Agricultural and fuel supply business, NWF Group (LSE: NWF) has hardly shocked investors with its growth over the past few years. Since 2013, earnings per share have grown by just 1p, from 13p to 14p and pre-tax profit has actually fallen by £1m.
However, it looks as if the firm is finally starting to turn things around. Even though City analysts are forecasting no growth for the group this year, according to a trading update issued by the firm today, earnings are currently “ahead of the prior year,” which indicates that the City’s forecasts are now out of date.
2017 has been somewhat of a turnaround year for NWF. The bulk of the company’s profits are linked to the UK dairy industry, which has been struggling in recent years thanks to low-cost overseas imports. A stronger milk market is helping the group make a comeback. Today management noted that “benefits of previous capital investment being delivered, alongside a recovering dairy market due to higher milk prices” is helping its feeds division that supplies close to 5,000 dairy farms.
A dairy industry recovery should help NWF return to growth in the years ahead. For the past few years, management has been preparing for this turnaround, investing in the businesses asset base to expand its offering. Over the next few years, this investment should pay off.
Indeed, one group of City analysts believes that NWF’s normalised earnings per share could rise by 61% by 2019 as the combination of an improving market and better customer offering starts to boost the firm. Based on these figures, shares in the company are currently trading at a forward P/E of 10.9, which seems to me to be too cheap compared to the growth on offer here. The shares also support a dividend yield of 3.9%.
Services in demand
Another stock that I believe can help you make a million is equity investment manager Impax Asset Management (LSE: IPX).
Over the past five years, as the demand for private equity products has surged, Impax’s earnings per share have more than doubled and analysts are projecting further growth next year.
For the fiscal year ending 30 September 2018, Impax’s earnings per share are expected to expand by 25% to 8.1p and the dividend is set to rise 20% to 3.5p. Based on these forecasts, the shares are trading with a yield of 2.2% and forward P/E of 19.4.
So why do I believe that Impax is still a good buy? Well, the company has really proven itself over the past few years. Asset managers only succeed if they can attract investors, and the firm has proven itself to be highly adept at this. Assets under management increased by 61% to a peak of £7.3bn for fiscal 2017, rising to £7.6bn one month after year-end. To help complement growth, management recently negotiated the acquisition of Pax World Management, which is set to complete in the first quarter of 2018.
If Impax can continue to impress investors, then I believe that there’s no reason why the group cannot continue to grow earnings at a double-digit percentage.
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Rupert Hargreaves owns no share 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.