2 growth stocks perfect for retirement

Royston Wild looks at two stock stars that could deliver brilliat long-term earnings growth.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investor demand for TT Electronics (LSE: TTG) ripped higher in Wednesday trading after the firm released exciting news on a recent disposal.

The tech titan was last 11% higher after advising that it had hived off its Transportation Sensing and Control (or TS&C) division to US giant AVX Corporation for $118.8m on a cash-free, debt-free basis. The Woking firm advised that it will use the proceeds to cut debt and to fund capital investments and acquisitions to facilitate future growth.

Celebrating the deal, chief executive Richard Tyson commented that “this is an important step for TT. Having returned the TS&C Division to growth and profitability faster than expected, we believe it will be better positioned to achieve its full potential under the ownership of AVX.

Following the disposal, TT will be a higher margin, higher quality business, with an improved geographic and market balance.” Tyson added that “we will continue to focus on structural growth markets where there is increasing electronic content.”

Broad approval

The news has been widely welcomed by those in the City. Harry Philips of Peel Hunt commented that “the disposal itself is not unexpected but the price is far better than the £65m we had in our model.”

He added that “[the deal] leaves net cash at around £50m, which is a terrific platform to build off and this represents relaunch of the company. The management team have done a great job and they will be strongly supported in the next phase of the company’s development.”

Meanwhile David Larkham of Numis advised that “the transaction will… materially improve the quality of earnings since operating margins in this division were particularly low at 1.3%.”

Strong trading

News of the disposal was not the only cause for cheer, however, with TT Electronics also putting out a short — but reassuring — commentary on current trading, the firm advising that the “pattern of trade across the remaining business has been good,” and that the “order book remains strongly ahead.”

The company’s decision to concentrate on structural growth markets with improving electronic content is clearly producing the goods, and prior to today’s results the City had been expected earnings improvements of 15% and 9% in 2017 and 2018 respectively.

I reckon the firm is worthy of serious attention, particularly given its very-unassuming current forward P/E ratio of 14.8 times.

Medical marvel

While Smith & Nephew (LSE: SN) may not be expected to generate eye-popping earnings growth in the near future — rises of 1% and 9% are anticipated in 2017 and 2018 — I am convinced profits should explode in the years ahead as rising healthcare investment across the globe powers demand for the company’s artificial joints and limbs.

The FTSE 100 giant has been pressured in recent times as demand from China has moderated and economic pressures in the Middle East weighed. But sales at the company seem to have picked up in 2017, and particularly in emerging territories (underlying sales growth in these regions returned to double-digits during January-March, rising 13%).

These figures underlined the huge potential of these highly-lucrative regions. And I believe the huge investment Smith & Nephew has made in growth arenas like sports medicine and robotics could also lay the base for stunning revenues growth in new and established markets alike.

I reckon Smith & Nephew’s slightly-heady forward P/E rating of 20.4 times is decent value given the company’s robust long-term outlook.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »