3 unmissable growth bargains? ARM Holdings plc, Carclo plc & Idox plc

Shares of Carclo (LSE: CAR) are up around 2% after the company released its annual results this morning. Trading at 157p, this FTSE SmallCap firm is valued at £104m, and looks set for a bright future in my opinion.

Very buyable #1

Carclo reported a 10.7% increase in revenue to £119m, with underlying pre-tax profit rising 22.9% to £8.8m and earnings per share (EPS) up 27.8% to 10.1p.

This excellent performance was driven by the company’s two main divisions: Technical Plastics, which specialises in injection-moulded plastic components for medical products; and LED Technologies, which designs and supplies injection-moulded lighting systems for luxury cars and supercars. Meanwhile, there was a one-off non-cash charge of £4.9m as a result of the group’s previously announced decision to discontinue its smaller Diagnostics Solutions business.

Ahead of today’s results, analysts had been forecasting earnings growth of around 20% for each of the next two years. EPS of 12p, followed by 14p, looks perfectly doable to me, and gives attractive price-to-earnings (P/E) ratios of 13.1 and 11.2. A price-to-earnings growth (PEG) ratio of 0.7 for both years underlines Carclo’s credentials as a very buyable growth share at an appealing price.

Very buyable #2

Shares of Idox (LSE: IDOX) were also in demand this morning, rising 2.7% to 66.25p following the release of the company’s half-year results. This firm — which supplies software solutions and services to the UK public sector and increasingly to the wider corporate sector — is one of the larger companies on London’s junior AIM market, valued at £238m.

Organic revenue growth reported this morning was 5% but, following two acquisitions during 2015, the actual top-line increase was 28% to £37.2m. This revenue growth, coupled with margin improvements, saw adjusted pre-tax profit motor higher by 36% to £7.9m, with EPS soaring 56% to 1.97p.

The board expressed its confidence in “at least” meeting market expectations for the full-year. If we annualise the first-half EPS of 1.97p we get 3.94p (a little ahead of the market expectations referred to). This looks a reasonable projection, and gives 20% EPS growth year-on-year, a P/E of 16.8 and a PEG of 0.8. On this basis, Idox’s shares also look very buyable at their current level.

Very buyable #3

The FTSE SmallCap index and AIM market are the natural places to look for high-growth companies, but some larger companies also have terrific growth credentials. Chip designer ARM (LSE: ARM) may be a £14bn FTSE 100 giant, but it has a growth record many smaller companies would envy. Furthermore, its growth is set to continue.

ARM’s super-efficient chip designs have become ubiquitous in smartphones, and the company continues to expand into other lucrative markets that will drive future growth, including connected vehicles, robotics, smart cities and Internet of Things devices. A recent $350m acquisition of a global leader in imaging and embedded computer vision technology will further accelerate ARM’s expansion into these new markets.

ARM’s shares are currently trading at 1,010p, and with analysts having pencilled in EPS growth of 43% to 34.5p for 2016, the P/E is 29.3 and the PEG is 0.7. While the P/E is more elevated than that of Carclo and Idox, it’s a little below ARM’s own historical level, and the FTSE 100 firm also appears worth buying with growth on offer at a reasonable price.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended ARM 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.