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2 resurgent Footsie growth stocks I’d buy before it’s too late

Software five-bagger

Shares in Tribal Group (LSE: TRB), a “leading provider of software and services to the international education management market“, have had a rocky ride — down 44% since a peak in March 2014 and down 29% over 10 years.

But since January 2016 we’ve seen a five-bagger recovery to 81p and the start of what looks like a new growth phase.

After a couple of disastrous years, which saw a collapse in profits and took the company into severe financial danger, Tribal has just reported on a 2016 that saw it back on a “sound financial footing“. The sale of its Synergy business helped, as did a rights issue, and the new management’s turnaround strategy achieved an operational cash inflow during the year of £8.3m (against an outflow of £6.2m the year before).

And though we saw a statutory operating loss of £1.2m, that was way better than 2015’s loss of £45.5m — and Tribal reported an adjusted operating profit of £4.7m, and adjusted EPS of 1.9p.

Tribal has a large installed base for its Student Management Systems, and 2016 saw new contact wins — in the UK, and from other countries including New Zealand, Malaysia, Canada and Hungary.

There will be a hit on 2017 revenues from the ending of a contract that is being taken back in house by Ofsted, but chairman Richard Last told us that “the Group has a sales order backlog of £113.8m (2015: £121.3m), of which £58.1m is expected to be delivered and recognised is 2017“.

P/E valuations aren’t much good at this turnaround stage, but I see long-term potential here.

Commodities turnaround

Anglo Pacific Group (LSE: APF) is a very different company, but it’s another whose shares are turning around and making me take note. Since late January 2016, the price is up 2.3-fold to 119p, as the mining royalty firm is starting to bounce back after a few years of severe punishment by a depressed commodities market — back in December 2010, the shares were changing hands at around 360p before the crash.

Royalty income climbed by 127% in 2016, to £19.7m, while rising coal prices and the weakening pound helped turn 2015’s after-tax loss of £22.6m into a profit of £26.4m and lifted adjusted EPS from 2.47p to 9.76p.

The firm is also sitting on net assets per share of 124p, which is more than the current share price, and got its year-end net debt figure down to £1m. The dividend came in a little below last year’s 7p per share, at 6p, representing an attractive yield of 5%. 

Forecasts suggest a further doubling in earnings for 2017, which would drop the P/E to a bit under seven, and that’s with a decently-covered dividend yield of 6% on the cards. On fundamentals, that seems very cheap, but is Anglo Pacific really a buy now?

Well, commodities markets are still volatile, and Anglo’s royalty revenue is affected by gearing and could be hit by a further downturn. But with production ramping up at its Kestrel operation and moving “increasingly into our royalty lands” (in the words of chief executive Julian Treger), I do see an attractive proposition here.

And it’s not just a growth prospect I see. With chief financial office Kevin Flynn saying Anglo is “in a strong financial position to grow its asset base and continue to reward shareholders through a progressive dividend policy“, I see strong income potential, too.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of Anglo Pacific. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.