Today I am looking at four FTSE favourites expected to experience outstanding earnings growth.
Chipbuilder ARM Holdings (LSE: ARM) has an enviable record of churning out brilliant earnings growth during the past five years, and has seen the bottom line swell at an annualised average of 18.2% during this period. The Cambridge firm has its terrific relationship with industry giants like Apple to thank for that, thanks in no small part to its ability to keep on delivering the very best next-gen gadget technology.
And with ARM Holdings branching out into other hot growth areas like networking and servers, the City sees no reason for this breakneck progress to cease any time soon. Indeed, earnings growth of 74% is currently pencilled in for 2015, and an extra 20% rise is chalked in for 2016. Although this year’s figures leave the tech titan dealing on a high P/E ratio of 35.6 times for 2015, a PEG multiple of 0.5 — comfortably below the value benchmark of 1 — gives investors plenty of bang for their buck.
I believe that sales should continue to surge at takeaway specialists Just Eat (LSE: JE), a view that is shared by the City’s army of analysts. A backcloth of rising wages and persistently low inflation is likely to keep the tills ringing across Britain’s curry houses and pizza makers, and with the business situated right in the sweet spot of online and mobile commerce, I expect revenues to gallop forth in the coming years.
Forecasted growth of 40% is currently chalked in for 2015, leaving Just Eat dealing on a gargantuan earnings multiple of 74 times. However, an additional 53% bottom-line flip anticipated for the following year drives this to 47.5 times. Although this is still relatively high, I reckon the prospect of further excellent growth beyond 2016 makes the junk food giant a great earnings pick.
Against a backdrop of surging homebuyer demand and chronic shortages in the country’s housing stock, I believe that Redrow’s (LSE: RDW) terrific growth story should keep on rolling. Latest Council of Mortgage Lenders data showed the number of gross loans edge 2% higher between April and May, and total lending of £16.2bn marked the highest for five months. This follows Rightmove numbers this week which showed the average house price hit a record of £294,351 in June.
In this environment Redrow is predicted to rack up a 48% earnings improvement in the 12 months ending June, leaving the business dealing on a brilliant 10.3 times predicted earnings — any number around or below 10 times is widely considered a steal. And this reading slips to 9 times for 2016 amid estimates of an extra 14% boost. As well, the housebuilder sports great PEG ratios of 0.2 and 0.7 for 2015 and 2016 correspondingly.
With construction activity picking up across its key US and European markets, I fully expect demand for materials supplier CRH (LSE: CRH) to continue marching northwards. On top of this, I believe that investors should take huge faith from the obvious success of the firm’s acquisition-led growth strategy, and May’s mammoth €6.5bn purchase of cement assets from Holcim and Lafarge suggests that this programme should keep on firing as cash levels surge at the Irish company.
Accordingly CRH is expected to punch a 43% earnings advance in 2016, followed up by a 33% rise the following year. These numbers see a P/E reading of 23.3 times for this year drop to a far-more appetising 17.5 times for 2016.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and owns shares in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.