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Can these hot growth stocks keep on going?

After trading within a tight range during Q1 2016, budget flyer Ryanair (LSE: RYA) has taken off more recently as fears over the health of the airline industry have abated.

The Dublin flyer has ascended 26% in value since the start of April and is now dealing at record tops above 18p per share. And while Tuesday’s full-year results release could be viewed as a bit of a mixed bag, I reckon there is still plenty for investors to cheer about.

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Rate pressures

Ryanair advised today that although it shifted 120m passengers in the 12 months to March — up 13% year-on-year — that revenues edged just 2% higher in the period, to €6.65bn.

Colourful chief executive Michael O’Leary said: “A series of security events at European cities, a switch of charter capacity from North Africa, Turkey and Egypt to mainland Europe, and a sharp decline in sterling” caused Ryanair to endure some trading difficulties over the last year.

And as a result the business was forced to cut the price of an average ticket to €41, down 13% year-on-year.

Still, these troubles could not prevent Ryanair posting a strong upswing in post-tax profit, up 6% to €1.32bn. And while it expects further sterling troubles and overcapacity in Europe to keep fares on a downward trajectory, declines are expected to moderate to between 5% and 7% in the current year.

And it expects profit after tax to rise a further 8% in fiscal 2018, to between €1.4bn and €1.45bn.

Growth plan

There are clearly a lot of uncertainties facing the firm, but I expect its rapid expansion programme (206 new routes alone last year) and cost-cutting drive to provide the platform for strong earnings growth. Unit costs excluding fuel fell 5% in 2017.

And Ryanair’s announcement today that “we will continue to pivot our growth away from the UK in 2017 and 2018 to capitalise on the many growth opportunities elsewhere in Europe,” due to Brexit-linked uncertainties should also remove a lot of risk for the years ahead.

The City believes these measures will keep driving strong earnings growth at Ryanair. A 34% rise is chalked-in for the year to March 2018, and an additional 7% advance for fiscal 2019.

Despite its recent share price charge, Ryanair is still a terrific value pick based on these projections. The airline now deals on a forward P/E ratio of 14.7 times, below the widely-considered value yardstick of 15 times.

Soap star

Although PZ Cussons (LSE: PZC) may not be packing the same sort of value as Ryanair, I believe the prospect of surging personal incomes in its core territories of Asia and Africa still makes it worthy of serious attention.

The number crunchers expect the consumer goods goliath to endure a 3% earnings slide in the year just ended as economic trouble in Nigeria and challenging market conditions elsewhere weigh. But Cussons is expected to march back to growth from next year, supported by a steady stream of product rollouts and spin-offs across brand heavyweights like Imperial Leather.

A forward P/E ratio of 20.3 times may be a turn-off for many, but I reckon this is still good value given its excellent emerging market exposure and packed stable of industry-leading labels. And I reckon signs of further recovery could see the firm build on recent share price strength — the firm has risen 12% from January’s post-trading statement troughs.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of PZ Cussons. 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.

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