Are Aggreko plc, Paysafe Group Plc & Bovis Homes Group plc The FTSE’s Ultimate Growth Buys?

A turnaround in sight?

Temporary power specialist Aggreko (LSE: AGK) has announced a new three-year deal to provide 200MW of power to an electricity supplier in Zimbabwe.

The deal wasn’t big enough to move the firm’s share price, which is still 55% lower than it was in 2012, thanks to a four-year run of falling profits. However, a turnaround may be in sight. Analysts expect Aggreko to announce an increase in after-tax profits in 2017.

I’m encouraged by this but still feel cautious. With the shares trading on 16 times 2016 forecast earnings, they aren’t especially cheap. Broker forecasts have edged lower over the last six months and could continue to slip.

Despite this I believe that Aggreko is nearing a turning point and could be worth a closer look. Growth investing legend Jim Slater said that the correct time to buy a turnaround stock is when profits are expected to rise in the next twelve months.  I believe we’re getting close to that buying zone with Aggreko.

Value buy or value trap?

Is it too late to put fresh money into housebuilders such as Bovis Homes Group (LSE: BVS)? Bovis shares have fallen by about 30% since last August, while other housing stocks have also fallen. In my view, the market is pricing in a cyclical peak for the housing market. The problem is that at a company-specific level, the outlook still seems very attractive.

Current broker forecasts suggest that Bovis will report a 16 per cent rise in earnings per share this year, with a 14 per cent increase expected in 2017. At 830p, Bovis shares trade on a forecast P/E of just 7.5, falling to 6.5 for 2017.

This looks cheap, but P/E ratings can be misleading for cyclical stocks. If house prices have peaked, then Bovis profits could fall sharply.  My preferred measure is the price/book ratio. Bovis shares have a book value of 712.7p per share, giving them a price/book ratio of 1.2. This is much lower than most other housebuilders, and looks quite reasonable.

With a forecast yield of 5.5%, Bovis could be good value — if you believe that the housing market has further to run.

Big profits but risky?

Last year was a year of big changes for payment processing group Paysafe Group (LSE: PAYS), thanks to its €1.1bn acquisition of US peer Skrill. Buying Skrill increased Paysafe’s revenue by 68% to $613m in 2015, while adjusted pre-tax profit rose by 60% to $108.7m. However, the full benefits of the deal are expected to shine through in 2016.

Paysafe’s sales are expected to rise by 48% to $901.8m, while adjusted earnings are expected to rise by 42% to $0.37 per share. This puts Paysafe shares on a forecast P/E of 15.

This seems reasonable, but I do have a few concerns. Based on last year’s H2 results, 54 per cent of Paysafe’s fees come from online gambling or gaming. These areas tend to carry high levels of regulatory risk. The rules can change overnight.

Paysafe also pays no dividend and had net debt of $391m at the end of last year, equating to four times 2015 profits. Overall, I think Paysafe shares look quite fully priced at the moment.

I believe there are better growth opportunities elsewhere.

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Roland Head 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.