Reckitt Benckiser to see earnings growth of 3% this year accelerate to 7% in 2016. Although these figures result in heady P/E multiples of 24 times for 2015 and 22.3 times for next year, I believe the firm’s broad range of industry-leading labels — combined with significant, pan-global presence — fully merits this premium.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.