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2 growth stars that could make you brilliantly rich

John Menzies (LSE: MNZS) was making headlines in Monday business after it decided to bang a planned merger with DX Group (LSE: DX) on the head.

The firms had been examining a tie-up since March, and in June a deal was struck that would have seen DX snap up Menzies’ distribution operations for £40m in addition to new shares worth 65% of the new company.

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However, DX’s worrisome trading update in July, in which it advised it expected EBITDA to flatline in the fiscal year ending June 2016, forced Menzies to undertake additional financial due diligence. These steps had forced the company to conclude that “the combination would be required to be effected on revised terms,” it advised today.

And the Edinburgh business has decided to pull the plug in light of these developments. It commented that it “does not believe it is currently possible to agree a revised set of terms with DX for the combination which would be in the interests of John Menzies shareholders.”

The company “has therefore terminated discussions with DX,” it said.

Menzies added that there remains strategic merit by separating its Distribution and Aviation divisions into two independent businesses however, as well as the potential to create shareholder value.

Ready to fly?

While latest developments have prompted it to go back to the drawing board, Menzies still looks like an attractive destination for growth investors.

The City expects it to flip back into the black from the losses of recent years, with consensus suggesting earnings of 54p per share in 2017. And this predicted spurt is not expected to be a flash in the pan either, with an 11% bottom-line improvement is predicted for next year, to 61p.

I reckon a subsequent forward P/E ratio of 12.9 times is excellent value given the company’s resilience in tough markets. The business saw revenues at Aviation soar 12% during the four months to April, it announced in May, while it also noted that “contract gain momentum has continued with notable wins across each region.” And its Distribution arm was also trading in line with expectations, Menzies said.

I believe the company’s low valuation could leave room for further share price strength, particularly should the next set of financials (first-half numbers are slated for Tuesday, August 15) impress.

Road warrior

Hill & Smith (LSE: HILS) is another stock tipped to be a great bet for growth hunters.

The number crunchers expect demand for the FTSE 250 firm’s signs, barriers and assortment of other roadside decorations to keep driving northwards. And as a result, earnings are predicted to grow 10% in 2017, and by another 5% next year.

The Solihull business may not carry the same sort of value as Menzies however, its prospective P/E ratio of 18.9 times hovering above the broadly-considered value benchmark of 15 times.

But this should not necessarily deter investors, in my opinion, as Hill & Smith picks up traction at home as well as in the US — revenues were a record £291.8m during January-June, it advised last week, up 6% at constant currencies. And I anticipate that the top line will keep on bulging as infrastructure investment increases in both of the company’s key markets.

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Royston Wild has no position in any 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 us better investors.