I believe that Castleton Technology (LSE: CTP) is an interesting stock for those seeking robust earnings growth in the years ahead.
The software and managed services provider announced that organic revenues rose by around 10% in the six months ending September, meaning that the board’s full-year profits forecasts remain in line with expectations.
Castleton also advised that strong cash generation had seen net debt continue to fall. This clocked in at £7.9m as of the end of last month, down from £9.4m at the close of March.
The result led company chairman David Payne to comment: “Our financial performance, along with a number of significant milestones previously reported to the market, including the delivery of the integrated product suite, is particularly pleasing.” He added: “This demonstrates the capability of the group to deliver on its strategy and increase our share in our chosen markets.”
Having flipped into the black in the year ending March 2017, the City expects profits to boom at Castleton going forward. Earnings of 4.9p per share are forecast for the current year, up from 0.59p last year, and these are predicted to rise to 5.3p in fiscal 2019.
In an added sweetener, current projections suggest that the Cambridge-based business is very attractively priced at the moment – it carries a forward P/E ratio of 12.9 times, comfortably beneath the widely-accepted value watermark of 15 times.
With Castleton continuing to stack up significant multi-year contracts with non-profit and public sector clients, and doubling-down on efforts to expand its customer base (it now has more than 750 clients on its books), I reckon City forecasts could continue to impress beyond the medium term.
Sales stamping higher
I am certainly convinced by the earnings outlook over at JD Sports Fashion (LSE: JD) as the retailer’s successful expansion scheme shows no signs of running out of steam.
The so-called ‘King Of Trainers’ saw sales jump 33% in the six months to July, to £1.37bn, another half-year record. And the Bury-based company is not done yet in refining and boosting its international expansion strategy.
Last month, it agreed to combine its operations on the Iberian peninsula with those of Sport Zone, a move that will create the second-biggest sports retailer across Spain and Portugal. And it also entered the South Korean marketplace in September, setting out on a joint venture following the purchase of a 15% stake in footwear retailer Hot-T for £5.5m (and which could rise to 35%).
JD Sports has proven it has what it takes to create a truly-formidable international retail brand. And with the company steadily building its multichannel proposition at home and abroad, the number crunchers are predicting earnings rises of 16% and 11% in the years to January 2018 and 2019, respectively.
I believe JD Sports is brilliant value based on these estimates. Indeed, I would consider the retailer a snip on its current forward P/E rating of 16.4 times, given the huge success of its ambitious growth strategy. But a PEG reading of 1, bang in line with the widely-regarded bargain watermark, really seals the deal for me. I reckon the sportswear star should generate eye-popping profits growth now and in the future.
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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 us better investors.