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Melrose Industries (LSE: MRO) found itself heading backwards in Thursday trade following the release of half-year numbers. The stock was last 4% lower from the mid-week close and dealing at levels not seen since late March.

This is despite the engineering play announcing that it had swung to a pre-tax profit of £47.8m during January-June from a loss of £9.2m in the corresponding 2016 period.

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Commenting on the first half performance, chairman Christopher Miller said: “During the first 10 months of our ownership, Nortek has delivered the fastest initial improvement in performance Melrose has ever achieved.  More investment is being made in Nortek to drive further improvements and appropriate actions are being taken in Brush for the long term.”

Nortek, which was snapped up exactly one year ago, has seen the fastest improvement in profit of any acquisition in Melrose’s history, the Birmingham-based engineer noted. Underlying profit here leapt 54% year-on-year, to £145.5m, while an underlying operating margin of 14.7% was up 5.5% in the period.

But performance was more worrying over at Brush, which provides electricity generators to industry and the oil and gas sectors. Melrose noted that the division “is experiencing its toughest market conditions since [we] acquired it in 2008,” adding that “over the summer, it has become clear from market feedback and discussions with customers that the market conditions have worsened further and there is no recovery in generators expected in the foreseeable future.”

Melrose added that “appropriate action is being taken for the long term with all parts of the business being reviewed.”

Earnings expected to rocket

While Melrose is clearly not without its share of difficulties, the City does not expect them to prove a road block to stratospheric earnings growth in the near term and beyond.

In 2017 the company is predicted to record a 113% bottom-line improvement, and an additional 15% advance is anticipated for next year.

A subsequent forward P/E ratio of 22 times may be considered a bit heady for some investors, although a PEG multiple of 0.2 suggests Melrose is actually attractively priced relative to its growth prospects.

Risk-averse investors may point to the escalating troubles at Brush as reason not to invest, a position I would sympathise with. Having said that, I reckon the strength of the rest of Melrose’s other operations give grounds for optimism. And with the company also on the hunt for more bolt-on buys to drive earnings, I am still confident the business could deliver stonking profits growth in the coming years.

Set to soar

Those not wishing to stash the cash in the engineering giant might want to take a look at Ryanair (LSE: RYA) instead.

Just like over at Melrose, the number crunchers are predicting great things at the budget flyer — a 20% earnings advance is forecast for the year ending March 2018. And an extra 14% rise is forecast for the following period.

Such projections leave the Irish airline dealing on a forward P/E ratio of 15.2 times, as well as a PEG readout of just 0.8. I believe this is unmissable value given the brilliant revenues opportunities afforded by the fast-growing, low-cost travel segment, not to mention Ryanair’s ambitious route expansion drive.

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