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Should You Buy These Growth Shares? SABMiller plc, Johnson Matthey plc, Elementis plc & Vp plc


SABMiller (LSE: SAB) suffered from currency headwinds in the past year, as the US dollar strengthened against most emerging market currencies. Adjusted EPS fell 1% to 239.1 pence, despite organic revenue growth of 6% on a constant currency basis.

There was some good news, though. Strong growth in lager sales volumes in Africa and Latin America were only offset by softness in North America and a dip in China. Chinese lager volumes have returned to growth in the last three months of the financial year, which may imply the dip was only temporary. Finally, the outlook for SABMiller’s soft drinks business remains bright, with sales volumes rising 8% in the year.

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A potential bid from Anheuser-Busch InBev, the maker of Budweiser, has boosted its share price. Its shares are now trading at a forward P/E ratio of 21.5, which seems to imply that at least part of the takeover premium has already been priced in. Investors could be disappointed if a deal does not actually go through.

Johnson Matthey

Johnson Matthey (LSE: JMAT) reported underlying earnings per share (EPS) rose 6% to 180.6p for the 2015 financial year. Driven by tighter legislation on emission controls in Europe and strong vehicle sales in Asia and North America, sales for its vehicle emission control products had been especially strong. But, as the outlook for its precious metals products remains negative, earnings growth will likely disappoint investors.

Higher working capital requirements led to an increase in borrowing, with its net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio climbing to 1.7x, from 1.3x in 2014. With a forward P/E of 18.2, its shares seem expensive.


Specialty chemicals manufacturer, Elementis (LSE: ELM), has delivered five consecutive years of uninterrupted earnings growth. Adjusted EPS rose by a compound average growth rate of 34% over the past five years, following strong demand for its additive products. Applications are wide ranging, but oilfield, coatings and personal care are most significant.

Although falling oil prices have yet to hit revenues for Elementis; earnings growth in the longer run should be more subdued. Currency headwinds, which will offset much of the growth from emerging markets, will likely continue to put pressure on earnings in medium term. Nevertheless, analysts expect adjusted EPS will grow by another 2% this year, and its shares are valued at an attractive forward P/E of 11.6.

With net cash of $64 million and strong operating cash flows, Elementis will be increasing its total dividend for the year to 15.4 cents per share. This gives it a dividend yield of 3.3%.


Vp (LSE: VP), the specialist equipment rental company, reported adjusted earnings per share (EPS) rose 30% to 54.5p for the 2015 financial year. Statutory EPS rose 28% to 51p, with full year dividends up 18% to 16.5p per share. Strong demand from housebuilding and construction helped to lift revenues 12% higher.

Vp sees significant growth opportunities in its forklift and construction tool hiring businesses, and has made capital investments totalling £49.3 million in 2015. But, the weak outlook for capital spending from infrastructure and oil and gas sectors could slow earnings growth in the coming years.

Shares in Vp have made new all-time highs, having risen more than 28% since the start of 2015. Its shares yield only 2.0%, but there is much scope for further increases in the dividend payout ratio, as its dividend cover is 3.3x. Currently trading at a P/E ratio of 14.9, Vp’s shares are still attractive.

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