First things first, I am hugely impressed at the rate at which its long-running self help strategy continues to bolster margins, achieved through a combination of contract execution and rigorous cost-cutting. At its Healthcare division, margins rose 1.9% between April and September, to 16.1% while, at Industrial, margins improved 2.2% to 11.5%.
Secondly, I like Scapa’s broad geographic footprint which provides terrific protection against macroeconomic turbulence in one or two regions.
And thirdly, I am encouraged by the tape manufacturer’s terrific progress in the defensive healthcare sector. Sales at Scapa’s Healthcare unit leapt 7.9% during the first fiscal half, to £57.7m, and it signed contracts with three major OEMs in the period.
Stuck on you
Now Scapa has a great record of doling out double-digit earnings growth, the business having seen the bottom line swell at a compound annual growth rate of 21.9% over the past five years. And City analysts believe there’s much more of where that came from.
For the year to March 2018, forecasts point to a 16% profits improvement and, in fiscal 2019, another 11% advance is predicted.
Meanwhile, expectations of extra heady earnings growth is expected to keep Scapa’s ultra-progressive dividend policy going. The Manchester firm lifted the dividend 14.3% in the last year to 2p per share, and additional meaty increases — to 2.3p and 2.6p in fiscal 2018 and 2019 respectively — are currently being anticipated.
These payouts yield 0.5% and 0.6% respectively, but such low readings would not discourage me given the possibility of Scapa becoming a lucrative income generator in the years ahead.
In my opinion Scapa is a top quality growth stock fully worth a premium P/E ratio of 25.5 times.
I also like the investment outlook for Wizz Air (LSE: WIZZ).
The Hungarian business is a major player in the low-cost travel market, a segment that continues to grow at a stratospheric rate. And to cotton onto this rosy backdrop Wizz Air, like many of its rivals, is rapidly expanding.
Having snapped up two slots at London Luton from the collapsed Monarch Airlines in November, it announced it would station an extra two planes at the airport in a move that would bolster its capacity at the base by 18%, to 7.1m slots, in 2018. Wizz Air has big plans for its British base and it also announced three new routes (to Keflavik, Bari and Athens) from there just last week.
So City analysts are expecting earnings at the FTSE 250 flyer to rise 25% in the year to March 2018, and to increase 18% in the following period.
And these forecasts make Wizz Air a brilliant value pick. A forward P/E ratio of 17.8 times may not appear that compelling, although a corresponding PEG multiple of 0.7 really is.
Considering its exciting growth strategy and its exposure to the lucrative emerging markets of Central and Eastern Europe, I reckon Wizz Air is a steal at current prices.
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.