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2 dependable growth stocks I’d buy before Christmas

Although revenues and profits at Cohort (LSE: CHRT) remain under pressure, I am confident that its long-term earnings picture remains solid.

The defence giant advised Wednesday that revenues dipped 10% in the six months to October, to £44.8m, while adjusted operating profit ducked 8% year-on-year to £3.6m. On top of this, it said order intake fell to £39.2m from £40.5m previously, and that its closing order book was down to £132.1m from £136.5m.

However, I see no reason for alarm yet. Chairman Nick Prest said: “In recent years the Group’s results have been heavily weighted towards the second half and we expect this pattern to be repeated this year. The closing order book and recent order wins support this outlook.”

Growth story goes on

Earnings have increased at a compound annual growth rate of 9.3% during the last five years, and the AIM-listed play is expected to keep this run going with rises of 4% and 6% in the years to April 2018 and 2019 respectively. And I believe the potential for M&A  should keep earnings on an upward tilt.

Despite its bright earnings picture, Cohort can still be picked up for a song, the firm trading on an ultra-cheap prospective P/E ratio of 10.9 times.

And against this backcloth, analysts are expecting dividends to keep growing at a terrific rate, with last year’s 7.1p per share payout anticipated to rise to 8.2p this year and to 9p in fiscal 2019. Consequently Cohort rocks up with decent yields of 2.6% and 2.8% for this year and next.

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Retail star WH Smith (LSE: SMWH) is another share with a distinguished earnings record and which, thanks to rapid expansion at its Travel division, looks on course to keep on delivering plump profits growth.

Earnings have swelled at a compound annual growth rate of 8.7% during the past five years which, while not spectacular, is still pretty impressive given the hard work the newsagent has had to undertake to turn around its troubled high street arm.

It has doubled-down on cost-cutting here in the face of ongoing sales pressure. So while like-for-like sales across its high street stores dropped 4% in the 12 months to August, the £12m worth of cost savings helped trading profit remain stable year-on-year at £62m.

And with further expense slashing to come, and the business improving space management and product mix in its stores, the outlook here continues to improve.

But as I say, it is the terrific sales potential of WH Smith’s Travel unit which really promises to churn out exceptional profits growth in the years ahead. Total sales here jumped 9% in fiscal 2017. And with the FTSE 250 company continuing to increase its international footprint (it saw an extra 414 units on foreign soil last year), and traveller numbers continuing to steadily rise, I am expecting the top line to keep sprinting higher.

City analysts agree, subsequently predicting an extra 5% earnings rise in fiscal 2018. And like Cohort, with profits expected to keep moving skywards, its progressive dividend policy is anticipated to keep rolling too. Last year’s reward of 48.2p per share is predicted to move to 51.6p in the present period, resulting in a chunky 2.3% yield.

I reckon WH Smith’s exceptional growth prospects make it a terrific pick today and worthy of an elevated forward P/E ratio of 20.1 times.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Cohort and WH Smith. 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.