Today I am looking at four growth greats expected to surge next year and beyond.
With rudderless Barclays (LSE: BARC) not expected to replace ousted CEO Antony Jenkins until the new year, a great deal of uncertainty is swirling around the bank, not least for the future of its Investment Bank.
Still, I believe there are plenty of reasons to expect Barclays’ bottom line to swell in the coming years. Thanks to brilliant UK economic growth I fully expect revenues to keep advancing — total income rose 4% in January-June, to £14.2bn. On top of this, the bank’s leading position in the field of e-banking, combined with its expanding operations in Africa, also promises to keep customers flocking through the doors, virtual and otherwise.
With Barclays’ restructuring having flipped it back into the black in 2014, the bank’s rise from the ashes is expected to roll on well into the future — expansion to the tune of 34% and 22% is pencilled in for 2015 and 2016 correspondingly. And these readings make the firm a snip, creating ultra-low P/E multiples of 10.7 times for this year and 8.7 times for 2016 — any reading around or below 10 times is generally considered a bargain.
The world of pet healthcare is a fast-growing market, making animal medicines and specialist food producer Dechra Pharmaceuticals (LSE: DPH) a star pick in my opinion. The business saw revenues jump 5.1% during the year ending September, to £203.5m, a result that helped push underlying operating profit 5.2% higher to £44.4m.
In particular, Dechra is making huge inroads in the lucrative US market, and a combination of new product launches, organic core brand growth and the purchase of the Phycox label helped power sales 59.9% higher during the period. The firm has also started trading via two new subsidiaries in Poland and Canada, while plans to purchase poultry vaccines specialist Genera would give its bright earnings outlook a further boost.
Dechra has a solid record of earnings growth in recent years, and the City expects this trend to continue with growth of 8% for the 12 months ending June 2016. Although this results in an elevated P/E multiple of 21.7 times — sailing outside the threshold of 15 times that indicates decent value — I believe the pharma play’s promising drugs pipeline, not to mention financial firepower to complete further acquisitions, fully warrants this premium.
Thanks to strength in overseas markets, I believe beverages giant Britvic (LSE: BVIC) is a great pick for those seeking solid earnings growth. The business — which boasts terrific brand power through labels like Robinsons, J2O and Gatorade — saw total revenues edge 1% higher during April-June, powered by sales growth of 7.1% in France and 6.8% in other international markets.
Britvic has doubled-down on investment in its colossal brand portfolio to push sales higher again, including fresh product roll-outs and innovation across key labels. On top of this, Britvic has also been busy on the M&A front and supercharged its strength in emerging markets in July with the purchase of Brazil’s ebba, giving it access to the world’s sixth largest soft drinks market.
The Hemel Hempstead firm has already proved itself a reliable earnings generator, and the City expects earnings to keep rattling higher — a 10% advance is chalked in for the year concluding September 2015, resulting in an attractive P/E ratio of 14.5 times. And an extra 7% rise forecast for the following year pushes the multiple to an appetising 13.5 times.
Marks & Spencer Group
Embattled retailer Marks & Spencer (LSE: MKS) continues to frustrate its investors thanks to the lack of sustained progress at its Womenswear arm. Earlier this year the business cheered investors by announcing that General Merchandise like-for-like sales rose 0.7% during January-March, the first rise for 14 quarters. But another slide in the following quarter snubbed out hopes of a momentous comeback.
Still, I believe Marks & Spencer has plenty of growth levers in its favour, and expect clothing sales to bounce higher again thanks to improved fashion ranges and improving UK consumer spending power. Meanwhile sales at the Food division continue to gallop higher, while further afield the retailer’s huge investment in China, India and other growth markets promises vast riches.
Accordingly the number crunchers expect ‘Marks and Sparks’ to generate earnings growth of 6% in the 12 months ending March 2016, producing a very-decent P/E multiple of 14.4 times. And this reading falls to just 13.1 times for fiscal 2017 as earnings expansion is predicted to accelerate to 9%.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and Britvic. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.