The indispensable nature of Nexus Infrastructure’s (LSE: NEXS) engineering products means that I am confident investors can bank on plump returns for a long, long time.
The fruits of the company’s endeavours are divided between two divisions: TriConnex, which creates and connects energy, water and fibre networks for the residential and commercial sectors; and Tamdown, whose services include building highways and drainage systems for the same sectors.
The fact that Nexus provides such essential building works offers a clear layer of earnings visibility. Indeed, even in the current patchy climate for the domestic construction industry it continues to add new business. The firm announced this month that its order book stood at £225m as of the close of February, an 11% improvement from levels seen just three months earlier.
But this is not the only reason to be confident over future profits generation thanks to its robust position within the country’s building sector. Nexus customers include nine of the country’s 10 biggest housebuilders, and with erection rates set to keep rising thanks to the UK’s yawning supply shortage, the company can look forward to sustained revenues expansion from this one segment.
Nexus is expected to throw out a 14% year-on-year earnings improvement during the year to September 2018, and to follow this up with a 17% rise in the following period.
This leaves the AIM-quoted business dealing on a forward P/E ratio of 11.7 times, and a corresponding PEG reading of 0.8. Dirt cheap on paper, this is eye-poppingly low for a stock with as excellent a long-term profits view as Nexus.
Cohort (LSE: CHRT) is another business that those seeking dependable profits growth in the years ahead should pay close attention to.
The defence sector is a traditional safe haven for those seeking profits growth over a sustained period. Contract timings may sometimes be lumpy and result in a little earnings turbulence now and again. But over a long-term time horizon, broader armaments demand moves relentlessly higher, reflecting mankind’s desire to wage war as well as to protect itself from external threats. And this in turn supports steady sales growth for the sector’s major players.
And while the UK defence sector may have experienced no little pressure more recently, Cohort has managed to overcome the worst of these problems by concentrating on key focus areas like submarine building and cyber security, on which the government continues to spend vast amounts.
Cohort itself boasts a long record of unbroken annual earnings expansion and City analysts expect this record to continue with rises of 4% and 6% in the years to April 2018 and 2019 respectively.
This leaves the business dealing on an ultra-low forward P/E multiple of 11.8 times. Given its terrific record of relentless earnings growth, not to mention the possibility of fresh M&A action now that its EID and MCL units have been fully welcomed into the fold, I reckon this makes the business look particularly cheap.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Cohort. 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.