In today’s article I’ll look at three stocks I believe have the potential to deliver fresh growth as we head into 2016.
Shares in soft drink manufacturer Britvic (LSE: BVIC) have risen by 80% over the last three years. The group’s earnings per share have kept pace, climbing from 24.7p in 2012 to 46.7p for the year which ended on 27 September.
Today’s results show good progress across the board last year. Britvic, which owns brands including Robinsons, Tango and J2O, said that pre-tax profits rose by 10.6% to £147m last year.
The firm’s dividend kept pace with this growth and was hiked 10% to 23p, giving a yield of 3.2%. Sugary drinks still appear to be strong sellers, but Britvic’s management did sound a note of caution about the outlook for the year ahead.
Chief executive Simon Litherland said that the group had “seen a slow start to the year”. Mr Litherland said that increases in disposable income were not being felt in grocery spend on soft drinks, which remain flat. Health concerns relating to sugar are also a growing issue.
Britvic trades on a 2016 forecast P/E of 14.7 and a prospective yield of 3.5%. That seems reasonable to me, although not compellingly cheap.
HSBC Holdings (LSE: HSBA) shares have fallen by 12% this year, as concerns have risen about the bank’s exposure to the emerging market slowdown. The bank’s performance has also lagged its own targets, forcing management to reset expectations.
However, in my view these concerns have provided a buying opportunity for long-term investors. The bank’s shares trade on a 2015 forecast P/E of 10 and offer a 6.4% prospective yield. This generous payout is expected to be covered 1.6 times by earnings this year.
HSBC stock also trades at a useful 16% discount to its tangible book value, providing further downside protection. I recently added to my personal holding and continue to see HSBC as an attractive buy.
Small-cap Trakm8 Holdings (LSE: TRAK) sells telematics and data software to fleet operators and insurance companies. This is a fast-growing area, as the growing computerisation of fleet management makes it easier for operators to manage costs, health and safety risks and compliance issues.
Shares in Trakm8 have risen by 300% over the last year and are worth a massive 2,380% more than they were five years ago. For investors who got in early, this has been a big winner. The question is how much more is there to come?
The firm’s half-year results on Tuesday showed sales up 38% to £11.7m and adjusted pre-tax profits up by 89% to £1.4m. These figures apply to the six months to 30 September. Full-year forecasts for 2015/16 suggest earnings per share of 11.3p, putting Trakm8 stock on a forecast P/E of 23.
That looks pricey, but earnings are expected to rise by 40% next year, giving a 2016/17 forecast P/E of 17. If Trakm8 continues to deliver this kind of earnings growth, today’s 261p share price could end up looking cheap.
Cash doesn’t seem to be a problem, either. Trakm8 had net debt of £2.2m at the end of the first half and appears to be breaking even on cash flow, excluding acquisitions. For growth investors, Trakm8 could be worth a closer look.
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Roland Head owns shares of HSBC Holdings. The Motley Fool UK has recommended Britvic and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.