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A 15-bagger growth stock that could have a lot more to give

I bet you wish you’d bought shares in Victoria (LSE: VCP) five years ago. I know I do, because those investors who did are now sitting on a cool 15-bagger — and you don’t need many of those to build up the cash.

Victoria designs, manufactures and distributes innovative flooring, and I see a good investment lesson there — while many folk try to identify the next hot technological or business development when looking for growth shares, there are plenty more seemingly mundane opportunities right beneath our feet (literally, in this case).

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Of course, hindsight is not really much good as an investment tool as it doesn’t say anything at all about the future, so what are the prospects for more of the same from Victoria?

Solid growth

I reckon they’re pretty good as I see the company growing organically and by acquisition. Analysts have an EPS rise of 22% forecast for the year to March 2018, giving us a forward P/E of 21 — and a further 10% boost the following year would drop that multiple to 19, and I think that’s decent value for such a tempting growth pick.

On the acquisition front, Victoria has just snapped up Ceramiche Serra of Italy, a ceramic flooring manufacturer, for up to €56.5m (£50.4m). Of that sum, €20m (£17.8m) will be held back and paid over the next four years, providing the business achieves its annual targets. That sounds like a canny acquisition strategy to me.

I’ll leave Victoria with a quote from executive chairman Geoffrey Wilding from the firm’s full-year results report in July: “I suspect few shareholders truly appreciate just how big our market opportunity in the UK and overseas is.

Oil prospects

I’m talking palm oil here, and I don’t know how many investors see that as a big growth business. But I do, and I’ve been taking a look at M. P. Evans Group (LSE: MPE), which operates palm oil plantations in Indonesia.

At 815p and on a forward P/E of 34, dropping to 23 by 2018, many will not see the shares as good value. But I do, and it appears the company does too as it’s been buying them up for cancellation all year.

EPS has been volatile and flat overall for a few years, but that doesn’t bother me too much as the long-term nature of the plantation business means earnings don’t always fit conveniently with a company’s short-term reporting calendar.

The dividend is a bit erratic too, averaging around 2% to 2.5%, but I reckon there’s a good chance of a long-term progressive policy coming to the fore.

Ready for take-off

In its interim report on 30 June, the firm spoke of the maturing of its young plantings, revealing a 26% increase in crop as that continues. Actual crude palm oil production rose by 56%, and the firm saw its operating profit almost trebling — boosted by a 10% rise in the price of the valuable commodity to $735 per tonne.

Big forecasts for a 40% EPS rise this year, followed by a further 49% next, have given the shares a very handy boost, and they’ve doubled in just over 12 months.

Palm oil is used in so many industries, including food production, soaps and cosmetics, biofuel and bioenergy, and pharmaceuticals, that I see continued growth in demand for the stuff.

I reckon Victoria is a good long-term buy.

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Alan Oscroft 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.

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